Anyone visiting a doctor’s office, maternity ward or prenatal screening clinic in Canada will likely see pamphlets for CST Fund RESPs, encouraging parents-to-be to start saving for their child’s post-secondary education.
I rarely take notice of such advertisements, and have picked one up and filled it out only once in my life. As a result of that weak, nervous, distracted moment in the waiting room, we found ourselves relentlessly hounded by the salespeople of CST. And, a few months later, we found ourselves signed up for 18 years of payments into the fund.
It was only when we began to prepare for our relocation overseas that we revisited this decision - with regret.
It seems that RESP group plans (such as CST) work well when all goes according to schedule i.e., your kids grow up and complete four years of post-secondary education, AND you continue to pay into the plan until that point. Any deviation from this arrangement, however, presents a problem.
We learned that Canadian law does not permit paying into RESPs if you live outside Canada. Moving to South Africa therefore means stopping our payments. However, stopping payments before university is completed also means losing hefty “enrollment fees” charged by CST. We stand to lose about $4000.
The only way around this is to continue paying into the plan at the same rate to which we originally agreed. Our helpful salesperson recommended that we resume payments when we return to Canada, or (his preferred scenario) by providing a fake Canadian residential address while we are overseas. Hear that Revenue Canada?
I’m not saying CST is a scam. I’m sure it works well if you follow the standard course. But the fine print is extensive and extraordinarily cryptic. Even our financial advisor had trouble deciphering the details. So, I am saying beware. Be aware - before you sign up.
Check out this Georgia Straight article for more information.
I would not sign up for a CST scholarship again for my children. The amount actually received from CST was approximately half what was indicated by the enthusiastic salespersons who contacted us yearly. Upon inquiring what went wrong, I was informed by the head office that “investments had not lived up to expectation and more people than anticipated had applied for scholarship money.” I would have done better to have administered my own plan for the children.
Thanks very much for your comments. I am still very irritated by CST (particularly their sales tactics) and am interested to hear from people who are either satisfied or similarly irritated.
Hi! I am enrolled with CST with both my children and honestly have nothing but good things to say. I would like to inform you of one thing, you CAN lower your payments if you want to continue contributing into the plan. As I recall and what I have read and have been told as low as $9.50/child. If your salesman says otherwise, I would contact head office regarding that. It doesnt hurt to continue your plan, especially when you will lose your enrolment fees. But, I was told all about the loses, gains etc if you leave or stay. I was told in my meeting about it only being good in Canada, to keep it in for at least 10 yrs (maturity) then you can cash out, if I terminate it what I would be penalized, if I stopped making payments etc, I also asked about lower and raising my plans when the going got tough. I dont know if this helps you or not. But, I have heard good things in the end from a large amount of people that have been paid out to this date. I was referred to them, have a great salesperson and my annual statement shows growing numbers…so, I can not complain. But, I also see the downfalls if your life changes…but, if you can make it work still…by having your parents, relatives or someone still contributing…I would try that. I really hope I was help.
Hello Interested Momma and thanks for your comment. I’m glad to hear that your CST is working out, and that you feel well-informed. We’ve not yet decided what we will do upon returning to Canada - other than a lot of research! We were definitely not informed of the consequences of leaving Canada, as that was always a possibility for us and we would have paid attention. Good to know that these plans can work out as promised. Thanks again.
I think it comes down to your sales person and how much knowledge they have regarding the program. The child can go out of country but the primary contributor/children must be residents of Canada and can move from Province to Province. It is very unfortunate that you were not informed about it. I truly believe it is a good program. Just like any product there are negatives and positives just like going to a Bank or and Advisor, there are perks…but then again there are alot of negatives too. Banks and Advisors still charge fees (MERs), have admin fees and transfer fees. The only downfall I found with CST is the upfront enrolment fee…but, then again MERs add up also…and you have 0% chance of recovering those, at least with the Group Program you have at least a 50% chance of recovery and up to 100%…that is a perk in itself:) Good luck with your decision and research, it is so hard to know what to do and what is right…everyone wants to sell their product…right???
An interesting thing: I had a scholarship trust thrust down my throat when my first child was born. Like twinutero, I found a bunch of rules and regulations, and lost about 25% of it when I took it out and put it in an Individual RESP. The Individual RESP is for my children, and if they don’t use it, I get both my contribution and growth back from the plan, to either put in my RRSP, or take as cash.
As I learned more about Individual RESPs, I found more flexibility in it. I can add money, stop paying money, and choose how the money is invested. The money goes to MY child (where scholarship group RESPs go to whomever applies…if your child doesn’t go to post secondary, your growth is forfeited).
A friend of mine got some money out of her group plan just a few months ago…with a $800 penalty because her son didn’t go to grade 13. Begs the question whose child does go to grade 13 in 2007?
I hope interested momma has all continue well with her plan. It just didn’t work for me, given the inherent problems in the product. I know these plans continue to be investigated by the Investment Securities Commission, due to the fees, forfeiture of money, and enrollment fees.
I have a CST Plan for both of my daughters and am thoroughly acquainted with all the rules and have a great CST salesperson.
Read the prospectus! Your contributions are returned to you whether your child goes to school or not, and the growth is paid out to your children if they go to school. If they do not go to school, then you still have the full ability, as in an individual plan, to transfer the growth to your RRSP, or take it out in cash which is subject to CRA taxes.
A lot of people think that it is group plans that have all the rules, but its just that they probably know the rules more than bank salespeople do as they actually specialize in the RESP!
I would do a lot more research on bank RESPs before blindly believing what they have to say!
I have group RESPs like the CST one and love it. I didn’t nor ever expect sales people to know it all .. I do my own research. I say that because panic is not a great place to make choice or fully informed decisions especially when it comes to money (in any venue)!! Please call CST and ask for a senior supervisor to review your experience. I am absolutely sure they want an opportunity to assist you inside of the “rules … CRA’s too” and your personal situation. Junior customer service agents won’t be able to help given you are going off shore. Next: I trade bank stocks so am intimately aware that people misunderstand banks/other financial institutions by assuming they are the “good guys with the sole purpose to help” … LOLLOLLOL … please don”t be naive and think those guys are in it for you. Ever. That no matter where you are in the world is dangerous. If you doubt me, become a shareholder and benefit from their stocks (especially now!) and watch your money triple over 3-5 years. That should speak to what their (banks, insurance, financial products etc.) motivation is … Finally: Group RESPs are just as reputable and ethical and flexible if not more credible because they are actually much more tightly scrutinized of late. You just have to get a senior customer manager to ask about your personal situation; all RESP are not simple especially when you make such a dramatic life change. There are options though I know it. CST TOOO! Ex: You could pay up your plan … you could stop and have it on hold etc. HOWEVER: If you don’t ever intend to come back to Canada then you cannot expect to reap benefits from a financial program designed for Canadian Residents if you don”t live here. That maybe where the misunderstanding started. Said with DEEPEST RESPECT. KJ
Mommaoftwo,
Thanks for your comment and glad to hear you have had a good experience with CST. Just to be clear though - we aren’t so much concerned with our contributions (the fate of which is relatively clear in the prospectus) but rather the enrollment fees - which are non-refundable if we withdraw from the program or do not return to Canada. It was this point that was not made clear to us.
KJ,
Thanks also for your comment. We will, no doubt, follow up with a senior person at CST. But also to be clear: we aren’t expecting to reap the benefits of a program designed for Canadian residents while we are living abroad. What we want is our hefty enrollment fees returned to us BECAUSE we are not eligible for the program from abroad.
Clearly, we should have been more conscientious when signing up; read the prospectus with a legal eye and an 18-year vision of what our lives might hold. We didn’t (our child was literally days old when the sales calls began) and the finer points were not explained verbally by our salesperson.
The point of my original post is to say: read, ask, read, ask and think carefully before signing on!
Hi,
I’m a sales rep of almost 5 yrs and a previous beneficiary of the CST plan.
You should call head office at 18773337377. When a family moves overseas and is no longer able to make deposits into a plan, CST will convert the plan to a fully paid plan, (lower units but also lower enrollment fees). THis will be based on the time and total contributions to the plan. Then you can let the plan sit and grow and the child can put it to use once they are a qualified student. It is a CRA rule that deposits cannot be made by non-residents, and CST does not want to penalize families because of this.
I don’t know your story 100%, but call head office and talk to them about your options. Customer service reps at the head office are salaried and do not rely on commissions.
Jason
Thanks very much Jason - that’s helpful information. We will definitely follow up as you suggest.
We did, by the way, speak to folks at the head office before leaving Canada but will be more persistent next time. Thanks again.
“interested momma” and “mommaoftwo” seem overly knowledgable and unusually positive about the C.S.T. Why would such positive investors be searching for blogs that discuss problems? If they are indeed posts from CST employees, I think it’s pretty sad and very telling about the company.
I’ve personally had my share of frustration with the C.S.T. and their costly “exit” policy that is buried in their prospectus. The programme is unnecessarily complex. I very much regret signing up. I feel the sales rep really snowed me. My hands are tied now; I don’t want my son’s savings to take the $4000 hit by moving the investment to another institution.
I recommend sticking with traditional investments from banks and other like providors. If you’re concerned about safety of investment, you can opt for safe securities (e.g. no stocks).
By the way, I very much appreciate comments - both supportive and those that disagree. I won’t, however, approve comments that are rude, especially if the writer hasn’t read the post and other comments carefully.
Thanks for the information - I found your site after searching for more information on CST. My wife got a call from a CST rep today, and while we’ve decided to stick with RESPs through the bank because of the flexibility, we were curious about how CST got our phone number. It seems a bit predatory to be calling up frazzled new parents and offering them security for their child’s education fund, but how did they get our child’s name to begin with?
Was it our health card application? Or the social insurance number? Or the birth certificate application? And why would the government be giving out this information? Just curious if anyone has further information on this aspect…
Good point dadoftwo, I was wondering how they got my name as well. The person who first contacted me was from my small town but the actual salesperson was from a nearby bigger city. I am confused as to whether to buy RESP’s through CST or to go through my bank. After reading all the previous posts I am tginking the only place my money will be safe is under my mattress lol. I am trying not to be cynical but the CST plan does sound too good to be true. Help!!!
I’m pretty sure its the hospital selling people’s info. I was warned by friends about this right before I had my daughter! And it was true, I had soooooo many calls from resp companies, pretty much harassing me all the time. But CST got my info from somebody from the Welcome Wagon I think. :S I’ve signed up with them because it seemed better than a bank (because of the economy, and where they invest your money) but my daughter’s only a year old now so I haven’t had much experience at all either good or bad so far.