How does an RESP work?

Set up A parent or grandparent sets up an RESP account by entering into an RESP contract with the promoter and names one or more children as beneficiaries under the RESP. Once the RESP is set up, the promoter also helps the subscriber apply for government grants.

Growth The subscriber makes regular contributions into the account and the government also deposits applicable grants into the plan. The promoter administers and ensures the amounts paid into the plan are made according to the terms of the plan.

Withdrawals When the child is ready for post-secondary school, the government grants and income earned on the grants and contributions are used to pay for their educational costs. These are made in the form of Education Assistance Payments (EAPs). The contributions, subject to investment risk, are always returned to the subscriber.

If the child doesn’t pursue post-secondary educations, for qualifying subscribers the Accumulated Income Payments (AIPs) can be paid into a Registered Retirement Savings Plan (RRSP). The principal is always returned to the subscriber.