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Review of Registered Education Savings Plan Industry Practices

A1. How the group scholarship plans work

A. The main features of group scholarship plans

The RESP, combined with the grant and bond, is a fairly complex saving instrument. However, the basic design is simple. Contributions are not tax-deductible and can be withdrawn at any time without tax consequences. The CESG is deposited as contributions are made, and the CLB is deposited if families qualify. Investment income accumulates free of income tax. Income, the grant and the bond are withdrawn through EAPs when the beneficiary is a post-secondary student, and taxed as income of the beneficiary. If this does not happen, the income can be extracted through an AIP, and is taxed as income of the subscriber, with an extra tax of 20%. The grant and bond are then paid back to the government.

To this design the scholarship plans add the following elements:

Subscribers commit to a contribution schedule that can be monthly, annual, or a single lump sum.
Funds are invested in accordance with investments permitted under National Policy 15 of the Canadian Securities Administrators. This means that the assets are conservatively invested, making for low downside risk and a relatively stable return.
All plans charge an enrolment fee and several annual fees, and all but one charge various transaction and penalty fees.⁹ Enrolment fees may be returned at or after the end of the contribution period.
Subscribers with a group plan generally have no claim on investment income earned on their contributions, except when they transfer to an individual plan with the same provider.
Beneficiaries are entitled to a share of the total investment income earned by the one-year cohort of which they are part when they become enrolled in a post-secondary program of a minimum duration.
Payments to students include investment income earned on contributions in plans that do not result in payments to students, and other enhancements.
Generally, payments of investment income are made annually, and the total amount paid varies according to the duration of studies.
Generally, beneficiaries have to indicate their study plans before the start of their studies, and apply for scholarship payments before the start of the academic year. Delays in start and progress of studies are allowed, generally one year at a time.

Although the group scholarship plans differ in many details, they have these features in common. At its core, the group scholarship plan is a scheme that concentrates gains on plans that survive through the contribution period and meet various restrictions. Beneficiaries receiving scholarships receive not only the investment income earned on their own contributions, but also a share of investment income earned in plans that do not result in a claim on the pooled investment income, or in only a partial claim. Payments to these beneficiaries include the grant and bond deposited in their own plans, and other enhancements. Investment income of a group plan becomes available for distribution to beneficiaries of other plans in the same cohort in three situations: First, the subscriber may close a plan and withdraw contributions made to date – an option that exists with individual and family plans as well.

Second, the provider closes a plan when the subscriber fails to make contributions on schedule and fails to make catch-up payments or exercise other options available. Third, when all contributions have been made according to schedule, the beneficiary may fail to qualify for a full scholarship under the rules of the plan, rules that are more restrictive than the rules established by the government. When the investment income in a plan becomes available for distribution to other plans, the grant and bond are repaid to the government.

B. Saving

A group scholarship plan consists of Units

Subscribers to group scholarship Plans sign up for one or more “Units”. The Unit is the basis for contribution schedules, enrolment fees, and the distribution of investment income.

A Unit is a share of income available for distribution at maturity, i.e., when the beneficiary can first enroll in a post-secondary program, typically in the year that he or she turns 18. At maturity, investment income is transferred to a separate pool of funds to be distributed across all Units held by qualifying beneficiaries within the same cohort.

Contribution schedules

Table A1: Two contribution schedules for a Unit, and the underlying assumptions
Term to maturity	18 to 19 years		5 to 6 years		Ratio total contributions, 18-19 years to maturity and 5-6 years
	Number of contributions	Annual amount ($)	Number of contributions	Annual amount ($)
CST Group Savings Plan (2001)	204	118	60	1,289	3.2
Children's Group Option	204	119	60	1,453	3.6
Heritage	207	60	63	566	2.9
USC	208	59	64	600	3.1
Plan Universitas	204	141	60	1,946	4.1
All contribution amounts include enrolment fees and premiums for insurance against death and permanent disability.
	Interest rate		Other assumptions stated in prospectus
CST Group Savings Plan (2001)	6% effective annual rate		Includes lapse assumptions reflecting the overall attrition rates experienced by CST plans. Includes enrolment fees and depository charges.
Children's Group Option	10.25%		No lapse assumptions used. (Fees not mentioned)
Heritage	6.08% before fees		Zero terminations. (Fees not mentioned)
USC	5% before fees		No assumptions about lapse or attrition rates. Includes enrolment fees of $100 per unit, depository fees of $3.50 and $10.00 per year, insurance premiums and sales tax.
Plan Universitas	bonds: 3.8% Canadian shares: 6.3%		Economic and non-economic assumptions. Includes life insurance fees; other fees not mentioned.

A subscriber purchases a number of Units and selects a contribution schedule from a table provided in the prospectus. The amount of contribution per Unit varies according to the age of the child, the frequency of contributions (once, annual, monthly) and the duration of the contribution period.

All contribution schedules were developed by external actuaries. Typically, there is a table with seven different schedules, each with 14 different levels of contribution depending on the age of the beneficiary when the plan is opened. The contribution schedules are developed to generate an approximately equivalent amount of income per unit by maturity for every child in the same age cohort, regardless of the age of the child when enrolling in the plan. Beneficiaries receive the same EAP per Unit from the pool of investment income and, to maintain equality, each Unit contributes a like amount of income to the pool.

The contribution per Unit is lower if a plan is opened when the beneficiary is young and investment income on early contributions can accumulate over many years (Table A1). A later start requires contributions per Unit that are higher, per year and in total.

The ratio of total contributions in a plan with a five-year term to maturity to a plan with an 18-year term to maturity varies considerably among the five plans. At Universitas, this ratio is 4.1, and at Heritage 2.9 (Table A1, last column). It appears that, compared to other plans, at Universitas enrolling in a plan is most advantageous when the child is young, while at Heritage it is advantageous to enroll when the child is older. The consumer may want to consider this when deciding when to enroll and in which plan.

The assumptions used in calculating contribution schedules vary among the plans. As indicated in Table 1, the prospectuses give the interest rate used in the calculations, but do not fully set out other assumptions (Table A1, lower part).

Fees

Enrolment Fees

Group scholarship providers charge an up-front enrolment fee of $100 or $200 per Unit (Table A2). The contributions per Unit vary in a similar way. At Heritage and USC, annual contributions in a plan with somewhat more than 200 monthly contributions are about one-half of annual contributions at CST and Children’s, just like the enrolment fee per Unit. All plans allocate the entire contribution amount to the enrolment fee until one-half of the fee is paid. After that, one-half of each subsequent contribution is allocated to the fee until it is paid in full.

For monthly contributions starting at the birth of the beneficiary, the enrolment fee is approximately 170% of the annual contribution amount, except at Universitas where it is 142% (Table A2). For RESPs that are opened when the child is 13, the enrolment fee is a small fraction of the annual contribution amount.

Table A2: Enrolment fee and contributions per Unit for two durations
	Enrolment fee ($)	Months	Annual amount ($)	Ratio	Months	Annual amount ($)	Ratio
CST Group Savings Plan (2001)	200	204	118	1.70	60	1,289	0.16
Children's Group Option	200	204	119	1.68	60	1,453	0.14
Heritage	100	207	60	1.67	63	566	0.18
USC	100	208	59	1.68	64	600	0.17
Plan Universitas	200	204	141	1.42	60	1,946	0.10

All contribution amounts include enrolment fees and premiums for insurance against death and permanent disability.

In an RESP opened at the birth of the beneficiary with a monthly contribution schedule, there is a balance of only a few dollars of savings at the end of the first year. It takes two to three years to pay the full enrolment fee. Thus, depending on the age of the child and the deposit frequency selected, subscribers who cancel their plans within the first few years and request a return of their contributions will receive a small to modest fraction of the money they put in.

Annual Fees

All scholarship providers levy additional fees. The level of fees is similar across the five funds, the one exception being Universitas which charges a higher fee for administration than the other providers but has no deposit and transaction fees.

Table A3: Fees
			CST	Children's*	Heritage	USC	Universitas
1	Enrolment		$200	$200	$100	$100	$200
	Per unit, once
	Paid from contributions:100% of initial contributions until 50% of fee paid, thereafter 50% of contributions
2	Depository		$10	$12	$10	$10	None
	Fixed amount, yearly
	Deducted from accumulated contributions
3	Custodial		0.015%	0.019%	0.015%~	0.015%	0.019%
	Percentage of trust assets, yearly	up to	$300 million	$200 million	$500 million	$300 million	$200 million
	Paid out of investment income*	above	0.010%	0.010%	0.010%~	0.010%	0.010%
4	Administration		0.50%	0.50%	0.50%	0.50%	1.22%
	Percentage of plan assets, yearly
	Paid out of investment income*
5	Investment management		.1% to .3%	0.24%	0.06%	.08% to .21%	0.14%
	Percentage of plan assets, yearly			average	average		average
	Paid out of investment income*
		years to maturity**
6	Insurance**	18 to 19	$3.60	$6	$2.88	$1.01	$6.00
	Per unit, yearly	5 to 6	$4.80	$18.00	$26.88	$10.20	$19.80
	Added to contributions		optional	optional	optional	mandatory	mandatory
	Death and permanent disability

* At Children's, all fees are deducted from deposits. ~In 2006, the custodial fee at Heritage was paid by the Distributor. ** The term to maturity and number of monthly contributions for each plan are the same as in Table A1. ~Children's offers two types of additional insurance. At USC, the insurance premium is 1.7% of contributions.

Annual fees are prominently displayed in each prospectus. There are four annual fees:

Depository fees for processing deposits, in the form of an annual fee that ranges from $0 to $12 depending on the contribution frequency and the plan chosen.
A custodial fee for holding the assets of the plan in trust. This fee has two rates that range from 0.01% to 0.019% of assets.
An administration fee of .5% of assets.
Investment management fees, also a percentage of assets. Some plans give a range of rates, some state an average fee. The fees range from .06% to .3% of assets.

Although, strictly speaking, insurance premiums are not fees, these premiums are included in Table A3 since they are a cost to the subscriber. All group scholarship plans offer insurance against death and permanent disability of the subscriber. At USC and Universitas the insurance is mandatory, at other plans it is optional. Premiums generally are presented in the form of a schedule with various rates.

Transaction Fees

All plans except Universitas charge various fees for transactions other than scheduled deposits (Table A4). Transactions include switching to a different contribution schedule, naming a new beneficiary, changes to the date of maturity and the date of eligibility. The four providers charge more than their lowest fee for a transfer to another RESP provider.

Four providers also charge penalty fees for missing deposits and application deadlines. The largest penalty is charged for not applying for an EAP on time. Before the beginning of an academic year the income in a cohort is distributed over Units of beneficiaries who qualify for EAPs. The provider determines what amount to pay out per Unit on the basis of EAP applications. The large penalty for a late application is intended to encourage timely applications that give the provider the information needed to determine the scholarship payment amount. More information about application deadlines is given in the section “Changes in timing” below.

Table A4: Transaction fees
	CST	Children's	Heritage	USC
Transaction
Transfer to another RESP	50	25	50	25
Penalty for late application for EAP	100	200	75	0
Lost cheque replacement	15			20
Missed deposits	15	15	10	10
Special services (e.g., change maturity date)		12	10	10
Change of contribution schedule		25	10	20
Change beneficiary, adding beneficiary, etc.		12	10	20

Options during the contribution period

All providers offer certain options during the contribution period. Subscribers can switch to a different schedule for the same number of Units, and may have to make an adjustment payment if they do so.

At four of the five providers, subscribers can request a transfer to the individual or family plan at the same provider, subject to certain conditions. Switching to the individual or family plan removes the requirement to make contributions according to a schedule. However, the possibility of an enhanced return is given up as well. These transfers are described in the section “Other plans offered by scholarship trusts”.

Finally, subscribers can request transfer to a different provider. If the beneficiary remains the same, they can transfer the RESP with contributions net of fees, and with the grant and bond and related investment income. The investment income earned on contributions, however, remains in the pool and cannot be transferred.

Subscribers who have difficulty making contributions according to schedule may choose one of these options. They can cancel their plan or cancel Units to reduce the amount of contributions they have to make. If they fail to make the required deposits on time, the provider will take action as described next.

Failure to make deposits on schedule

All group scholarship providers respond quickly to missed deposits by sending a notice to the subscriber. Generally, if the subscriber does not pay the deposit or makes other arrangements within a period of one to three months, the plan is declared inactive or, in one case, converted into an individual plan.

As noted, four providers give the option to transfer to their individual or family plan before maturity or until the beneficiary reaches a certain age, subject to certain conditions. At CST and USC, this option is available after three years of contributions¹⁰, and at Children’s after enrolment fees have been paid in full. Universitas allows the transfer at any time before the beneficiary turns 16, but without investment income earned on contributions. Heritage offers no such option.

The subscriber is given the option of resuming deposits and bringing the plan up to date by depositing the missed contributions plus the interest that would have been earned if the deposits had been made. Subscribers who choose this option may have to bring deposits up to date within a period of a few years, before the beneficiary reaches a certain age, or whichever comes first. In all cases, plans have to be reinstated before their originally scheduled maturity date.

At CST, an inactive plan is automatically converted into an individual or family plan if contributions have been paid for three years or more. This transfer is tantamount to having a contribution holiday, since the individual and family plans have no contribution schedule. The subscriber can rejoin the group scholarship by making the necessary catch-up payments. At USC, a transfer to the individual or family plan is available if catch-up deposits are not made within two years.

Failure to transfer to an individual plan, request suspension of contributions, or bring the plan up to date (“reinstate” or “reactivate”) by paying missed deposits plus interest leads to termination. Subscribers can have their contributions returned net of fees and without any investment income. According to rules established by the government, when a plan is closed, the CESG and CLB are repaid to the government, the corresponding grant contribution room is lost, and investment income earned on the grant and bond is set aside to be extracted through an AIP or donated to an educational institution.

Interest charged on late deposits is intended to restore the accumulated income to what it would have been if contributions had been paid according to the contribution schedule. Three of the five prospectuses do not give a precise interest rate but indicate the rate should reflect the rate earned by the pooled contributions in the scholarship plan. Children’s charges an “Interest Deficiency Administrative Adjustment”, which seems to be the same thing. Universitas charges a rate of 9% on arrears, more than the rate used to establish its contribution schedules.

The government treats the entire catch-up deposit, including interest on arrears, as a contribution. In plans where contributions have been scaled to reach the lifetime contribution limit of $50,000, interest on arrears would push contributions over this lifetime limit, with adverse tax consequences. All prospectuses contain warnings about this risk.

Table A5: Missed deposits, reactivation and termination
	Missed payment, notice sent, no payment made within 30 to 90 days	Reactivation by paying all missed contributions with interest earned in active plans	Termination
CST	Automatic transfer to individual or family plan if contributions paid for at least three years.	Transfer back to group plan possible until maturity.	If not eligible for transfer to individual or family plan, two years to reactive, otherwise plan terminated.
Children's	If enrolment fees paid in full, can request transfer to individual plan before maturity or suspension of deposits.	Within three years, before 16th birthday.	Plan terminated if not transferred to individual plan before missing three consecutive deposits or not reinstated.
Heritage	Request reactivation option, or plan terminated.	Up until 15th brithday; if older, within 6 months from missed payment and up to six months before maturity.	Plan terminated if not reactivated.
USC	Can request suspension of up to 24 months or transfer to individual or family plan.	Before end of suspension and before 14th birthday. Automatic transfer to individual or family plan at end of suspension period if eligible.	Plan 'discontinued" if not reactivated and not eligible for transfer to individual or family plan, and CESG repaid to government. If not reactivated within two years, plan terminated.
Plan Universitas	Automatic default unless suspension of up to 24 months requested and granted.	Before end of suspension period granted. Interest at 9%.	Plan terminated if suspension not requested and granted, and if not reactivated.

Account statements

All five providers issue account statements to subscribers as required under securities legislation. The statement shows the amount of contributions, fees deducted, and the rate of return or investment income earned during the year. As well, all providers undertake to send annual reports and management reports if requested.

C. Withdrawals

Maturity and eligibility

In group scholarship plans, contributions are made over a period of time that is determined at the outset. Each plan has a date of maturity which generally is in the year in which the beneficiary turns 18 (19 in the case of Plan Universitas), i.e., the year the beneficiary would, under normal circumstances, be able to enroll in post-secondary studies. At CST and Children’s, the maturity date is the precise date of the anniversary of the opening of the plan, while at Heritage and USC it is the 31^st of July.

At maturity, contributions are available to be repaid to subscribers, who may, however, want to postpone this action until they have submitted proof that the beneficiary is enrolled in a post-secondary program, since otherwise the CESG has to be repaid to the government. CST allows subscribers to keep contributions in the plan until the final EAP payment, and credits them with market interest until they are withdrawn. Universitas does the same until the first scholarship payment, at which time it pays out interest earned on contributions since maturity. In other plans, interest earned on contributions after maturity goes to the investment income pool.

In the year following the date of maturity, qualifying beneficiaries become eligible for scholarship payments. The year is called the year of eligibility. At CST, eligibility coincides with maturity, and at Universitas, eligibility generally occurs in the year the beneficiary turns 19.

The scholarship payment schedule

All group plans make scholarship payments only for full-time studies at eligible institutions (as defined by government) in Canada and elsewhere. Heritage specifies that the student should be enrolled for at least 6 months per year, and treats correspondence and distance courses as eligible. Plan Universitas pays scholarship only to students enrolled in university or in the technical stream of a CEGEP.¹¹

All plans except CST make payments only for programs that are at least two years in duration. Contributions generally are returned in the first year, and a scholarship payment is made in the second year, except at Universitas where payments start in the first year. A student in a one-year program does not have a claim on the accumulated income of the cohort, but two or more consecutive one-year programs may entitle the student to one or more payments. CST pays out one-quarter of the accumulated income in the first year (Table A6). Universitas makes a first scholarship payment after 12 credits at a university, i.e., one semester.

Table A6: Scholarship payment schedules
Duration	1	2		3			4
Year	1	1	2	1	2	3	1	2	3	4
CST Group Savings Plan (2001)	0.25	0.25	0.25	0.25	0.25	0.25	0.25	0.25	0.25	0.25
Children's Group Option*			1.00		0.33	0.67		0.33	0.33	0.33
Heritage*			1.00		0.50	0.50		0.33	0.33	0.33
USC			0.33		0.33	0.33		0.33	0.33	0.33
Plan Universitas - university				0.33	0.33	0.33	0.33	0.33	0.33
- college		0.33	0.33	0.33	0.33

* Programs of two or three years entitle the beneficiary to 100% of a reduced scholarship amount.

At Children’s and Heritage, the beneficiary chooses a payment option before maturity. The scholarship is paid in full, but the amount of the scholarship is lower for a two- or three-year program than for a four-year program.¹² CST and USC make only a partial payment for programs of two or three years. A study program of two years draws one-half of the full scholarship amount from CST, and one-third of the full scholarship amount from USC. Universitas pays the full scholarship amount in three installments for university programs of three or four years, but makes only two payments for college programs. However, when a college graduate goes on to university, the third installment is paid after some time.

In accordance with legislation, the CESG is paid out in the same installments as investment income earned on contributions. Beneficiaries who do not qualify for scholarship payments do not receive the grant as part of their EAPs, even if they qualify for this under rules established by the government. A beneficiary who receives only a partial scholarship receives the same part of the grant. Thus, for instance, at CST and USC, only four years of post-secondary study entitle the beneficiary to the full amount of the grant, and at Universitas the grant is not paid in full for a college program. The same applies to the CLB and investment income on the grant and bond.

Thus, the grant, bond and related investment income are not pooled. Grant and bond amounts that are not paid to the beneficiary in whose plan the grant was deposited are repaid to the government. Investment income earned on the grant and bond that is not paid to the beneficiary can be extracted by the subscriber through an Accumulated Income Payment (AIP) or is held by the provider until it can be so extracted. If an AIP is not at all possible, the funds are donated to an educational institution. These same rules apply when the plan is closed before maturity.

The amount of the scholarship payment

In the year of eligibility, the group scholarship provider determines how much each Unit held by qualifying students pays out for that year. The amount is the same for each Unit of all qualifying beneficiaries in each cohort group that reaches eligibility.

The net income earned through invested contributions up to the maturity date is the primary source of funds for scholarship payments. The group scholarship payments are augmented using the following sources:

accumulated income transferred out of plans when they closed before the maturity date;
interest earned on the accumulated income of plans that closed, from the closing date to maturity;
accumulated income of plans that reach maturity but do not result in a full scholarship payment;
interest earned on the accumulated income that remains invested after the maturity date to the date at which scholarships are paid;
amounts that are not claimed by subscribers;
at some plans, investment income on contributions from maturity until they are repaid to the subscriber;
a surplus of revenue over cost of operations.

Each fund has its own way of arranging and accounting for these top-ups of scholarship payments. Generally the scholarship trusts have an “enhancement fund” through which some of these amounts are channeled, and some trusts have more than one fund to handle the accounting. The not-for-profit Foundation that sponsors the plan may contribute a surplus of revenue over cost of operations towards the scholarship payments to beneficiaries. The degree to which this occurs varies by promoter.

The degree of discretion exercised by providers in determining the top-up varies according to the source of funds. Income from plans that close before maturity may be directly credited to the subscribers’ pool, but allocation of a share of operating surplus is entirely discretionary.

There is a considerable difference between the providers in the extent to which the funds treat the top-ups as automatic or discretionary. With CST and Universitas, the process is entirely laid down in rules set out in the prospectus, and CST has only one discretionary item: the transfer from operating surplus. Children’s presents the augmentation of scholarship payments, except for income from plans closed at the request of subscribers, as entirely discretionary. The prospectuses remind the reader that discretionary top-ups are not guaranteed and that past amounts are not a guide to future amounts.

To determine the group scholarship amount, the provider needs to know how many beneficiaries in the cohort will be entitled to a full payment and how many to a partial or zero payment, as it redistributes the income earned but not claimed by beneficiaries to other beneficiaries. Beneficiaries are asked to indicate the duration of their studies and provide evidence of enrolment before the beginning of the academic year. The process is repeated for the second, third and fourth scholarship payment. The amounts of those payments may be somewhat different as students may drop out of studies and investment income is earned. However, the scholarship payments generally stay close to the shares indicated in Table A6.

Repayment of enrolment fees

All five providers undertake to repay enrolment fees in whole or in part. Universitas guarantees full repayment at maturity, and takes the funds out of the pool of investment income. The other four repay the fee in installments with scholarship payments, and three of those offer no guarantee that the entire fee will be returned. CST guarantees repayment of 50% of the enrolment fee, and sets aside part of the enrolment fees it collects as a reserve for this purpose.

USC, CST and Children’s distribute the refund evenly over the group scholarship payments. Heritage pays one-quarter of the refund with each of the first two scholarship payments, and the remainder with the third payment. Thus, only students in four-year programs receive the full refund from these three providers, and students in two-or three-year programs, and at CST also those in a one-year program, get only part of the refund.

Table A7: Repayment of enrolment fees
CST Group Savings Plan (2001)	50% guaranteed
	One-quarter of fee with each scholarship payment
Children's Group Option	No guarantee
	One-third of fee with each scholarship payment
Heritage	No guarantee
	One-quarter with first payment and with second payment, one-half with third payment
USC	No guarantee
	One-third of fee with each scholarship payment
Plan Universitas	Full repayment at maturity, guaranteed

Changes in timing

All providers require that beneficiaries indicate their study plans and, if applicable, show proof of enrolment of the beneficiary before the beginning of the academic year. Generally the deadline is August 1. At Universitas it is July 10, and Heritage has a separate deadline for EAP payment applications: August 15.

Providers allow changes in the date of maturity and the year of eligibility to accommodate a different starting date for post-secondary studies. Approval of advancement and postponement of the date of maturity for up to two years tends to be automatically given.

If the maturity date is advanced, the final contributions in the schedule may not be made, and an adjustment is necessary. Most providers convert some of the contributions made up to that point into investment income, thereby maintaining the number of Units in the plan but reducing the amount of contributions. Universitas requires that all scheduled contributions are made before the advanced maturity date. The providers move the plan and the income associated with it to the earlier cohort. Postponement of the year of maturity means transfer to a later cohort.

The year of eligibility is changed with the date of maturity. It can also be postponed after maturity and before the first EAP payment, up until the year in which the beneficiary turns 21, 22 (USC), or 24 (Universitas). By postponing the year of eligibility, the first group scholarship payment is postponed, and the plan is transferred to the later cohort.

Scholarship payments can also be postponed after the first payment has been made. All plans provide varying degrees of flexibility to accommodate different student academic progress. Some plans allow a postponement a year at a time, and some prospectuses advise that postponement of more than one year may not be granted. The prospectuses warn that, under government rules, EAPs cannot be paid after a certain age and that the RESP has a maximum lifetime.

D. Other plans offered by scholarship trusts

Individual and family plans

Every scholarship promoter offers an individual and a family plan or an individual or self-determined scholarship payment option. Some trusts offer both an individual and a family plan or option.

CST and Universitas offer an individual and a family plan, and Children’s an individual plan, separately from the group scholarship plan but through the same prospectus (Table A8).¹³ These plans come with a minimum initial contribution, but without a contribution schedule. The individual and family plans do not have Units. There is an enrolment fee that is modest compared to the enrolment fee for an average group plan. USC offers an individual and a family plan with the same Units and contribution schedules as for its group plan, but these can be abandoned after three years. For an individual plan drawing the CLB or ACES, USC requires no deposits.

CST and USC allow subscribers with a group scholarship plan to transfer to an individual plan after three years, and Children’s allows this after enrolment fees are fully paid. All assets - contributions net of fees, accumulated income, the grant and income earned on it are transferred, and from that moment on the subscriber is no longer bound by a contribution schedule.

Subscribers who switch to the individual or family plan do not pay the enrolment fee for the individual plan, but also do not get a refund of the enrolment fees they paid for the group plan. Universitas allows a transfer to the individual plan before maturity but does not transfer the investment income earned on contributions.

All prospectuses make it clear that under the individual plan or payment option the subscriber forgoes the EAP enhancements available in the group scholarship plan. As well, while enrolment fees may be returned in whole or in part in the scholarship plan, this is not the case in the individual and family plan.

Table A8: Main features of individual and family plans at group scholarship promoters
	Contributions	Enrolment fee	Transfer from group plan
CST Individual Savings Plan and Family Savings Plan	Initial contribution of $150 including enrolment fee, no schedule.	$50 per plan, $25 if plan has CLB.	After three years of contributions, transfer all assets at any time before maturity.
Children's Self-Initiated Option Plan	Minimum of $300 in first six months, no schedule.	$200 per plan.	If enrolment fee fully paid, transfer up to 60 days before maturity.
Heritage Self-Determined Option	Same contribution schedules as for group plan, minimum $4.99 per month.	$100 per Unit, same as group plan.	Select self-determined payment option in last six months before date of maturity.
USC Family Single Student Education Savings Plan and Family Multiple Student Education Savings Plan	Same schedules as for group plan, minimum $9.90 per month, $110 per year or $449 at once. After 3 years, can contribute less or stop. No schedule for new plan with CLB or ACES.	$100 per Unit, same as group plan.	Transfer before maturity until beneficiary turns 19.
Universitas Individual Plan	Initial contribution of $400 including enrolment fee, no schedule.	$200 per plan.	Transfer before maturity without investment income; after maturity with interest since maturity and refund of enrolment fees and must keep individual plan for 12 months.

CST, USC and Children’s present further information that a consumer can take into account in choosing among plans. The CST prospectus shows that compound rates of return for the individual and family plans are several hundred basis points lower than the rates for the group plan. The prospectus explains that in the individual and family plans, the assets are managed to meet short- to medium-term cash flow requirements, while in the group plan investment terms are matched to future liabilities.

A second group plan and an individual pooled plan

Universitas has a second group plan called Plan Réeeflex, and Children’s offers an Achievers Plan, an individual pooled RESP. These plans pay EAPs for more types of studies than the main group plans of the same providers, and the Achievers Plan is more flexible with respect to contributions.

The Achievers Plan at Children’s has these features:

Units worth $465 each in contributions with an enrolment fee of $55 per Unit;
An administration fee of 0.95% of assets (0.5% in a Group Option plan);
No age limit for the beneficiary (a maximum age of 13 years for a new Group Option plan);
Choice of the date of maturity;
Change of beneficiary according to the Income Tax Act;
EAPs are paid for part-time as well as full-time studies, according to the Income Tax Act;
Scholarship payments can be requested at any time after maturity;
Investment income earned on one’s own contributions can be extracted as an AIP.

Subscribers choose a deposit schedule but can change this at any time. They can make catch-up payments of contributions without interest for up to three years. Under a “continuance” option, they can also request a reduction of their contribution level or an end to contributions altogether. The consequence of this is that fewer units are achieved by the maturity date.

The Réeeflex Plan of Universitas has these features:

The same age limit, Units, enrolment and administration fees as Plan Universitas. The contribution amounts are different.
Up to age 21, change of beneficiary to one of the same age or a younger one (In Plan Universitas, this can be done only before the beneficiary turns 15).
After three years and up to 90 days before maturity, the option to switch contributions, grants and investment income to Plan Individuel (in Plan Universitas, investment income cannot be transferred).
EAPs are paid for the same studies as Plan Universitas and also for part-time studies in the same programs, as well as for the CEGEP university transfer stream and for professional training of at least 900 hours.

According to the Universitas prospectus, at the end of 2006, there were 22,243 subscribers to Plan Réeeflex compared to 104,379 in Plan Universitas and 568 in Plan Individuel.

⁹ All RESP providers charge fees. Group scholarship providers charge several fees that have no counterpart elsewhere.

¹⁰ The mechanics differ. CST allows the transfer after contributions have been paid for three years. At USC, the individual plans have the same Units and contribution requirements as the group plan for the first three years.

¹¹ In Quebec, two years of academic training in the “university transfer” stream at CEGEPs await the person who has completed high school and wants to go on to university. These two years of study are not eligible under Plan Universitas.

¹² The prospectuses do not give information about the manner in which the reduction that applies to these “accelerated” payments is calculated.

¹³ Heritage has an individual plan called the “Impression Plan”. It is offered through a separate prospectus and is not referred to in the prospectus for Heritage Plans and therefore is not included in this Overview. The Impression Plan has $0.5 million in assets.

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Date Modified:: 2008-07-25

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