The federal government’s proposed changes to RESPs and its popular Canada Education Savings Grant program are “a very positive leap forward for Canadian families”.

That’s the resounding verdict of the members of the Registered Education Savings Plan Dealers Association of Canada (RESPDAC), which represents four of the leading providers of RESP’s across the country. The proposed improvements were outlined in the federal Budget for 2007, released in Ottawa yesterday.

“We are extremely pleased with all of the proposed changes,” said Peter Lewis, newly-elected chairman of RESPDAC. “These improvements will benefit all Canadian families, and provide even greater incentive to invest in their children’s college or university education. And that’s good for everyone.”

Among the highlights of the budget, relating to post-secondary education, are:

  • The $4,000 annual per-plan RESP contribution limit will be eliminated, and the lifetime RESP contribution limit (per child) will be increased to $50,000 from $42,000.
  • The maximum annual RESP contribution qualifying for the 20-per-cent Canada Education Savings Grant (CESG) will be increased to $2,500 from $2,000, thus increasing the maximum CESG per beneficiary for 2007 and subsequent years to $500 from $400. The maximum CESG for a year will increase to $1,000 from $800 if there is unused grant room because of contributions of less than the maximum CESG-eligible contributions for previous years.
  • A relaxation in eligibility rules to accommodate qualifying part-time students that do not meet the existing 10 hours per week study requirement, but require that at least 12 hours per month be spent on courses. Under this proposal, students 16 years of age or older will be able to receive up to $2,500 of benefits from their RESP for each 13-week semester of part-time study.
  • Budget 2007 proposes to introduce a new non-refundable child tax credit for parents based on an amount of $2,000 (indexed) for each child under the age of 18 years at the end of a taxation year. This new tax credit will take effect beginning in 2007, and will provide personal income tax relief of up to $310 per child. This move will free up funds within families; we anticipate some of these funds will be set aside in an RESP for their children’s post-secondary education.

RESPDAC represents the four leading national group RESP Dealers, including CST Consultants Inc., Children’s Education Funds Inc., Heritage Education Funds Inc., and USC Education Savings Plans Inc.