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How Much Are RESP Maintenance Fees in Canada?

By Pushpinder Puri, September 05, 2024, 6 Minutes

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How Much Are RESP Maintenance Fees in Canada

Planning for your child’s education is one of the major essential financial moves a parent could make. The RESP is a great way to save for it in Canada, but with it, just like any other investment, there is an associated cost. So many families come to us at Canadian LIC, and they’ve all had the same sort of struggles: How much does it cost to keep an RESP? Will these impact their savings? What’s behind the curtain? If you have ever wondered about all these things, know that you are not alone. Here, you will learn about some common concerns around RESP maintenance fees, what the reality is, and why choosing the right provider makes all the difference.

The Initial Struggle: RESP Fees Are a Mystery

However, when it comes to Canadian families looking to save for their children’s education, one could say that the RESP makes for a perfect middle option. Of course, it offers tax-sheltered growth and government contributions, like the Canada Education Savings Grant, which have really encouraged the savings rate. But here’s where the common challenge kicks in—fees. One of the first questions we get from parents is, “How much will RESP maintenance fees cost me in the long run?”

We see this all the time at Canadian LIC. The clients want to start building a healthy future for their kids, but it gets slightly overwhelming when they hear of management fees, service charges, and other costs associated with opening and maintaining an RESP. To some, these could be funds eating up into their hard-earned savings. But then, when you break it down, obviously, how these fees work, why they exist, and how to not overpay is simple. All right, take it one step at a time and understand how much you might end up paying.

Different Types of RESP Fees Explained

Different Types of RESP Fees

The type and amount of fees one will pay when opening a Registered Education Savings Plan in Canada largely depends on the provider. Fees can be divided into three broad categories:

  1. Account Setup Fees
  2. Management Fees
  3. Transaction and Service Fees

Understanding each fee type can help you avoid unnecessary costs. Let’s explore each one in more detail.

Account Setup Fees

Setting up an RESP is not always free. Some providers charge a preliminary account set-up fee to get the process underway, which may also vary depending on where you originally opened the account. Banks or other financial institutions could charge one flat fee for setting up your RESP. At Canadian LIC, however, we have had some clients who can find providers with no upfront charges, which makes the process much more affordable right from the very start.

One of our clients, David, came to us after a very annoying incident wherein a provider charged him $100 just to set up an RESP. He later realized that better options with no setup fees were available. Of course, this is a cost one should take into consideration before committing to a provider.

Management Fees

This is where many families need clarification. The management fees, also known as MER(Management Expense Ratio), are the ongoing costs applied by the institution managing your RESP. A MER pays for the investment management and administration costs. Depending on whether your RESP is a mutual fund, a group RESP, or an individual account, it will have a MER between 1% to 3%.

Here’s an example of the sort of real struggle we’ve seen. Take this client of ours, for instance, a mother of two who was paying close to 3% in management fees for her group RESP. Over time, that fee significantly reduced her earnings, and she did not even realize it until we sat down to review her RESP. She felt frustrated, thinking she was doing everything right. That is why it’s better to check into Savings Plan Insurance for Education and make sure you research all the management fees associated with it before you enroll. You don’t need or want to pay more than you have to for your child’s future.

Transaction and Service Fees

Besides the management fee, there may be smaller fees for some transactions. Some will charge to take money out, change eligible beneficiaries, and even the simple service of receiving RESP statements by mail. These smaller fees are usually a couple of dollars at most, although larger ones can also apply for more complex transactions.

One of our clients was alarmed to find out that each time she made an adjustment in her contribution, there was a charge from the provider. This added up over time, and she felt like she was being charged for trying to manage her child’s education savings. Canadian LIC always advises clients to read the fine print and be aware of such hidden service charges.

Group RESPs: The Fee Trap

Another area of caution we give to many parents is group RESPs. While the plans promise access to pooled savings, they can be fraught with higher fees and more stringent rules. Most parents who come to us after signing up for a group RESP tell us that they had no idea there are various charges that include contribution penalties, plan cancellation fees, and high administration costs.

For instance, one family we worked with was paying close to $150 annually in maintenance fees for their group RESP, on top of losing some government grants due to missed RESP contributions. Coming to us, we could help them move into a much more flexible RESP with considerably lower fees. Their frustration was understandable, but knowing the right questions to ask helped them make a better choice moving forward.

How to Minimize RESP Fees: Strategies from Canadian LIC

At Canadian LIC, we always focus on helping clients maximize their savings while minimizing unnecessary costs. Here are some practical strategies to keep in mind:

Compare Providers

Not all RESP providers are equal. Before signing up for an RESP, compare different financial institutions, online platforms, and insurance brokerages. Look at the fees, flexibility, and ease of access to your funds

For example, some banks offer RESP Quotes online, allowing you to see the fee structures and compare them to others quickly. Some institutions, like credit unions, may have fewer fees but offer fewer investment options.

Choose the Right RESP Type

There are three main types of RESPs: individual, family, and group plans. As we’ve discussed earlier, group plans tend to have higher fees and stricter rules. An individual or family RESP may offer more flexibility with lower fees, especially if you plan to manage your investments actively.

Look for No-Fee RESP Accounts

Yes, they exist! Some providers offer no-fee RESP accounts, which means you won’t have to worry about paying annual fees or setup charges. However, these plans may limit your investment options, so you need to balance the low fee with the potential for lower returns.

Watch Out for Penalties

Missing contributions or withdrawing funds before your child is enrolled in a qualifying education program can result in penalties. Always read the terms carefully to avoid penalties that can eat into your savings.

One family we worked with at Canadian LIC shared that they were unaware that withdrawing funds early would mean losing the government grants. They ended up paying fees and having to repay part of the grants, which added unnecessary stress to their financial planning.

The Impact of RESP Fees Over Time

When any of us at Canadian LIC discuss the RESP with parents, one of the key things that always arises is the long-term consequences of fees. On the surface, the fees associated with an RESP seem rather inconsequential. When you begin to think long-term, though, these fees can make a big difference in your child’s education savings. Let’s break down how these costs can add up and what you can do to keep them under control.

Here’s why it matters:

Small Fees, Big Impact Over Time

It is amazing how even small fees- a 2% annual management fee, for example- can nibble into your savings over many years. For example, if you have $25,000 in your RESP, a 2% fee will cost you $500 per year. Over ten years, that is $5,000-money that could have gone toward your child’s tuition or books.

It was a big surprise for one of our clients at Canadian LIC that such fees would actually result in such a big impact. He had no idea how his savings were being reduced until we went over the details with him. This is why it’s crucial to understand the long-term effects of these fees early on.

How Fees Affect Your Returns

The dollars and cents you pay to a fee don’t earn a return; they don’t grow. Over time, that can take away from your overall returns. If your RESP earns 5% a year, but you pay a 2% fee, then your net return is only 3%. That difference adds up, especially over 10 or 15 years.

At Canadian LIC, we often deal with families who, because of high management fees, have to suffer through lower returns than expected. By the time we go through their plans with them, we tell them that picking a plan with lower fees will increase their savings quite significantly over time. That is why you need to take a closer look at those fees once you get your quote from the RESP provider.

The Value of No-Fee or Low-Fee Plans

Some RESP providers offer registered accounts that have low fees or no fees at all, and that starts to make a big difference over time. Those no-frills options might offer fewer investment choices in return, but they let more of your money stay in the account, working for your child’s future.

At Canadian LIC, we have seen many people save several thousands of dollars over the life of their RESP simply because they moved their RESP to a lower-fee option. There was one family that was very pleased when we were able to hook them up with a no-fee RESP due to how much more they could save within it towards their child’s education. It would be best if you took a moment to compare fees before making your final decision.

The Compounding Effect of Fees

Fees not only reduce your savings directly, but they also take away from the compound growth of your investments. The less you pay in fees, the more money you have growing and earning interest. And over time, even a small reduction in fees can mean a considerably larger balance.

Look at the difference in the fees alone: 1% doesn’t seem like a lot, but over 15-20 years, that equates to thousands of dollars more going into your account. One client we had, who was paying among the highest possible fees, was astounded when we told him how much he could have saved with a lower-cost plan. However, once they switched to a more affordable option, their RESP started to grow much faster, and they became much more confident about the future of their child.

Hidden Fees: Know What You’re Paying For

It’s not just blatant fees, like MERs, you have to look at. Most of the RESP providers charge for making changes to your account, switching investments, or withdrawing funds. All these are extra hidden fees that you’ll have to pay, and it does add up, especially if you make frequent changes.

Many of the families we see coming to Canadian LIC have been blind-sided by these added fees. We’ve had one client who was paying a fee every time they made an adjustment to their contributions, and until we reviewed their plan, we did not realize how much that was costing them over time. When you select a provider that has fewer peripheral fees, you can easily avoid these extra fees.

Reducing Fees to Maximize Savings

Of course, it goes without saying that the less you pay in fees, the more you can save for your child’s education. If you are aware of the type of plan and the fee structure associated with it, then you can keep more of your hard-earned money in the RESP. That can make quite a difference for your child later on, especially in terms of when the child will finally need to pay for post-secondary education.

At Canadian LIC, we help our clients with all these decisions day in and day out. You can get insurance that actually works for your family without adding hefty additional fees by choosing the right insurance for education savings plans and comparing different RESP providers. We have helped many families save more in this regard by making those smart decisions well in time.

Your RESP Quote Matters

When seeking a quotation from various RESP providers, be sure to ask about all the associated fees. Do not be satisfied with just knowing the setup fee, but go further to find out what ongoing management fees are there and what hidden charges could be lurking about. The right plan will balance out the lowest possible fees with good investment options so that your savings can grow effectively over time.

Too many families have fallen into the trap of signing up for the first RESP that comes their way, only later to be disappointed with the high fees. Canadian LIC is one brokerage that advises its clients to take all the time they need to compare quotes and ask questions before committing to a plan. This is how we can assure ourselves that they will end up with a Registered Education Savings Plan in Canada that really fits their needs.

Reviewing Your Plan Regularly

It only makes a lot of sense that once you set up your RESP, you check on it from time to time to make sure you are not paying into an RESP any more than you have to pay in fees. Markets fluctuate, and so do the fee structures, so keeping track of how much you pay will be to your benefit. You may find opportunities to move to a lower-fee provider or ways to adjust it, which will serve your savings better in the long run.

One of our clients did not notice that their provider had increased the fees until they took a closer look at their statement. We worked with them to change them to a better plan, and within months, they were already seeing more of their money staying within the account. Regular reviews can help one stay on track and reduce extra costs.

Long-Term Growth Requires Careful Planning

RESPs are designed to grow over time, providing a solid foundation for your child’s education. But to get the most out of your RESP, you need to be aware of how fees impact your savings. By choosing a plan with reasonable fees and regularly reviewing your account, you will make sure you make the most out of it.

Canadian LIC is dedicated to helping families find the best RESP solutions to fit their needs. Whether you’re just starting or optimizing an existing one, we’ll be privileged to guide you through each step.

So Save Smart To Avoid Unnecessary Fees

RESP fees might seem like a minor thing, but over longer periods of time, they add up considerably and can make all the difference in your savings. Fortunately, with the choice of a good provider and keeping a keen eye on the fee structure, you can minimize these costs and maximize your child’s education fund. At Canadian LIC, we see this firsthand: how important it is to get this part of the process right. Paying attention to fees is a great way to set your child up for success without sacrificing your financial goals.

If you’re ready to start saving for your child’s education with a focus on affordable fees and long-term growth, Canadian LIC is here to help you every step of the way.

Finding Affordable RESP Solutions with Canadian LIC

If there is anything that we have learned from working with Canadian families, it is that saving money for a child’s education is of the essence, but finding a suitable plan that comes with somewhat affordable fees is not always so easy. Families come to us with stories of high fees and complicated RESP plans that keep them feeling disheartened. But with the right guidance, those struggles can very well be turned into the success of financial plans for your child’s future.

Canadian LIC focuses on obtaining the best return from a Registered Education Savings Plan for our clients without overpaying the fees. In light of this fact, we work closely with you to find the most suitable RESP solutions that would meet your financial goals while keeping the fees transparent and controlled.

Ready to Save Without the Stress?

Your child’s future shouldn’t be set back because of the RESP fees. Canadian LIC offers a variety of RESP solutions with reasonable fees and an effective manner of saving. When you’re ready to explore your options and secure a bright future for your child, our team is here to guide you through every step of the process.

By choosing Canadian LIC as your partner, you get a brokerage firm that puts your financial health and your child’s education first. So, start saving with confidence and take control of your RESP today!

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FAQs about RESP Maintenance Fees in Canada

Here are some of the most frequent questions regarding RESP maintenance fees, using real experiences we at Canadian LIC have seen when working with our clients. We’ll help you understand how the fees will impact your Registered Education Savings Plan in Canada.

RESP fees are the costs associated with managing and maintaining your RESP account. They can include enrollment fees, annual administration fees, and even per-transaction fees. We at Canadian LIC do find that sometimes clients were not clearly briefed on such fees when they signed up for their RESP; thus, sometimes, later on, they get shocked knowing the charges.

You will be charged management fees, also known as MER, every year, depending on the amount of money you have in your RESP account. For example, if you have $25,000 in your RESP account and you pay 2% in management fees, that’s $500 a year. After ten years, this equates to thousands of dollars. It’s true that you need to choose a plan with low fees so more of your money is directed toward your child’s education.

Some RESP providers do offer no-fee or low-fee accounts. At Canadian LIC, we try to help all our clients find those plans to make the most of their savings. No-fee plans may offer fewer investment options, but they can still be a great avenue for saving without paying more than you should.

There are a lot of stealthy hidden fees, such as the transaction or service fee, which may silently chip away the money in your RESP. These might include administrative fees for contribution changes or withdrawals. Some of our customers did not know they were being charged a fee every time they updated their account, and over time, it added up. Always ask your provider for a clear breakdown of all possible fees.

To save on costs, first, compare the number of RESP providers and their respective fee schedules. Some have plans that are low-cost or no-cost. Secondly, by limiting the number of transactions or changes made to your account, service fees can be avoided. At Canadian LIC, we always advise clients to closely review the RESP Quote they are given to identify where costs can be saved.

Fees won’t just reduce your savings; they can also gradually reduce the growth of your investment. If your RESP earns 5 percent per year and you’re paying a 2 percent management fee, that translates into a net return of only 3 percent. Over a long period of time, the difference can take away big chunks from your savings. Opting for a plan with lower fees lets investments grow better.

Yes, group RESPs are often more expensive and have more restrictive rules. We have a number of clients who switch over to an individual or family plan because of the overwhelming extra costs of group plans. Group plans sound like they would be a great option, but the fees add up fast.

When looking to get an RESP Quote, ask about all potential fees: setup fees, management fees, and even transaction fees. Make sure how those will continue to affect your savings later on is clear. At Canadian LIC, we always make sure to remind clients to get full cost breakdowns prior to committing to an RESP plan.

Yes, you can transfer your RESP to another provider if you find one that has a lower fee. There could be some providers that will charge a fee to transfer it. Keep that in mind when making a decision. We’ve helped many families at Canadian LIC successfully transfer their RESP to one with lower prices without losing their savings.

If you find that fees are reducing your RESP savings than you think they should, or if your returns are coming in lower than you expected, then you might be paying too much. At Canadian LIC, we often check back with our clients about their RESP plans to ensure that they have the best deal and aren’t overpaying fees.

Some RESP providers will charge a withdrawal fee, particularly if the withdrawal is not for educational purposes. One of our clients was feeling anxious about getting access to their early savings and was shocked by the RESP withdrawal fees charged by their provider. Prior to taking such a step, take some time to go through your RESP plan for details relating to withdrawal fees.

With some providers, there’s an inactivity fee if one does not regularly contribute. Here at Canadian LIC, we have seen many clients who were subject to this inactivity fee because they were unaware their RESP plan had such a requirement. The best way to get yourself exempt from these charges is to ask about the contribution requirements of your provider when you obtain your quote for the RESP.

No, there are different fees for RESP providers. Some charge for setup, annual administration, or management fees. Others offer no-fee plans. As always, we here at Canadian LIC recommend that you compare many providers to suit your financial goals with the least amount of fees.

While self-directed RESPs might give you more control, they will often still come with some kind of fee. The truth is, even though you administer the investments yourself, you still might be required to pay a management fee on the account or a transaction fee each time you buy and sell investments. Canadian LIC helps its clients determine whether a self-directed RESP is worth the potential fees based on their financial situation.

No, government grants to the RESP, such as the CESG, do not cover the fees of the RESP. Those are provided to supplement the money that you save for your child’s education, not to pay the fees. We have one client who thought that if she got the grant, this would offset most of the fees, and we had to correct her that fees still apply to her accounts and that she should get a reasonable fee plan to maximize her savings.

These can vary a great deal from one provider to another. The management fees generally range from 1% to 3%, but some plans will also charge for administrative or withdrawal fees. Many times at Canadian LIC, we see a family paying more than they have to in fees, which is why we work with them to find more affordable options for their Registered Education Savings Plan Canada.

Your RESP provider should be able to give you full details of all the fees associated with your account. If there is confusion, request a clear statement showing every hidden charge cost. We once reviewed one of our client’s RESP fees and, quite frankly, were surprised to find that they were paying several hidden charges they had no idea about. These are things that need periodic reviewing.

Some RESP providers do have a transfer fee when you decide to transfer to another institution. At Canadian LIC, we have transferred many of our clients to providers that charge lower fees, but we will always make our clients aware of any penalties before we do so. Sometimes, the savings from lower fees may be greater than the transfer costs.

Yes, RESP fees can vary depending on the provider. Some may increase their management or administration fees, while some may introduce new charges. That is why it always pays to review your plan on a regular basis. One family we were dealing with at Canadian LIC hadn’t reviewed their RESP in years and found out that their fees had increased. We helped them find a better option that suited their budget.

If your child doesn’t pursue post-secondary education, you may face fees when closing the RESP. Additionally, any government grants would need to be returned, and you could be charged for withdrawing the earnings. One of our clients was worried about this situation, and we explained that choosing the right Savings Plan Insurance for Education can provide flexibility in case their child’s plans change.

These FAQs address the most common questions and concerns of Canadian families about RESP fees. Be informed, and with the right questions, ensure you get the most out of your Savings Plan Insurance for Education to secure your child’s future without extra, unnecessary costs.

RESP

Sources and Further Reading

For readers looking to dive deeper into RESP maintenance fees and how to optimize savings, here are some trusted sources and further reading materials:

  1. Government of Canada – Registered Education Savings Plans (RESPs)
  2. Canadian Securities Administrators – Understanding Investment Fees
  3. Canadian Education Savings Grant (CESG)

These sources provide valuable insights into RESP fees and how to navigate them effectively to maximize savings for your child’s education.

Key Takeaways

  • RESP fees can have a significant impact on your savings over time. Even small fees can add up and reduce the funds available for your child’s education.
  • There are several types of fees to watch out for, including setup fees, management fees (MER), and transaction fees.
  • Group RESPs often come with higher fees and more restrictions compared to individual or family plans.
  • Choosing a low-fee or no-fee RESP can make a big difference in how much you save over time, allowing more of your money to grow.
  • Always review the RESP Quote carefully to understand all potential costs before committing to a plan.
  • Regularly check your RESP for hidden fees and evaluate if switching to a lower-fee provider could be beneficial.
  • Savings Plan Insurance for Education and working with an experienced brokerage, like Canadian LIC, can help you minimize fees and maximize growth.

Understanding RESP fees and managing them effectively can make a big difference in your child’s future education savings

Your Feedback Is Very Important To Us

We want to understand the challenges you face with RESP maintenance fees to better assist you. Please take a moment to answer the following questions:

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    2. Feedback Questions

    1. Have you opened a Registered Education Savings Plan (RESP) for your child?





















    Your feedback will help us better understand the challenges Canadians face with RESP fees and how we can improve our services. Thank you for sharing your experiences!

    The above information is only meant to be informative. It comes from Canadian LIC’s own opinions, which can change at any time. This material is not meant to be financial or legal advice, and it should not be interpreted as such. If someone decides to act on the information on this page, Canadian LIC is not responsible for what happens. Every attempt is made to provide accurate and up-to-date information on Canadian LIC. Some of the terms, conditions, limitations, exclusions, termination, and other parts of the policies mentioned above may not be included, which may be important to the policy choice. For full details, please refer to the actual policy documents. If there is any disagreement, the language in the actual policy documents will be used. All rights reserved.

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