Anyone visiting a doctor’s office, maternity ward or prenatal screening clinic in Canada will likely see pamphlets for Canadian Scholarship Trust 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.
As an investment manager with 25 years in the industry, I frequently have to counsel the victims of CST and similar plans. The only people who make serious money from these things are the reps that sell them. Who, by the way, have about the lowest level of licensing requirement in the entire financial services industry. The RESP is a flexible, tax-efficient vehicle for your children’s education that can be as simple or as complex as you like – just like an RRSP. It’s really just a ‘box’ and you get to choose the investments you put inside – cash, GIC’s, mutual funds, even stocks if you really want to get really sophisticated. Even if you stick with good old-fashioned interest-bearing cash, the government’s contribution is like getting a 20% return right out of the gate! If you want something simple, or are confident about picking your own investments, go to your bank. If you want more complexity, see a financial advisor (PLEASE check credentials and get references first). But under NO circumstances lock yourself into an inflexible, overly complicated, high commission-paying, oppressive contractual obligation like CST.
Contributed from 1989 to 2006, since our daughter was 1 year old.
She will be going into her third year post secondary come September. Our first statement indicated that based on the 1990 amounts, we should be getting 10.5k, 10,5k, and 10.75k for the next three years after the initial payment from our investment. We realize that the prospectus states the following: ‘The value of each unit is determined by yields on investments, participation rates, investment income from terminated plans and monies from the General Fund. The Canadian Scholarship Trust Foundation cannot predict or guarantee the EAP amounts that will be available to qualified students in a given year”. Last year, the cheque sent to us for her 1st Education Assistance payment was only about 36 % of what was the estimated value. We’re very disappointed as we had hoped for a greater return for our investment, especially after 18 years. Has anyone else experienced what we are experiencing? If so, your thoughts?
Stephen Smith and AB,
Thanks for your comments and very helpful information. I would be interested to hear from more people with good/bad returns on their investment, as well as from people like Stephen who are in the business.
I am a new dad and considering CST. As a family, we are undecided as of yet, but CST seems like the best plan to me. I don’t have any intention of leaving the country and there seems to be a variety of options for me if my child chooses not to go to school, or chooses a part-time vocational program. My wife and I grilled the salesperson for 1.5 hours and he was quite helpful.
One fact I can add to the discussion relates to purchasing marketing data. I know positively that the company handling our baby shower gift registry has sold our contact information and expected due date to corporations. We were told by a photographer that she directly purchased our information from this company. I don’t believe the hospital or the government has sold our information since we did not sign a release allowing them to do so.
Here is a further comments from PC Hamilton:
To Author: P,
You will note several comments (including my own) about how very disappointing the financial returns of the CST can be; one of my children got nothing and the other received about half what the salespeople continued to suggest right to the end was a “highly likely” return. Be aware that you are giving up every vestige of control over the funds you hand over to CST. I deeply regret not having placed my money in, and retaining control of, registered educational plans with my local bank. Both children would have been far better off.
Paul C. Hamilton
I’ve not taken the trouble to track exact numbers, but many, many times I have seen people have experiences very similar to AB. In fact, I can say that the only people to speak positively of their experience are those that have yet to discover the harsh differential between the benefits they receive and those they were promised, or ’sold’ to expect.
From an ethical perspective, I find the mathematics of these plans nothing short of predatory. I’ll try to explain with minimal jargon……
Because the investments do not have prices in a traditional sense (like mutual funds or stocks) they must be viewed as a ‘participating’ program. This means the pool of capital in which investors ‘participate’ is subject to many factors, one of the most significant being the huge penalties or contributions that are forfeit by investors that decide, or are forced by circumstance, to take their benefits early or discontinue their contract. The projections used by the sales people include (historically at least) overly ‘optimistic’ assumptions about how many investors will suffer these misfortunes. Therein lies the ethical dilemma; the only way you CAN have a positive outcome from one of these things is if more people than expected are deeply disappointed.
If anyone would like to propose a single advantage that these plans have over a traditional RESP, I would be glad to refute it.
Sorry for the negative tone. I’m actually quite a happy, optimistic person, delighted to be the father of twins!
Thank you for your thoughtful responses. It definitely has given us pause as to whether we would ever recommend this savings approach. I contacted CSTF and enquired about the low returns. I was pleased to see a prompt reply from one of their specialist, but the news is not good. Thank you Stephen for shedding another perspective to the issue.
Here’s CSTF’s response:
Thank you for your message regarding the value of ****’s Plan.
When you first set up your Plan in 1989 the Education Assistance Payments we awarded to students who had a similar type Plan as **** was $10,000.00 per academic year. It is important to note that these Plan holders had been investing during the previous two decades when interest rates were at their highest. In addition, there were less students attending and continuing with post-secondary studies at that time.
The Securities Commission prevent us from predicting the value of the Education Assistance Payment, so the value we provide to you is based on current amounts. Since 1989, the value of the Education Assistance Payments has steadily declined; this has been noted in each annual statement. If you refer to your last statement of 2007, we indicate the illustrated value of around $23,000.00, which is a truer reflection of the current amount.
We agree that contributions have increased since 1989; however, this has no impact on the participation rate. This rate is based on the number of units paid to students who qualify for Education Assistance Payment. As mentioned above there has been an increase in the number of students attending and continuing with post-secondary studies since 1989.
Due to the lower interest rates we have experienced, there has been an adverse effect on both the Education Assistance Payment pool and the General Fund. In addition, the participation rates have increased considerably. As a result of these factors, the overall Education Assistance Payment value has decreased.
According to the standard investment restrictions and practices contained in the Tax Act and National Policy No. 15 of the Canadian Securities Administrators, we can invest in:
- Guaranteed Investment Certificates.
- First mortgages
- Bonds
- Government of Canada Treasury Bills.
We agree these investments are in the low risk category. We consider this to be positive, as you can to be certain that your principal and income earned is secure and is available when Kye needs it most for her post-secondary studies.
Even though the Education Assistance Payment values are less than in 1989 it is still extremely competitive. This is particularly true when you consider the relative security of the investments and the flexibility of your Plan.
Questions? Please call our Customer Care Centre from Monday to Friday, 8am to 8pm Eastern Time.
Stephen and all: your thoughts???
Thanks.
AB
I am a licensed group RESP sales rep for 20 years looking for positive reviews on Group RESPs. I guess I have to write my own because very few people out there understand what they are talking about. I started working in the industry after enrolling my two daughters into one of the Group Savings plans. At that time there was no CESG, NO transfer flexibility at all; i.e. if my kids did not go to post-secondary then I only received the principle.
This did not bother me because I knew my children would need a post-secondary education of some kind. Today-wow- a 20% grant and if the kids don’t go then ALL of the income can be transferred to an RRSP or withdrawn as an AIP.
So, why all the negative reviews? The Group Savings Plans started in 1960! This IS the traditional RESP–the starter of them all! Think about how you are drawn in by advertising and how much that costs the companies trying to get your business; banks, etc.! The Group Savings Plans cannot afford this because the plans are not-for-profit so they rely on the sales force to help parents. And we are doing a great job, because ALL of my clients whose children qualified for Education Assistance Payments starting in 2006 for example did not lose any of their money during the 4-year payment period when the stock market lost 30% of their money (2008) in a mutual fund or self-direct RESP. Can you imagine how you will feel when its time for your child to attend post-secondary only to find out that you have lost principle, grant, income, and paying fees anyway every year at the min. rate of 2%MER to manage your portfolio (you are paying this even if you don’t know it). Are you aware that a recession occurs on average every 5-8 years since 1948? Therefore in an 18 year period you can expect 2-3 recessions on your money? In a Group Savings Plan you will only expect growth-steady growth because it is a very low risk–putting you further ahead.
Re: the loss of enrolment fees–in ANY RESP–banks, insurance, fund investments, etc., you will lose fees if you leave the country. Same with your RRSP–if you leave the country the government will tax you back at your current tax rate + 15-20% if you do not live here and cash out, and there is never a refund of fees paid for service! This is a registered plan; a special benefit for Canadian Residents, not for Canadian citizens who do not live here.
This is only a smidgeon of what I have to say about this.
One thing to remember; a group savings plan is the BEST way to save for your child’s future post-secondary education if that is your goal. At this time I can tell you this from personal experience as I am currently cashing out at a very postive rate of return and have never lost anything.
AB’s customer service contact and ESGB raise a number of interesting issues. I have no intention of entering an unproductive battle of opinion here but it may serve the readers to address some of the facts:
1. CSA National Policy 15 put prospectus constraints on the investment composite of scholarship plans in an attempt to preserve capital for unitholders. This has been broadly unsuccessful as evidenced by the fact that many have received only 30% of the expected return from investments that were essentially fixed income in nature and not subject to equity market risk. Canadian interest rates from 1989 to date are very close to the long-term average.
2. Interesting point – Paragraph (7) of NP 15 attempted to constrain the distribution costs:
“The fees charged, including the commissions of the distributor and its salesmen, must not exceed $200 per plan. The first $100 paid under the plan may be applied against this fee and the balance may be deducted at a maximum rate of 50% of each of the further contributions.”
This also was unsuccessful as the plan operators devised a structure that enabled them to levy commission and other fees on each ‘unit’ within the same plan.
3. Comparisons to the stock market are unhelpful. While you certainly can put equities in an RESP you should only do so with a clear understanding of the risks and timelines involved. Why not use GIC’s, Bonds & T-bills yourself? Your return will be higher as you don’t have the overhead of the plan provider’s sales and admin costs.
3. It is also unhelpful to draw a comparison to expensive retail level mutual funds with an MER of 2%. What about ETF’s at 0.4%?
4. None of the RESP’s I’ve seen charge enrollment fees. So I’m not sure how you lose them if you leave the country.
5. If you do need to leave Canada, please don’t cash in your RRSP until you have qualified for non-resident status. Then you will be subject only to the witholding tax which will almost certainly be lower than the credit you received for the contribution.
Credit to ESGB for the solid sales pitch. These plans have indeed been around for many years so clearly it is very effective.
We have had this plan for both of our children. The annual statements were quite diferent from the reality of actually getting anywhere near the dollar amount projected over the years. The highest amount was between 65-70% of projected amounts. The worst case was closer to 55%. This was quite disappointing. When calling the cst to find out why the large discrepancy, the 2 standard answers were either that more people applied than was projected or that the investments they were involved in hadn’t paid as much of a return as anticipated. The bottom line is that while the projections look “rosy”, the reality won’t be when it’s time to actually start getting cst monies. The most recent payment(2009) was again in the 55% area.
Wow Stephen Smith, seems like you have a personal vendetta against group plans. Have you lost sales to them in the past?
I wasn’t going to post anything else after my February 14 submission, but I do take offence to some of your comments. I’m sure you want what you think is best for your clients and are probably a fairly pleasant person, but to make statements about people you don’t know is quite unfair.
You wrote:
“As an investment manager with 25 years in the industry, I frequently have to counsel the victims of CST and similar plans. The only people who make serious money from these things are the reps that sell them. Who, by the way, have about the lowest level of licensing requirement in the entire financial services industry.”
Come on Stephen, “frequently council the victims”?
As a beneficiary of the plan, I feel that my parents and I were far from victims. My EAP’s through CST helped me during my University years, and so I signed up and started a plan for my son when he was only a week old. (I became a rep 3 months later)
As a rep, I have talked to people who were not happy with their plans at financial institutions, be it under performing, loss of principle, or the fact that they were pushed into high risk investments, most not having a clue about fees they are paying.
With any product that anyone on earth purchases, there will never be 100% customer satisfaction, no matter how good that product be. CST has over 2.6 Billion dollars under management and has hundreds of thousands of active plans. With that many clients, of course there will be a few who regret signing up. Most, in my 5 yr experience, are satisfied with what they have signed up for.
Remember, if market ‘experts’ could accurately predict the markets, we’d all be rich.
“The only people who make serious money from these things are the reps that sell them”.
Sorry Stephen, that is just untrue.
Yes I earn on commission and I can make decent money through hard work. (I disclose this to all of my clients). That commission, is nowhere near what plan holders have earned on average over the duration of their plans.
(by the way, don’t you earn your living from commissions as well? I get paid on a per unit basis. How about yourself, care to share?)
“…..Who, by the way, have about the lowest level of licensing requirement in the entire financial services industry.”
In an financial services industry that historically has low requirements I should add! Anyone wanting to look into this should read a great book by Canadian Financial Analyst Danielle Parks called ‘Juggling Dynamite’……
But what is your comment implying?
I sell the Canadian Scholarship Trust plan only. I know all the ins and out of the plan. I can answer all of my clients questions about the plan. I don’t sell insurance, Mutual Funds, stocks, or advise people on those investments at different stages of their lives.
So no, we don’t have to take many courses, but does that mean that I’m not concerned about the quality of what I sell or lessen my commitment to full disclosure and great customer service…..I don’t think so. (FYI, I have taken the Canadian Securities Course, and try to keep up with what’s happening in the industry, and have met a few financial advisors who had nowhere near the level of RESP knowledge as myself).
I won’t get into the specific comments you have made about group plans and how they work, the math that is used etc. Those comments are incorrect. Period.
Like any other fund, there must be a prospectus filed with securities commissions each and every year. If the prospectuses were deemed fraudulent or predatory, there’s no way they would be allowed to be distributed.
Prospectuses should always be read by potential buyers of funds, whether on not it is a mutual fund, or group plan prospectus, and regardless of who it is that hands it to that potential buyer.
Sorry Jason. It was not my intent to cause any personal offense and would never seek to use a forum like this to attack anyone. I intended my input be taken entirely in the context of my professional experience and an attempt to bring factual information to the discussion. If you were offended, I clearly failed in that regard for which I sincerely apologize.
I’ll try to clarify some of the points you raised but please understand that I make no judgment of your personal practice here and assume you to be an ethical and professional person.
Please be assured I bear no vendetta. I do not actively market RESP’s and write them only as a favor for the families of the high net worth clients my company serves. I used the term ‘victims’ as this is how scholarship plan clients seem to view themselves when, prior to seeking my input, they have often discovered that simply wishing to discontinue their contributions can attract costly penalties.
I do not wish to dismiss your length of time in the industry, but during your 5 years I do wonder how many plans you have seen run from inception to maturity.
I hold to my view of where the money is made. In investing, all returns must be evaluated in the light of the risk taken. The risks in the act of receiving a commission cannot compare to the market, contractual, and circumstantial risks borne by planholders.
Contrary to your suggestion, I am paid a salary only by my company which provides investment management strictly on a fee-for-service basis. It has been more than 10 years since I or my firm charged any commissions.
The licensing issue is, again, not a comment on your personal education or competence but simply a factual observation. The Canadian Securities Administrators are moving to improve matters. National Instrument 31-103 comes into force on the 28th of this month and will require registrants such as exempt market dealers and scholarship plan salespersons to pass exams rather than only take courses. I am sure your clients are better served because you have taken the trouble to write the CSC.
I agree wholeheartedly with your view of Canada’s low regulatory requirements. I wrote 5 exams to qualify as a discretionary manager (CIM) and it took 9 exams to become a Fellow of the Canadian Securities Institute but I have to admit that none of the material was as challenging as the licensing exams I wrote years ago in the UK.
I made no assertion that the plans’ prospectuses were fraudulent, but simply pointed out that regulators have placed constraints on them which, in my professional opinion (I am a registered compliance officer) have been ineffective. It is important to realize that the acceptance of a prospectus cannot be viewed as an endorsement by the regulators. It simply means that the disclosure requirements have been fulfilled and that it contains nothing considered to be ‘contrary to the public interest’.
To avoid a lengthy mathematical debate, let’s simply disagree on the issue of management and distribution costs. Suffice to say that while my registration certainly permits me to distribute these plans, the internal costs are one of the main reasons I would not consider doing so.
I am sure that by now the readers’ appetite for this topic has been exhausted so I plan to not write further unless specifically asked to comment on a particular aspect of the matter.
Again, my apologies to Jason for causing him to be offended.
Stephen,
I accept your apology and thank you for your quick response and your honesty. I’m sure you hadn’t set out to ruffle any feathers in your effort to provide your opinion. I also hope I have ruffled none.
Although one would think that the reader’s appetite for the topic has been exhausted, the blog was created back in jan 09 and people are still leaving comments. I only came across it when I googled ‘Canadian Scholarship Trust Plan’. It now comes up as #3!!!! on the list……..
I registered my daughter in 1989 for a CST plan knowing full well the risks involved if she did not attend post secondary. As late as 1998 I received documentation stating the estimated total (3 yr) value of EAP’s would be $13,800. Since 1998 the estimated value of EAP’s inidcated on my statements gradually decreased. This past August my daughter received her first EAP equaling a grand total of $2300. If this amount does not increase dramatically for her next 2 EAP’s, my return will be exactly 50% of what was projected in 1998. Even though I knew the consequences of her not attending post secondary, I did not think for one minute the projections of payout could be so far off…..very, very disapointing.
Think about how disappointed you might be if you were invested in equities and had to cash out your RESP at a loss. At least you never lost any of your children’s mnoney.
I registered two of my three kids in 2001, and have regretted it ever since. I was not informed that the payments I signed up for was the payments you have to make every year no matter what, or face severe financial penalties in the plan, even if your income changes drastically. As a single mom, the payments were overwhelming, and I have now sacrificed thousands of dollars to close out these plans, so that I can avoid having to go into further debt to make my annual contributions. And closing them out has taken more than a year of phone calls, faxes, payments (of course), and heated arguments, I might add. Never ever would I recommend this plan to anyone.
I registered my daughter this summer and am really kicking myself. She was extremely premature, very sick, and had an extended hospitalization. So in those early days we weren’t thinking very critically. In retrospect the sales rep bordered on predatory [Note to other reps: if a parent needs to ask "what will happen to this money if my baby dies?" then for the love of god quit trying to sell them stuff!] but I’m more annoyed with myself for not acknowledging that I was not in the right frame of mind to be making that sort of financial commitment. Ultimately it’s not the end of the world — we plan to stay in Canada and the monthly premiums aren’t prohibitive so we’ll probably stick it out and hopefully we’ll come out ok.
Stephen Smith — thank you for all the information you’ve provided. Not sure if you’re still checking back here but if you are: do you think that alternative RESP investments are sufficiently superior that it’s worth forfeiting the enrollment fees in order to transfer your money elsewhere? I suppose it’s dependent on the amount you’ve committed to CST? If so, is there an optimal time to pull out? I seem to recall there was a time period (3 years?) after which you are eligible to receive a portion of your growth… I should probably try to decipher the prospectus
Dear preemiemama
I am sorry to hear about your child’s health problems however you seem optimistic. You will realize the full return on investment if you can stick with your original deposit plan for approx. 8-9 years; called a “Conversion.” Ask your provider about that option. Alternatively, once enrolment fees have been paid, approx. 3 years, the deposits and income earned can be transferred to a Single/Family Plan. There are lots of options to get what you want/need. This year’s posted return at CST so far without bonuses is 6.9% net of fees; not bad for protected principle and they have never lost a penny of parents’ money in 50 years.
Dear Andrea:
If you have been making deposits since 2001 then your plan should qualify for a “Conversion.” Therefore, no further deposits would be needed. The best to do is leave the deposits in the Plan until maturity, but future deposits would be freed up to invest elsewhere if you want to try something else. Alternatively, you could reduce “units” since most are already fully paid.
ESGB: Thank you for your kind words. Our daughter is doing very well these days, and we are very happy and grateful.
Regarding CST, I think my biggest current concern which is obviously completely hypothetical at this stage is the regulations around four years of post-secondary education. Our daughter is at an increased risk for learning disabilities so it seems plausible that she might not end up going for a traditional university degree. I understand that the definition of “student” is quite broad and easy to satisfy — but what if, say, she took a one- or two-year professional program and then got a job? Would she have to take a course or two during the next two years in order to maintain student status and collect her remaining EAPs? My understanding with RESPs in general is that there are rules about EAPs during the first 13 weeks but after that no limits so it would be possible to use them all during a single year of education. It seems silly to spend too much time worrying about this now since she may very well go to school for four years. But I suppose my overarching concern is just that we’re being subjected to a fair amount of regulation and commitment and most likely only stand to gain a modest return on investment. I suspect that there are more flexible options out there that would stand to yield us similar returns.
I have 5 plans setup with CST for my 3 children. In early December I was online looking at the balances which totalled x dollars. This month the amounts of the plans has reduced significantly. I have spoken with many people at CST but no one has been able to provide me with an answer. I have left messages with no return of calls. I am really concered as to the non customer service approach with CST employees. Who knows what will happen when its time for them to pay up…very very disapointed. I have now left a message for the CEO to call me back…it’s been 4 hours and no return of call…next step will be to call the regulatory body which governs CST. I would NEVER recommend CST to anyone…extremely poor customer service…
Hi. This extensive conversation has been very helpful in our current situation. We signed up our daughter for a CST plan this past summer and are now having second thoughts. We feel we may have jumped the gun and gotten into something we didn’t properly research simply because the plan was recommended by a family member who has still 15 years before his son will be of the age to attend post-secondary. My biggest concern was to hear from people who’ve been paid out and this post has definately set me at ease to know taht the company DOES payout. A 20 year investment is a long one, and I can’t imagine how manyt hings will change in the next 20 years!
After reading these posts we would like to throw a few questions out there and see what we can decipher from all of your answers.
1- I read comments about 1st and further ‘payments’ once the kids go to school. Does the money not get transfered into some sort of a trust fund at maturity? It sounds like the payout is on some sort of a schedule?
2- if payout is on a specific schedule, what is it and what if our daughter goes to school for a year and then takes a year off before returning again? And does it matter if she is a fulltime or parttime student?
3- I didn’t see any posts responding to the question of what qualifies as a post-secondary school. (she was ondering about non-traditional education). Does it have to be an accredited Canadian Univeristy? What about college or adult ed?
4- many people have posted that they recieved approximately 50% of the payout promised to them. We are wondering if these people are speaking of 50% of the WHOLE amount, or 50% of the amount of invesment (ie, we were promised our principle in return, and if we can get 50% of the promised investment growth on TOP of that principle, we are fine by that…that is what investing is right? a gamble won what you will gain? We just don’t want to lose those principle dollars that we’ve worked ahrd to earna dn set aside for our daughter).
Thanks to anyone who can help with these questions. We will be calling customer service as well as our sales rep, but would definately like to hear more from people who’ve had experience with the company.
Thank you.
Thanks for your input, Calgary. There are many informed people on this list of comments, so I hope to get some replies to your questions.
Reply to Calgary. Hope this helps to answer some of your questions.
1. Your money does get tranferred to a trust fund when the plan matures and then you apply for the moneywhen your child starts post-secondary. In the first year of post secondary, you apply for the principal amount invested, and each year there-after the child applies for a scholarship. In my case the payout was based on 4 yrs of post secondary, so I applied for the principal at the start of year 1, and my daughter applied at the start of yrs 2, 3, and 4.
2. There is a specific time frame the funds have to be applied, but it does not have to be immediately upon completion of high school. My daughter waited 2 yrs before starting post secondary (because of wait times for the program she wanted). A child can take a year off, but they cannot go beyond the end date of when all funds must be applied for and used. A student must be enrolled in a full-time program to qualify for payouts.
3. The post secondary school, must be ACCREDITED, and it can be a university, college, or private institution. The important point is it being an accredited institution.
4. I stated in my earlier post of only receiving a 50% payout. This referred to the scholarship portion only and not my initial investment. I received all of the principal amount I invested, when my child started 1st year college, but the total amount she received the subsequent 3 years, was about 1/2 of the projected amount my statements stated over the years that she should have received.
My daughter just finished post secondary, therefore take into account 17yrs of contributing, 2 yrs delay starting post secondary, and 4 yrs in school….the rules when I signed into the plan may have been a little different that when you signed on.
helpful for sure. The info on pyaout is exactly what we were looking to hear about, although i’m a bit confused on why/how the child has to apply for a ’scholarship’ to get teh rest of the funds? Can they be turned down? Is the only qualificaiton that they be enrolled in F/T studies at an accreditted institution?
Being a university grad myself, i am very concerned that we should have looked a little harder at some of the conditions of payout. It took me nearly 7 years to finish my 4 year bachelor’s degree because of only being able to take part time stuidies due to family obligations and my own indecisiveness on what program to take, not to mention I attended three seperate universities with transfer courses. I guess i will have to ensure that my daughter is fully comitted and has no other obligations when she attends university.
Anyone know if all funds have to be used at ONE university? Say she attends SAIT for a two year program and then transfers to the University to start a new program?
Kevin, re-reading your response I have another question. In point 4 you state that “the total amount she received the subsequent 3 years, was about 1/2 of the projected amount my statements stated over the years that she should have received.” Since we are new to the game we have yet to receive any statements so I have no idea what they look like, but I’m wondering if they show true amounts, or are they ‘projected estimates’? ie. did the CST make poor investments and send out optomistic statements, or were the investments doing good throughout the statements, and then lose a bunch near payout date?
I apologise if my question comes out overly simplistic, or if I am way off base here (sometimes I feel that I am in no way qualified to be dealing with my own finances!) but this is the way that I understand the CST funds to work.
Again, we’re just estatic to hear from someone whose principle amount was returned without hassel, as that is really our main concern.
The Canadian Scholarship Trust Plan has a great 50-year track record! Why are you focusing on seemingly negative details when the importance should be on the total package? Here is an example of the kind of care you would receive from people who work for this company: (reprinted from email to CST Sales Reps)
“Hello everyone. I would like to give you all an update regarding the fundraising project we embarked on in December for the Sorensen Quadruplets.
I am thrilled to say that in 3 short weeks of fundraising over the Christmas holidays among the CST Sales Reps, CST Branch Managers and CST Sales Executives, we raised $9,991 in total which absolutely blew me away and far exceeded my original goal of raising enough money to purchase 3 units for each child of the boys.
We topped that up to $10,000 which was able to purchase 3.975 lump sum units for each of the quadruplets and I met with Lisa and the fabulous 4 boys today. Lisa gave me a big hug and gave me, and everyone at CST her sincere thanks for such an incredible gift we were able to give her children. The boys are amazing and full of smiles and very outgoing little people. I heard a lot more about their incredible story and the very unfortunate diagnosis of Tim’s Multiple Sclerosis, and I got to witness a bit of what it would be like to live with, and care for, 4 one year old boys. I have no idea how she manages it, especially by herself, with a bit of volunteer help.
Below is a short article that appeared in the “Good Neighbours” section of the local paper that informed the public of our combined efforts.
Thankyou everyone for making a difference in this families life.
Stuart
——————————————————————————–
More Help For The Quadruplets
Times Colonist (Victoria)
Sun Jan 17 2010
Page: A4
Section: Capital & Van. Isl.
Byline: Jeff Bell
Column: Good Neighbours
Source: Times Colonist
Public generosity continues to give a boost to the family of Brentwood Bay quadruplets.
Lisa Hardy, who gave birth to the rare set of siblings in December 2008, has been raising them alone since September, when her husband, Tim Sorensen, was hospitalized with multiple sclerosis. Times have been tough, because he is receiving only a disability allowance and her maternity benefits are ending.
Donations began coming in soon after the family’s situation was reported in the media, and last weekend the North Saanich Fire Department donated the proceeds from its annual tree-chipping event to the cause.
Now the Canadian Scholarship Trust Foundation has joined in, with its sales representatives and managers from across the country combining for $10,000 in donations. The money is being put into a registered education savings plan, which will be worth an estimated $40,000 when the quadruplets turn 18.
Stuart Labron, a Victoria branch manger for the Canadian Scholarship Trust Plan, came up with the plan for the RESP. He said he decided to do something to help after reading about the family’s difficulties in the Times Colonist. He sent the newspaper story to his colleagues in December and suggested they make donations to an RESP fund for the children.
The responses came quickly, said Labron who was thrilled to help.
“People thought this was quite a story, and the money started flowing in. It just makes you feel good.”
More donations to the RESP are welcome. Call Stuart Labron at 250-370-7611 or e-mail stuart.labron@cstresp.com. “
I guess the last post finally got to me. My grandfather purchased plans from CST for my younger siblings. I was too old at the time and did not qualify. They worked fine but that was at a time when interest rates were high.
In the last post it was indicated that $10,000 should grow to $40,000 over an 18 year period of time. This would indicate a return of 8% per annum throughout that period of time. Current interest rates on 10 year bonds are 3.37%, 5 year GIC’s are 3.25% and one year treasury bills are at 0.52%.
If (??) rates stay at those levels then it is impossible to predict that the plans will be worth $40,000. Rates may change and probably will but even using very optimistic projections I think it very unlikely that these plans would achieve that level of growth.
Then there is the issue of fees. According to the prospectus there are additional fees charged to each plan and to the group as a whole. (see page 38 of the prospectus)
These fees include a fee of anywhere from $3.50 to $10 per year per plan plus an administrative fee of 0.5% per annum, A very tiny trustee fee and then Portfolio Management Fees of 0.10% to 0.30%. the big issue is the enrollment fees. On a newborn total cost a unit paid for monthly is $1,938 with an enrollment fee of $200. That is more than 10%. But the real winner is for those who pay by single contribution. The cost is $829.00. Again that makes the $200 enrollment fee almost 23%. WOW.
The prospectus clearly shows the returns over the past few years with a high of 7.2% in 2004 to a level of 0.9% in 2008 and then in 2009 the fund return after fees was back to 7.1%. These are the returns after all fees. Not quite the level of return one would require to reach the $40,000 level. The total return of this plan over the past 5 years (page 4 of the latest financial statement http://www.cst.org/site/cst/assets/pdf/Group_Savings_Plan_2001-2009-Annual-Financial-Statement.pdf ) was 5.1% per annum and since inception of the fund in May of 2001 the total average return was 5.9%. In that same time period if you had bought the TD Canadian Bond fund you would have had a return of 6.2% after all fees. Not stellar but no huge enrollment fees.
Keep in mind that if the fund had a 4% return (which is higher than government yields right now) for the first 10 years it would have to earn 13.2% per year for the next 8 years to achieve the $40,000 estimate.
Although the Foundation is listed as non-profit they charged fees of more than $14,000,000 to the fund in 2007 and 2008.
Now don’t get me wrong the investment managers that this fund employs are first rate. They have good track records and manage well but I don’t care how good you are you can’t make a 4% bond yield 8% and like they say past returns do not guarantee future returns.
Hello Bob. Just a few points to your well-analyzed however incorrect piece.
$14 million is one-half of one percent of $2.6 billion on deposit with only one Group Savings Plan (not including the others). This pays the trustee fees and is a minor cost compared to the total assets, and ensures that in the event of insolvency that the deposits and income are protected by a Trustee–a very important feature but comes with a modest cost.
This is not a GIC or a Treasury Bill so can’t compare to those. Buying and selling bonds generates capital gains and the ROI will fluctuate over time; however, the benchmark used of 6% is based on the Scotia Capital Universe Bond Index which over the term of 17-18 years which they believe is achieveable, and then add the bonuses (Group Plan Bonus, Attrition, Discretionary Payment from the Foundation and the commitment to return half or more of the enrolment fees) which add to the final pay out at plan maturity which brings up the total ROI a few percentage points. When you compare to mutual funds you are looking at 1,3,5 year returns, which is not fair because this is a 17-18-26 year investment.
The opportunity is in the bonuses added to the plan return at maturity. If you could beat that opportunity in the stock market in 17-18 years then that is a parent’s dilemma. Statistics tell us that parents do not want to take risk with their children’s future post-secondary education money and that is exactly why they choose a Group Savings Plan–a managed portfolio with low low risk investments, modest cost that they commit to return a portion thereof, as well as the opportunity for the additional bonuses.
You did not mention that half of the enrolment fees are refunded. They must be taken into account over 17-18-26 years; i.e. $200 per unit over 17-18-26 years and then half refunded by the 18-26th year. A percentage MER in a mutual fund is twice+ as high a cost over TIME.
You can analyze and re-analyze and then again and again, but after 50 years its clear that the Group Plan RESP has staying power because of this: low low risk over a relatively short term (up to 26 years) and the opportunity in the bonuses stated above–never lost a penny of anyone’s money in 50 years!
ESGB. For someone familiar with the plan I am surprised at your answer. First of all the $14,000,000 comprises Administration fees of 1/2 of 1%, plus a management fee of between 0.10% to 0.30% plus the trustee fee which only amounts to a nominal amount. It is the admin and portfolio management fees that are so high that bothers me.
Second, you indicated that we shouldn’t compare to GIC’s or Treasury Bills but that bonds should be chosen. You indicate that bonds produce capital gains. That is true but only in times when interest rates are falling. This has been the case for the past 20 years but how much further do you think they can fall from here. The major risk is that rates will increase and in that case bonds will produce capital losses.
Although you indicate that the Scotia Capital Bond index is used to benchmark performance the 2001 funds has yet to measure up to that performance after fees.
It is apparent from the financial statements as well as your comments that the major reason for investing in this type of plan is that you are hoping that your children do go to school and that others do not. If there is high attrition you will benefit by having the investment return on their dollars returned to your child. The other child will, unfortunately, only get back funds paid in to the plan.
Before there was a government grant I used to suggest that clients invest their RESP money in a trust account. That way their earnings and principal could be used for tuition, wedding costs or even bail money if needed. A good low risk balanced fund would provide good returns after all fees and could be switched to money market as the child got closer to age 18. Now with the government grants I do suggest RESP’s but if the child doesn’t go to school the earnings can be transfered to your RRSP. You don’t get to benefit from the other peoples kids who don’t go to school but you don’t lose the investment earnings if your kid doesn’t go.
I have read the prospectus and even though I am very used to reading financial statements and prospectus documents I find this document more confusing that the mutual fund documents.
I do have a suggestion which I am sure will not be met with any degree of cooperation. Why doesn’t the foundation publish actual numbers clearly indicating the amount that a person would receive. Show the amount of contributions, government grants and then the dollars received by the contributor and show a rate of return to the client. Combine this with information on the original projections given to the client and I suspect you might find the numbers would discourage people from contributing or perhaps if it is such a great deal maybe it would encourage people.
Bob, a customer can calculate projected EAP’s by looking on page 68 in the Prospectus. It gives you the value of one basic unit for 2008 which is $500 for the first payment. If the client has 10 basic units its simple 10×500=$5000 for the first EAP. What concerns me is that CST also applies a discretionary power, that states the foundation has the right to decide how much each student will receive.
I would like ESGB to explain to me why the figures in financial statments in their prospectus does not match the figures in their management report.
Net Assets Available for Education Assistance Payments, End of Year $ 347,360 (2008) from Prospectus
Net Assets Available for Education Assistance Payments 432,096 (2008) Management Report for Jan. 2010.
This is just one of many examples I have compared.
Bob: Lets talk about costs first: step by step—
CST Direct fees to client: $200 per unit of which half is commitment to refund (but lets forget that for a moment). RBC Bank charge $10.70 per year ($192.60). Total Direct Cost to Client: $360 for a unit (life cost). Divide this by 18 years = $21.11 per year without the committed refund. A family has 20 units: $200 X 20 = $2000 + $192.60 bank charge. Divide this by 18 years = $121.81 per year (not including committed refund). Compare: Mutual Fund MER 2% (most are higher) per year of just the $7200 grant money is $144.00 for just the ONE final year of the total grant money collected! NOT INCLUDING DEPOSITS, INCOME (IF ANY).
$14million divided by 250,000 families is $56.00 per family and paid from plan income; not a direct cost to families.
Even if you include the $14mil its MODEST for a managed portfolio.
Enrolment fees are deducted in the first 3 years then 100% of deposits earn income. RBC bank charges are annual.
Secondly, Re bond investment: This investment is not chasing current returns; it is a 17-18-26 year investment. It will fluctuate year by year but not drastically. BTW 5 year returns did beat the benchmark by .9% (6.9%). Early returns in 2009 were LOW (BUT NO LOSSES). BTW current returns are higher than the benchmark–I will get back to you to confirm the number if it matters.
I NEVER SAID “It is apparent from the financial statements as well as your comments that the major reason for investing in this type of plan is that you are hoping that your children do go to school and that others do not. If there is high attrition you will benefit by having the investment return on their dollars returned to your child. The other child will, unfortunately, only get back funds paid in to the plan.” YOU SAID THIS. WHY?
There is absolutely nothing apparent about my statements or about anything I said that is in your summary. You are just fighting the truth.
Financial statements are written by CAs who would not risk their license to publish false information. Prospectus’ are reviewed by Deloitte, and the SEC. Its foolish for you to accuse this company of printing false information.
My suggestion is the one thing you have not done: invite me for a personal presentation of the plan, and hear it. Anytime if you are in south Ontario I would be pleased to meet with you, or I can ask a Rep anywhere in Canada to meet with you to do the same.
Cory: The prospectus is printed at a different time than the MRFP. Its possible (although I have to check) but you may be looking at two different years of statements.
The Foundation does not decide how much a student will receive. They decide how much of the discretionary amount they can “top up” to EAPs. Whatever the contributor earns on their deposits is always their money. It is the “bonuses: discretionary portion, group plan bonus, attrition” that is the opportunity.
I understand the Prospectus is printed at different times than the MRFP but numbers should not change. A financial statement for a given fiscal year remains the same. CSTs fiscal year ends in Oct. I’ve looked at statments from other collective plans and their figures remain the same. Just pull out your propectus for the past 3,4,5 years and compare the value of a basic unit from those years. Each propectus shows different numbers for a given year. Just that example, puts a doubt in my mind whether the statements are upfront.
ESGB. Believe me I am not putting words in your mouth. You indicated that one of the factors is Attrition which basically means that some students will drop out of the plan or decide not to pursue a college education. This appears to be a major part of the return.
In addition you talked about the costs being than other plans but this ignores the time value of money. By charging the fee up front even with the refund of 1/2 the fee (presumably many years later this is a huge fee. You can’t seriously believe that it isn’t.
Mutual fund MER’s are charged each year but would actually be less in many cases. I think you need to do the math.
Example:
Let’s purchase one unit fully paid for a newborn. According to the prospectus the cost would be $829. When we take off the sales fee we are left with $629. Invest that amount for 18 years at 6% less the administration fee of 1/2 of 1% and the investment management fee of 0.1% you would end up with a total of $1,621. Then I get my refund of $100 which is 1/2 of the enrollment fee which means that I would end up with $1,721.
But instead I decide to purchase the TD Canadian Bond Fund (why TD because they are one of your managers). Instead of 1/2 of 1% I pay an MER of 1.25% which is 2.5 times the fee which CST charges but there are no upfront costs so all my money is invested. Since the fund is a bond fund managed by the same manager you use the return should be very close to the same yielding me a grand total of 6% less 1.25% or 4.75%. The total amount of dollars after 18 years would be $1,911 or $190 more than the CST amount even after refund of 1/2 of my enrollment fee.
The difference would be attrition and other possible discretionary payments made by the foundation.
As for me I would rather control my own fate. If a large number of parents/contributors do not complete their plans or a large number of beneficiaries don’t attend I might end up with more through the CST but to put it another way what I am hoping for is that the other kids in the plan are less intelligent than mine and I always suggest that you shouldn’t count on that. In my own case I have four children. Two attended University, one is enrolled as an apprentice and the other one (my smartest or rather the one with the highest IQ) did not attend any post secondary. The plan would have been a complete waste for me as only half my children would have collected.
Bob, I don’t understand your logic. The enrollment fee on one basic unit is 200.00 to which half is refunded with the scholarships. Ask any bank whether their fees will be refunded at maturity. If you find a bank that does….please give me their name and I will start doing business with them. The administrative fees are deducted from the entire portfolio, not directly from each contributors plan. As far as attrition is concerned, all you have to do is ensure that your child is one of those that benefits from attrition. Anyone that knows investment knows the benefits of attrition. When most investors see this point, they feel it is a plus for them. I have 3 children, the first two I had no scholarship plan at all, so believe me, I know the sacrifices that have to be made to send a child to school. For my third, I started a collective plan, although not with CST, I am more than happy with my decision and my son knows that in two years, he will have enough money to be able to attend college and university. Believe me, I wish my parents would have done this for me when I was growing up, I certainly would have stayed in school longer. The problem with most people that start a program is their lack of disciple. Why would the government be ready to deposit 20% annually into an RESP if they didn’t expect people to commit to their decision when opening an RESP. The banks statements are so complicated, that most people don’t even understand whether they have made or lost money. Remember that the majority of new contributors are young families, most have very little experience with investment. To understand all the ins and outs of a collective program, a rep would have to spend 3 to 4 hrs if not more with each subscriber. The propectus is left with each contributor for a reason. Do the banks give a propectus when a contriubor opens an RESP. No way. In most cases, you can’t even get a straight answer as to the rate of return for an RESP. As well, they tell people their are no fees. Give me a break, we all know there are fess involved with anything we do at a bank. How do you think they pay for all the highrise building at every corner of the street or pay the CEO over 1 million dollars per year, along with all the shareholders. In a collective plan the kids are the shareholders. Who would you rather see make a profit. Shareholders in a bank, or the kids for their education………!
My thoughts on the merits of Scholarship Plans are well described in previous posts and I don’t intend to revisit them. But I do think some general comment about RESP comparisons may be helpful.
There can never be a meaningful comparison between the performance of one ‘type’ of RESP versus another. The RESP should be considered simply as a box, in the same sense as an RRSP. The performance will be a composite of 1. The cost of buying/maintaining the box. 2. The investment returns of the components in the box. 3. The commissions or management costs associated with the components.
Group (or collective) RESPs are subject to all of these factors plus additional factors such as attrition rates and the discretion of the trustees.
The comparison of the underlying investments of conventional versus collective RESP is also moot; even if both invest exclusively in say, fixed income, the asset allocation will be different and therefore it is to be expected that each will take its turn outperforming the other over certain windows of time.
Where the collective scheme is significantly weaker is in the distribution costs – the price of the ‘box’. Most mutual fund or investment management firms will charge $0. Some may charge as much as $50/ year. But even the expensive ones place no restriction on the size of the plan. So a family with four children can have a single plan, contribute to the lifetime limit of $50,000 per child, collect all the CESGs from the government AND have full flexibility in transferring assets between the beneficiaries in the event that they do not all opt for qualifying education.
I offer no comment on the professionalism of those selling group plans, or on the monetary value of the counsel they provide. But it must be recognized that ‘enrollment fees’ (commissions) of $200 per ‘unit’ are very significant. Of course it is not unreasonable that the selling agents be fairly compensated if it takes 3 or 4 hours to walk parents through the complexities of the plan. But why choose a plan that is so hard to understand?
Recently, we have chosen to put in $5 K per year per child in order to maximize the benefit of receiving the 20% top-up from the government.
We have been paying into the plan since our children were 3, 2 and a newborn. They are now 15,14 and 12.
Do you think this was wise? We were thinking that a guaranteed 20% return would be the best course of action (less the admin fees).
I certainly have no problem with adding money in order to maximize the government grant but you could achieve the same thing at your bank and avoid the huge fees associated with the CST or similar plans. No fees at the bank would be a lot better. Remember you can have more than one plan and just because you have a plan at CST you don’t have to continue.
Bob..at this stage is is not wise to recommend anyone to pull out of their CST plan, since they will lose their enrolment fees. I’m so fed up with you folks telling people there are no fees at the bank. Again as I have said before, show me a bank that doesn’t charge fees and I’ll do all my banking there. I have transferred numerous people’s RESPs from a bank to a collective plan (not CST)and believe me, they have charged these people fees, and have in fact lost peoples principle. Just an example, my husband and I had over $35,000 in our RRSP with a bank, they lost $5,000 of that and when we transfered out they charged us over $4000. So stop misleading people.
In support of Bob’s comments, I have to agree that the RESP’s offered by the banks provide very good value – I have never seen them charge fees that come close to CST or other collective plans. The primary reason being that distribution costs are spread over the entire operating expenses of the bank; the teller or personal banker receives no commission for offering the product.
Dealing with an investment professional at a bank (e.g. TD Waterhouse or RBC Dominion Securities) is a little different as the advisor may opt to offer investment products inside the RESP that carry a transaction cost or sales commission. But you only have to pay these if you want a sophisticated plan. (BWT, I work for a private wealth management firm that competes with the banks.)
Cory’s RRSP experience was unfortunate and not unusual but costs/losses of that magnitude are certainly not related to account fees. They are the result of investment losses and/or penalties such as deferred sales charges. Both can be avoided by asking the right questions; “how much risk is the investment exposed to” and “are there any penalties for selling the investments” would be good places to start.
If asking these types of questions makes you uncomfortable, choose a basic plan with savings or deposit rate interest (rates will improve and certainly will average much higher than current over the life of the plan. This way you will get to keep all the 20% the government gives you, you pay no commissions, virtually no fees, you can easily ‘bump’ money from one child to another in the same plan, and you have no contractual obligation – contribute what you can, when you can.
Very interesting discussion here folks. I am guessing the majority of people reading some or all of this are here, like me, to simply find out if the CST RESP is a good investment or not. Some of the posts have been contradictory and too granular to absorb without some sort of experience in the field. However, the general sense I am getting after research here and elsewhere is that the CST RESP is very conditional as to how and when it is payed out and the payouts are significantly lower than advertised (50% or worse). The other observation that has me concerned is that the annual trend is toward decreasing, not increasing returns.
Given these general perceptions, I am very uncomfortable with the plans I have for my two children. I will be calling CST tomorrow to find out what the penalty is for walking away.
It can’t be worse than what I paid Bell to get out of my cell phone contract.
Can it?
This response is for Bob Feb 11 6:40PM, (I have been busy working since the last posting). I had many responses so I am reading them one at a time inbetween appointments. My goal is to help people understand the Group Savings Plan; there are far too many mis-perceptions.
$829.00 for one unit for a baby less $200 per unit enrolment fee, less $54 RBC Bank charges ($3.75 per year) = $575.00 invested. Today’s EAP (includes: income, attrition, group plan bonus, discretionary donation from Foundation, and half the enrolment fee) is $2000 (no other fees since the trustee and admin fees were paid from the plan income. This $2000 is the actual pay out net of fees–no future guarantees.) So: $829 ($829-$200-$54) deposited + $2000 EAP = $2575.00 actually returned to the contributor and student. Grants and grant income have not been included.
Compare: Mututal Fund 2% MER (very very reasonable because the higher the investment risk the higher the MER–most are 2.5 to 3%–check your prospectus please) So, either we use 6% return less 2% MER = 4%, or being reasonable and generous in this posting and giving the benefit of the doubt, lets use a net return of 6% (which means the mutual fund earned 8% consistently over 18 years). I used a compound interest calculator to save time.
The total is: (deposits $829 plus 6% compounded annually) = $2366.25.
So if you control your own fate and consistently earn 6% net return over 18 years you have a total of $2366.25. If you go with the group plan and cash out completely you have $2575.00 (based on today’s students). If you transfer your Group Plan to the Individual/Family and and give up the “opportunity” then you have $1795.38 (assuming the same 6% net return as the mutual fund). So, the opportunity with the Group Plan is in the bonuses paid to participating students and the very very low risk investments(never lost a penny of people’s money in 50 years). The risk with the mutual fund is in obtaining the 8% return before fees consistently over 18 years.
Does that help?
As I mentioned to you in past emails, statistics show that parents choose the Group Plan because they are risk-averse with their children’s money, or unsure about the 17-18 year potential of the stock market. ie; what is the greater risk: attaining 8% consistently each year in the stock market over 18 years or your child going to post-secondary education (minimum 4X3-week programs between 17 and 26 years of age) with option to transfer to Individual/Family Plan? Same RESP rules apply to all choices: if the child does not attend post-secondary then tranfer income to contributor’s RRSP or take an AIP.
By the way, a parent must ask this question: “Why are you saving in an RESP, what is your goal?” Isn’t this to save money for your child? If you have an RESP isn’t it because you want them to get an education? As a parent myself I ask personally why wouldn’t you choose the surest path to get your goal?
Cory: thanks for your response of Feb 12th.
re; ESGB and Cory. Unfortunately you have twisted my response and need a little informtion.
1. First of all the fees charged by a bank on an RESP are zero for enrollment and there is no annual administration fee. See the following link for the Royal Bank. http://www.rbcroyalbank.com/products/resp/benefit.html
2. There is no front end load on their mutual funds nor is there a back end load. Since there are no enrollment fees one doesn’t need to have the fee refunded.
3. If you want to compare mutual funds with the CST then you need to compare a fund with a similar investment objective as well as a similar portfolio. That is why I suggested the TD Canadian Bond Fund. (no I don’t work for them) Their MER (all fees) is 1.25% and therefor in my post of Feb 11 I used that amount. Trying to do the apples to apples comparison.
4. The family plan option gives you the ability to shift earnings to another child if one of the children does not or cannot attend school but in your plan this does not end up giving bonus’s or allowing one to benefit from attrition.
5. You seem to insist on comparing funds with a higher MER. I certainly would not choose a high risk fund to fund my childrens education but I wouldn’t hesitate to use a balanced fund such as Fidelity Cdn Asset Allocation. (15 year average return 9.48% after fees). Remember you only lose money on a fund if you sell prior to recovery. $1,000 invested in this fund in 1994 would be worth $3,900 and even at the bottom of the market in 2008 was worth $3,000.
6. Loss in an RRSP is unfortunate but is usually due to not understanding the nature of your investment and selling when the market is down. People who don’t understand shouldn’t be investing. Those are the people who sell their RSP’s when they are down instead of when they are up. I don’t understand how you could be charged $4,000 in fees to transfer out an RRSP. Bank mutual funds don’t charge loads. I suspect that this is something else.
I know that both of you are reps for
Bob has made some excellent points, none of which I would challenge.
I recognize the risk of being accused of self-congratulation. But with 25 years in the industry, many of which in a compliance role, and the highest designation offered by the Canadian Securities Institute, I am arrogant enough to consider that I know a little about the subject.
Some of the comparisons offered by those selling collective plans have been unhelpful and certainly add nothing to an objective discussion. This not surprising; one would hardly expect the Toyota salesman to send you down the road to the Nissan dealer out of a deep conviction toward objectivity!
CST is expensive. Period. But expensive is not necessarily bad. So instead of using incorrect math to compare apples to oranges, I would like to see CST defend their costly product.
Some folk really like the idea of a 10 minute discussion in the bank that results in a basic, low cost, get-the-job-done RESP. Others might actually prefer a scholarship plan with the kind of commissions and expenses that pay for a salesman to come to your home for a 3 or 4 hour initial meeting, another visit following the birth of each child, and possibly a number of other calls or visits over the life of the plan. I know what I would want to be paid to provide such a service. Lots.
But it’s not for me to decide whether or not clients would see value in this arrangement. So if you want to sell an expensive product, do so with enthusiasm! Provide a service that justifies the cost! But please don’t baffle folk with fuzzy math and distorted comparisons.
Scholarship plans are in a unique category. This is why the Canadian Securities Regulators have a distinct (very restrictive) category under which their salespeople are licensed.
On the matter of objectivity, it would be interesting to know if any of the group product salespeople contributing here holds a securities or even a mutual funds license that allows them to sell regular RESPs, but has chosen instead to sell group plans.
My experience with CST has been very disappointing. I feel like I fell for a scam. When I signed up I was given a graph which stated we would receive equal to my prinicpal investment for the 3 years after the first year. My prinicpal was $7,000. which I used toward my son’s first year of university. Every year after that I have reveived $2,900, half of what I was promised. I think it basically boils down to economics. I wish I had consulted an actuarian. In the 1990’s all the baby boomers were putting money into plan and the dividends looked good. Hence the salesperson could rightly say that if your child was graduating in 1995 he would get equal to the principal each of his remaining 3 years at university. In fact the yearly statements from CST stated that. Now that all the baby boomers kids are actually in university and the pot is being dipped into by more membership, there is less money to disburse. It is a bad investment and I would definitley not recommend CST to new parents. I wonder if there are more unhappy customers of CST out there. Now almost everyday in the paper I see the face of the lady who was our salesperson who is now a realtor selling million dollar properties. It’s beginning to grate.
My wife and I signed up with CST when our first child was born in Edmonton AB in 1983. The unit costs were ridiculously low (in retrospect) for what seemed to have great potential. Unfortunately we fell on hard times and were unable to maintain even those small monthly payments. At the time we were literally scrounging up enough change to be able to buy a single can of baby formula. I recall getting a letter from CST, although it doesn’t seem to exist now with the other papers from CST, to the effect that since we had “defaulted” on our agreement everything we had paid into the plan to that date was forfeited and would not be returned.
I say anyone who deals with this organization is just asking to get taken for a ride. If the details are not clearly and completely stated UP FRONT and fully comprehensible then there is something fishy about whatever organization is selling the product, especially if the sales pitch is high-pressure. And as always, if it sounds too good to be true, it most certainly is. Something my wife and I learned about CST way too late.
Hi, my personal experience. I did my first RESP with Mutual Funds in 2002. Market crashed, I lost around 45% of my original investment. I was thinking, oh well, I still have time to recover. My initial contribution was $1000. The plan was flexible, pay when you want. Guess what, I didn’t, because I didn’t have to. a bit later, I opened a plan with CST for my first child. My cousin finished university while using CST Scholarships. In 2007, I decided to transfer my funds from Mutual Funds to CST. I made $123 in seven years. Volatile economy and MER killed me. I do my RRSP with mutual funds and I checked the MER calculator, brutal. So my other two children are with CST. Yes yes fees are up front, but who cares, I am doing a plan for 17 years, so I look at the fees that are over 17 years. It’s not too bad. There is no free cake in Canada. I am paying over 2% in fees for my RRSP, I don’t like it, but what am I going to do? I referred my friend to CST, and last year they had problems with employment. CST put their account on hold with no problem. My point is, there is a product out there for all of us. This year statement was very confusing. I called the office and they explained that it was a bad attempt to improve the look of the statements. The projection values: I follow them, but I also know that economy will affect them. You can’t count on projection. My mutual fund rep also gave me a projection and it wasn’t $123 in 7 years. So for people that keep complaining about not getting what they were supposed to, use some common sense: it is an investment, a low risk investment!!!
Good luck to everybody!!!
One of my friends referred me to this website. I referred that friend to my CST rep, but they decided to do their own research.
Mother of 3
Hello everyone
I saw some strange activities to my kids plan with CST e.g more money going towards to enrolment fee instead of principle and i googled and found your valuable group. I need to call CST tomorrow and will clear things with them and will post the information and experience i having.
My question with you right now is that if i pay full maximum amount per month which is 167 for 18 years then how much enrollment fees i will be paying in 18 years? Will this enrollment fees will return back to my kids education? I see some comments half of it?
Thanks
Please advice.
Hi Adeel,
Thanks for your comment. This is a very loosely formed group – people comment or respond as they see fit. It’s not really set up for financial advice. That said, some contributers may have valuable information for you.
Enrollment fees are established at the outset, when you first set up your fund, as I understand it. It should be clear on your statement how much you have paid. We were told that enrollment fees are fully refunded if payments are made to maturity. On my statement it says “you MAY be eligible to receive a refund of UP TO 100% of your enrollment fee.” Best to check… and then check again.
Hi Twinutero
Thanks for the response.
My question is still not answereded that how much the enrollment fees would be in 18 years if i pay 167 per month which is full payment. There must be a formula and just want to curious to know.
It seems to me if your plan is lumb sum per year as i see with my other son. you pay less enrollment fees. Very interesting.
Thanks
AD
Hi Adeel,
I think I can help you with the enrollment fees question. The fees are a certain dollar amount per unit and are taken off the first three years of the plan so you don’t see them come off at the end of 18 years. I has 2 units for my child and each unit’s enrollment was about $60, so a total of $120 was taken off each year for three years. That was verified by the district manager here and head office just recently. If you continue with CST my advise is to keep all your statements and write down conversations that you have with them. With me I just paid the monthly amount and thought all was taken care of for 16 years. Boy did I have a wake up call when I found the money I was counting on for my sons education was not there as I was led to believe by CST all those years. Good luck and stay informed.
Cathi
Hi Adeel, When I signed up my kids, I made sure I understand the fees very well ( unlike I did the MER). The fees are fixed amount depending on how many units you buy. $200 per unit. So if you have 10 units, then the fees are $2000 over 17 years.I found an interesting website http://www.investored.ca Type MER Calculator in search box and then do some numbers. The fees that you pay with CST over 17 years will look like peanuts compare to what we pay with mutual funds. If your child going to university or college, the fees are refunded only with CST. I signed up a few years ago, so back then %100 of the fees were refundable. I know what you mean about the statements this year. I spoke to my agent and the office. It was a bad attempt to improve the statement (according to them) The best thing to do is look at the last page and it will give you overall look at the plan:total principal, total fee and so on….
I hope it helps…
Hi Ann,
I guess things have changed a bit since I enrolled my son in 1992. Did you say that the enrollment fee is refunded if your child goes to university? I wwasn’t sure what you mean by fees.
thanks
Cathi
Hello and thanks for the responses.
Spent lot of time to talk someone head office as there were long waiting and finally i spoke with the representative and below is the information i got.
2009 statement was confusing as the enrollment fees showing for entire period not only for the year 2009.
The CST pay you back all enrollment fees but there are coniditions and there are variables “Variability is the enemy”. we are now kind of recession and if i loose my job i will not able to contribute and that will be problem for me to get the enrollment fees back (100%) at the end of the term. Jason mentioned on the top that the convertion is the options and i kind of agree that if you have straight 8 years plan with same contribution amount then you can convert your plan so that way you are 100% guarantee of enrollment fees back (100%). and you can start new plan afterward. You need to make sure you have one plan for 8 years. for instance if you have plan for 5 years in which you contribute maximum and 3 years are left and you decided to change your contribution then CST usually open new plan so everything starts from begining. This things everybudy must know and that is why people having problem at the end (correct me if am wrong).
The funny thing is that if person A open CST for his/her kid for 18 years and contribute $30,000 from his pocket without any break or skip payment and Person B do the same amount of contribution in 18 years but had some rough years in the contribution will not get back same amount for his kid as person A. (interest and grant is not in this example). Person B deserved to get his/her own money and should not be penalize with huge enrollment fees. my 5 cents.
I like CST as there are lot of option etc and i will stay with them and will take chances for my kids.
Thanks
Ad
Adell: The enrolment fees for the amount of $167/month is $3695.99 and you should have 17.579 basic units. Look on your statement since it should tell you exactly how many units you have. 50% of the enrolment fees are refunded with each EAP that is paid to the child. CST reps say that 100% of the fees are refunded but if you read the Prospectus page 11 :”Students who collect all four Education Assistance Payments will receive a refund of at
least 50% of enrolment fees paid” And on page 38 it says the following: “The Foundation is not obliged to return more than 50%
of enrolment fees unless there is a surplus in the EFR
Account.There is no assurance that a surplus will be
generated in the EFR Account or that a surplus will be
available for distribution in a particular year in which
you become entitled to receive an enrolment fee refund
instalment. Any surplus in the EFR Account will be
allocated at the discretion of the Foundation to
Contributors with Beneficiaries eligible to receive
an EAP.” With a collective program, it is important to keep making your deposits until the program reaches maturity. I hope that has answered your question regarding the enrolment fees.
Cory
With the reference to you reply to Adeel. I dont understand how you calculate the 3695.99 enrollment fees as adeel is only contributing 167 / month and the total for the year would be $2004. How you come up 3695.99.
Jordon
Jordon, if indead Adell is depositing $167/month, this would give her 17.579 basic units.(for a child age 0) The enrolment fees are $200 per basic unit as well as a partical unit. 17.579×200=3515.80….sorry off by about $100. Still remains that her enrolment fees are more than $2004. Check out their prospectus to verify how they calculate their enrolment fees. As well Adell should be able to find that information on the contract she signed, since by law one is supposed to fully explain these fees and write the full amount on the contract.
Cory, very well said the calculation you did is correct.
When i login to the cst online service on the summary i see my plan started three years ago from now and have total contribution is as follows:
Principal 2464.60
Contribution 6012
enrollment fees of -3515.80
less service charge -31.60
# of units 17.579
I asked them why enrollment fees is too much they said it is accumulated from 3 years. As per your comments i assume is setup as 1/3?. Also my question is now after 3 years onward from now will my account look like appox as follow? I’m out of town but will look the contract i signed.
Principal 4929.2
Contribution 12024
enrollment fees of -7031.6
less service charge -63.2
# of units 35.158
If yes i am no happy then
. I saw in this group that enrollment fees is higher in first three in the begining. Is that true?
Thanks
AD
Hi Adeel, no you are not correct. If you purchased 17.579 units, then that’s all you have. So in the next three years the numbers should look like that:
principal $8509
contributions $12024
enrollment fees 3515.80
Right??? The fees are fixed, they will not go up, unless you buy more units. From what my agent explained me, the fees are collected over the first 3 years, because that’s when all the expenses have to be covered, the head office and the agent paid, but also, they reinvest portion of the fees so that they are able to refund it when the child goes to university or college.
I was thinking another day, I am paying $10.95 for my cheqing account with bank. It’s like $2365 over 18 years…..mhhhh….
Hi Ann
You make me very comfortable here. If this is all the units required for entire 17-18 years terms and there is no more enrollment fees then i am happy here. Even if i atleast get my 50% of enrollment back from 3515.80 it is enough also as we will be getting income and govt grant as well.
Thanks alot.
AD
I hate to jump in with a negative comment but the enrollment fees of $3,400 plus for Adeel are too high. If he got a plan at the bank he would pay no enrollment fees and would have access to all his money. If he wants security buy a bond fund or invest the money in GIC’s. No risk and no fees. Having the fees collected up front is a huge expense. By taking your money up front in fees you don’t actually earn anything on those monies deposited.
Even if you bought a plan from a mutual fund with front end fees the fees would only be collected as the funds were deposited and would be a lot less. If I look at Ann’s example keep in mind that the fees are over 30% of contributions. To compare it with a chequing account is ludicrous. Compare it with the fees on a bank RESP. 0% front end, 0% annual fee and 0% back end. Obviously Ann works for the company or has been sold a bill of goods.
Check out the post from Stephen Smith Feb 16 and the post from Richard Renneboog. Ann mentioned losing money in mutual funds. She probably bought an equity fund or similar. I have owned balanced funds for years and only in 2008 did the funds go down in value and they have recovered all they lost.
Dear Bob, I have investments with the bank. I have done a lot of research about the fees. So if you tell people to invest with the bank in GIC, please tell me, what is the interest rate now???? I am sorry, but I would rather pay the fee and get a bit more interest, then earn my big 2% in GIC. It would probably work for somebody else. As I said before, there is a product for everybody out there. I am talking to people that already signed up for CST and want to understand it. Second, if you invest with Mutual Funds, with no front load, or back load….but just MER, please tell me what would be the fees over 17 year if I deposit $167 a month. I read the post for Stephen, honestly for regular people that don’t have much knowledge about investment, it’s quite confusing. As far as I calculated for my RRSP, plus I played with some numbers on the website that I previously mentioned, I would pay around $6000 in fees on $100 contribution over 17 years with MER of 2% and none of them are refundable….Give or take….. I am willing to pay it on my RRSP, because it’s a long term and I can gamble a bit. But for my RESP, I chose to be conservative and make my average 6%.
Tell me Bob, am I lying here? Just because I have something positive to say about my choice of investment for my kids, you don’t have to attack me that I do it for some other reasons. There are a lot of products, they all have their positive and negatives. Stick to your choices and I will stick to mine. By the way, which bank do you work for?
Hi Bob and Ann
I like your critism to each other and we should take this positively. I dont know what would be the outcome from my plan with CST at the end for my kids but atleast i want to make sure my own money is save same as GIC.
I have RRSP with bank both high risk and consertive portfolio getting nothing since 10 years. Banks say it is long term 10 years already passed and dont know what exactly the bank means about long term.
Also opened tax saving account and getting 1.75% very little,
To be honest thinking to buy rental property keep it for 20 years and sell it when kids go to university this will be a crystal ball.
Thanks
AD
Will Govt give grant 10% to Bank’s RESP and 10% to RESP with CST?
Thinkng if i contribute in both meaning 50% with Bank and 50% with CST. I know the interest rate are low these days but we pay less interest on mortgage as well so i still it is balance.
I’m with CST for 3 years now and dont know what will be there reaction if i down my monthly payment. (penalties etc). or may be it is not the right time to do that.
Thanks
AD
Adell, at this stage if you decide to reduce your contribution with CST by half, you would reduce the number of basic units you have resulting in being charged for half the enrolment fees. To invest in a bank GIC would not result in much interest, since most banks offer very little for a GIC. If you chose a Mutual Fund, your principal and grants are not guaranteed. After three years with CST, your best option would be staying with them till maturity. And no, fellow bloggers, I am not a CST rep! I do believe that most people don’t understand that an RESP is a long term investment (17 or 18 years depending on the company) It is an income tax law and has rules and regulations that apply simimlar to and RRSP. No one seems to make a big deal about it when they cash in their RRSP early and have to pay a 20% penalty. With any type of RESP we choose, whether with a bank, or RESP company it is important to fully understand the implications and stick to our decision. Folks read the propectus and if you don’t understand something,call the rep. and have it explained. I have a 16 yr old and although there were rough times over the past 16 years, we never for one moment thought about opting out of our RESP. Both my son and I are very happy we stuck to our decision.
Thanks Cory
Yes i believe you are right.
Now atleast i am capable to explain about CST to someone who has no knowledge of CST RESP.
AD
Could someone please explain the enrollment fees? I scanned through the comments, but didn’t see much about them. I work for a financial institution and am waiting on hold to speak with someone at CST and nothing yet. A client of mine has lost $1900 to enrollment fees…
Shelly
I learned here alot and let me explain and anyone can correct me if i am not correct.
We need to know more about your client meaning, Is she/he completed the 17-18 year term if yes then she should be able to get atleast 50% of the enrollment fees which comes up to 3515.80/ 2 = 1757.9. This is the assumption if your client kept continue to end of the maturity and have unit of 17.579. I dont know how your client lost $1900 enrollment fee. May be she/he contributed more money to by more units? or discontinued the contribution during the time?
Thanks
AD
Shelly: The enrolment fee is based on the number of units the person has started the program with ($200xnumber of units) In Adeels case he/she started the program with $167 per month giving 17.579 basic units. With any collective program, the enrolment fees are explained in detail and the amount should be shown to the person and explained that if they decide to stop, cancel or transfer their program the enrolment fees are applied.
I enrolled my daughter in 2007 and I am wondering if it was a bad idea. I’m currently on mat leave and am struggling to make my $100 payments every month. When I called the company to ask if I could pay $50 a month instead they said I would lose 50% of my enrollment fees when my kid goes to school. They said the reimbursement is paid out on the amount of units owned, not the dollar amount paid ??? So, I figured then they would recalculate my enrollment cost to be 1/2 of what it was and they would use the other 1/2 to buy units, no. I simply lose 18 months worth of contributions. This is so wrong and should be against the law. I can understand stocks not doing well, a crash or just plain old poor investments, but maliciously stealing money from people through intericate little “rules” is so disgraceful. There is no good reason why I can’t have that money moved.
So they customer sales rep’s advice to me was that for the remainder of my mat leave they could stop my payments and make the enrollment date start later (so I have five months left of mat leave that I would not be giving them any money, and instead of my enrollment date being sept 2007 it would be feb 08). Does that make sense to anyone? Any reason that I shouldn’t. I’m so confused and honestly embarassed that I fell for such a scam. I would rather put my money in a shoe box under my bed!
Ann. Your situation is unfortunately one of the best examples of why these plans make no sense. You are charged the enrollment fee right up front. If you had gone to the bank you would have been able to skip payments, make extra payments or stop payments altogether without losing any enrollment fee. What other investment charges you a fee right up front before any of your money goes to work. I have spent 43 years in the investment business and this is one of the worst ideas out there. I don’t have any advice for you but I sometimes wonder if adding more money is just sending good money after bad. It is quite unreasonable that they don’t have built into the system a method of stopping payments for a period of time for any of a number of reasons such as mat leave, unemployment, or a critical illness. One thing is for sure since you are on mat leave I am sure you won’t get one of these for your new child. Congrats on the new baby hope all is well.
Bob, her name is Michelle.
And Michelle, I am very sorry about how you feel and that you are no longer sure about the choice you made. Plans or investments or payments that involve some commitment are not always a bad thing. Look, you buy a house, you have a mortgage. You have to pay, but at the end you own a house. Same goes with car payments or life insurance……The point is, you made a brave, mature, adult decision about investing your money for your child. If you had an option to pay whenever you wanted, would you really be able to save as much??? The group plans force you to be disciplined about your payments, but at the end of the day you will end up with more money then your friends that choice “pay as you go” plans….The fact that the head office put you account on hold for the duration of your maternity is good, it will help you financially. And all this talk again about the fees. Tell me, who else offers you the refund of any???? Bob keeps saying that CST charges up front, but you do your investment for 17 years, aren’t you supposed to look at the fees the same way. Bob, you never answered my question. How much would a client pay if they do they same investment with mutual funds???
Now, I wanted to keep my money in the shoe box a few times in my life: lost a lot in 2002 and 2008. I was afraid to buy my first house or open an RRSP. But for people that give in to that mentality, guess what, they will end up with nothing but some money in their shoe box…….Michelle, it’s scary out there, so many options, don’t know who to trust….We’ve all been there. Call your rep, ask her or him to go over the plan with you again.
Bob, I am sure that you are very smart and very experienced in what you do. But in the past 43 years a lot of things changed. Market changed, products changed, personalities changed. I am opened minded to learn more about different products and options, that’s how I ended up signing my kids with CST. I mentioned before that my cousin finished her University with help of CST. My uncle said it was the best decision he’s ever made.
Michelle, congratulations with your new baby! And even if you don’t sign up your new child with that company, please rest assured that your first account is in good and professional hands and you will get your money at the end no matter what!
Michelle’s situation is unfortunate and typical of many cases I have seen. Life throws curve balls, never more so than when we are in the child-rearing phase, and submitting to obligations with oppressive penalties is something we should try hard to avoid. I cannot agree that committing (willingly) to such an arrangement represents a mature decision. None of the folk I have counselled had any idea of the price of discontinuance – until circumstances struck. Had they been better informed during the sales process, I am sure they would have evidenced their maturity by not buying the product.
It is hardly valid to draw a comparison to mortgage payments and vehicle loans. Such arrangements are, by their very nature, contractual and there are few alternatives. The choice with RESP’s is broader and clearer – rigid, expensive, inflexible group plans, or flexible, inexpensive individual plans over which you have complete control, with or without the input of a financial advisor.
The constant attacks on mutual fund expenses are wearing a little thin. I tend not to use them myself, but the right fund in the right application can be a very cost effective way to achieve diversified market exposure. However, if you don’t have the knowledge to identify a good fund from its peers, don’t even think about guessing – get professional advice.
On the matter of professional advice, general comments on the motives of advisors and salespersons would not be helpful here, and might risk causing offence. But some clarification on compensation types might be useful:
There are two ways to get paid in the investment business – selling investments, or managing them. Salespeople with limited licenses (such as CST reps) are commission only. Mid-level licensees (segregated or mutual funds) typically take a fairly small initial commission and a ‘trailer’ or portion of the management fee which ties their compensation to the performance of the investment. Professional money managers (Investment Counsel or Portfolio Manager) receive only management fees which makes their compensation dependent entirely on account performance.
Penalties??? Michelle said that she was offered to skip payments without penalties….. I asked my agent years ago, what would happen if I lose a job , or we have some financial problem, she explained that we can put account on hold and pay later. I don’t see any penalties here. I asked what if my child goes to school earlier, and she explained that I can withdraw the funds and they will adjust it so that my baby still gets the same interest. I see a lot of flexibilities….I have an option to transfer my Group plan to Individual Plan and have all the “flexibilities” you are talking about. I have choices, I can stay with group plan depending on what my kids want to do and get a few extras or transfer….Man, I am learning a lot more about my plan on this blog….
You know how people are afraid and uncomfortable with thing that are different from what they used to and comfortable with? That’s where the negativity is coming from. I think that the problem here. You set your mind that investments with the bank is the only right one, you chose to see that what people need. I speak to a lot of people and lately about this blog, just to get an opinion. Shocking, people (most, not all) said that they would like a plan that the money would come out each month and they don’t think about it or worry about investment market and they DON’T want the freedom to pay one month and not to pay the other. Don’t decide for people what they need or want. You sound like a true sales person.
My husband and I are seriously thinking about transferring our RESP contributions elsewhere. We’ve only been contributing for a few months, and so far have paid about $1200, all of which has been going towards fees. Does anyone know if it is possible to simply walk away and lose that money, without owing CST? We are going to ask our sales rep, but I’m not sure we’ll get a straight answer out of him. I suppose we could help contribute to the famously-promised attrition
Also — I wasn’t going to wade into the larger discussion, but AnnA, I think it is disingenuous to imply that the inflexibility of CST counts as a strength. It is very easy to set up any manner of investments such that a set amount is taken from your account each month. If you question your self-control you can set things up so that it would be tedious and annoying to stop a payment, so that you would likely only do it in a very difficult situation. Where this almost always would differ from the CST setup is that if you experienced an extended period of hard times and had to stop or reduce your payments indefinitely, you would still “own” all the money contributed previously. How is this a bad thing?
We’ve started working with a great financial planner (non-commission), and when we told her we were with CST she didn’t mercilessly slam them or anything — she just said “they’re fees are quite expensive relative to other options, and I prefer investments where you know exactly what you have at any given time.” I tend to agree, which is why we’d like to walk away.
Hi preemiemama, I am sorry you feel that way. But by walking away from CST and going somewhere else, you will lose your $1200 and pay the fees all over again somewhere else. I was approached by bank a few times, especially when I was pregnant with my third child. I listened, I asked questions. But nobody, not once gave me a clear answer about how the product works or if there are any fees.
I trust companies that are transparent when it comes to fees, they tell you upfront the cost of taking care of your plan. Even on this blog I didn’t get one clear answer. Everybody gets paid, either over 3 years or over 17. Preemieemama, at least here you have that chance to get some of that fees back, and you can’t lose your money.
PremiemamaPremiemama, you are right, that product is not for you then. I think there is a product out there for all of us. I wish you all the best and I hope you make lots of money. I just don’t like when people are so closed minded and see only the upfront fees. I wonder what your financial planner will say about your fees…. just a thought…., you are right, that product is not for you then. I think there is a product out there for all of us. I wish you all the best and I hope you make lots of money. I just don’t like when people are so closed mineded and see only the upfronf fees. I wonder what your financila planner will say about your fees…. just a thought….
preemiemama
My kids are with the CST for 3-4 years. Here is my little experience so far.
1. Don’t invest anywhere unless you are very clear about. (Fees and penalty if you quiet etc).
2. CST charge upfront enrollment fees so later you have to think twice to switch with other RESP organization and hard for you to go as there are lot of fees and penalties involved. (I guess this is their business plan).
3. CST is only for people who know that their life will be ok for 17-18 years no bump etc (although everyone has up and down.)
I would say listen to everyone in this group and do what you thing is best for you. I had the same feeling that CST is not good but i am taking my chances as Enrollment fee is high upfront but if you serious to have this plan for 17-18 years then you will be getting back atleast 50% of your enrollment fees which is 3515.80/2 = 1757.90 and losing 1757.90 (Not a big deal as compare with other investment organization).
I dont know about if you stop contribution for 2-5 years due to hardship how this will affect the EAP for your kids. You will definately get my your principal amount 100%. (Can anyone correct me Ann?)
Thanks
AD
Page 24 of the prospectus outlines the options where someone cannot make the required contributions and they are not very good. You can reduce the number of units you hold but you forfeit the enrollment fees already paid on those units. They then kindly offer to allow you to later purchase more units and use the enrollment fees from the cancelled units. It also looks like the principal (but not interest earned) from the cancelled units can go toward the remaining units. Since half of what you paid for the first two years went to enrollment fees there is probably not a lot remaining in principal.
So many have posted that it is probably not wise to recommend someone close their plan due to the forfeiture of enrollment fees but that begs the question why buy it in the first place when there are so many more flexible plans available.
As stated in previous posts one of the major sources of additional funds being made available is attrition. Looks to me like Michelle is going to be one of the victims of this plan rather than one of the beneficiaries.
As far as preemiemama is concerned if you have only been contributing for a few months then I would cancel. Take whatever you can get back and get out. I probably would write to the securities commission in my province with a complaint about the plan as well and hope that resulted in gettting better treatment on any potential refund.
Bob,
I don’t believe that CST can touch your principal. I know you will lose the enrollment fees if you stop making payment.
What I will do that is to convert my plan after eight years consistent and open the new plan with smaller amount. That way your first eight years will be fully paid to you at the end including enrollment fees. Clear like a mud or I am wrong here?
Thanks
AD
Adeel
The prospectus says that if you cancel units you can use the principal (which is the amount you paid less enrollment fees) to reduce future Contributions on the remaining units. In effect by cancelling 1/2 of the units you would see the principal transferred which in effect would mean that you have paid twice the enrollment fee since there is no refund of the enrollment fee for cancelled units. It does indicate that ncome for the cancelled Units will remain in the Contributions Account. For someone in the very early stages of such a plan where they haven’t paid all of the enrollment fees I would simply (may not be that simple) cancel the entire plan. For someone further on you would have to do calculations and don’t expect any help from your salesperson as he has already moved on to other potential clients.
If you cancel to the Self-determined plan you also lose your enrollments fees and never get back the 1/2 of the fee. Remember if you have a child that decides not to go to school you are forced to transfer and lose all of the fees.
Adeel, you are right. You can convert your plan to fully paid plan after about 9 year WITHOUT penalties. And if you wish, you can stop contributing or start a new plan. So CST plan is not a commitment for 17 years, but at least for 9. If during this time you do have problems with finances, they will put it on hold WITHOUT penalties. If you have a problem for a few years, they will reduce your units and you might not get the fees on this units, but overall, if you don’t get a few hundred dollars, it’s really not a big deal if you look at a big picture. Look, I know parents with 8 -9 year old that did plans with banks back in 2001-2002, and some made 0% return plus they lost some of the Government Grants. Guess how they feel? They probably considering to keep their money in the shoe box. I don’t believe RESP is a long term plan. All these families got hit by market in 2002 and then 2008. Now they need a few year to make up their loses. By the time they do, they won’t have time to make money because their kids will have to start their postsecondary education, considering if economy doesn’t give us more surprises.
My husband works for one of the largest Mutual Fund Companies. I am in Life Insurance, Seg fund business. Trust me, nobody and I mean nobody ever mentions to people about the fees they are charged on their accounts. Why not? Because they don’t have to. People will invest anyways, so why confuse people with fees. People pay even more fees for Segregated funds because of the extra guarantees they offer. But does anybody knows the $ amount that is taken from their accounts as a fee. Forget about getting refund of the fees. I know how much!!!! A few times more then CST charges.Go to any bank now and ask them their average 5-10 year return on their RESP and then ask what the MER and ask them to calculate a dollar #.
So when the company tells you up front the cost of investing with them, offers a few bonuses and potential return of your fees, suddenly they become crooks and thieves?? It’s HYPOCRITICAL!!!!!!!
You attacking their prospectus, but did you read yours??
I also think that this blog was started by a poor mom that became a victim of a bad customer service. The rep didn’t do their job properly. My rep told me that if the family will more to another country, they will have an option to convert their plan without losing fees or cancel their plan and get full refund. So her rep screwed up!! There is never a 100% satisfaction in any company. It’s a fact. She has a right to complain and be upset.
I think Ann, you should work for CST, if you don’t already, as you seem to be very knowledgeable about everything regarding CST and very angry at anybody that says anything bad about them. A little odd that you are still here exchanging barbs with others if you are so happy with CST. Most people would have moved on to other things going on in their lives. Anyway, after reading a lot of comments lately I would like to revise my original comment made Feb 17th where I stated I was very unhappy with CST. Once I’ve calmed down about being lied to, it seems that my return on my principal is about 10% over a 14 year period. All in all, not too bad really. Because I only had 2 units, my monthly payment was only $45, $540 per year. It wasn’t very onerous and we never were in danger of having to cancel it, hence I did not know about the hassle with enrollment fees not being returned. Our enrollment fees were only $600 in total. I think the mistake would be to invest in too many units. Then you are into a major outlay of cash. Basically the amount I get from CST covers the tuition costs per year($3,000, plus $1,000 for books at McGill. $4,000 U of Lethbridge). CST definitely exaggerates the cost of university. Also I came to the realization that student loans were a very good leveraging tool because that money borrowed doesn’t have to be paid back until 6 months after your child leaves school and you get the use of that money for 3 to 4 years. My son’s living cost is about $5,600 for a school year($700 per month x 8 in Montreal). That money could easily be earned by your child over the summer. I give these figures because I’m sure parents with younger kids don’t know how much it costs for university. When it comes time to repay the loan, if there is one, we will help by contributing a monthly amount applied to that loan as well as our son contributing. I took out a student loan way back in 1970 so I know it is not a scary thing at all and can be very manageable for all concerned.
Cathi
In conventional terminology, the principal is the amount of money you invest. Any fee deducted from the amount you invest is an attack on principal as it results in a loss to invested value. CST’s separation of fees from principal in its prospectus is a clever distortion of reality. Evidence that regulators still have some way to go with these plans.
The reason that enrollment fees are forfeit under some circumstances is that the sales reps keep their commission regardless whether the plan member surrenders early.
This compares poorly to sales systems such as insurance, where commission can be clawed back from the sales agent who is motivated to consider suitability very carefully. Or mutual fund sales where the salesperson’s commission may be paid by the fund company and only reclaimed from the client’s principal in the case of the funds being liquidated in the first 6 or 7 years. Or professional money management where there are no commissions, only management fees.
Cathi, I made it my business to know what I am involved with for my three of my kids. Plus, as I said, I learned a lot recently….The reason I spent time on this site, not that I have to explain it to you, is because I hate unfairness. My friend read the blog and was concerned with my choice and also because I referred my friend to CST. Why is that whoever is against CST is a good person, but because I take my precious time to defend a company, right away I am bad…..Please don’t compare me to most people and decide what I should do with my time.
Now your comment about “CST definitely exaggerates the cost of university”… I get the same statements as you do and it’s clearly states the cost of education is provided by statistics Canada. The same # are given to us by the bank. It’s a prediction, not a sure #. Yet you still chose to blame it on CST. I see a lot of prejudice.
And Stephen, you are lucky nobody attacks you for keep making bad comments about CST. You took you time to learn about them, are they your big competition and you out there to crucify them? Yes, Life agents and Mutual fund agent get probably different commissions, but they also get trailer fees. CST reps get paid once and then they serve their client until the account matures.
Ann, please be assured that I have no agenda to crucify, or even disrespect anyone or any product. As I have said earlier in the blog, I do not market RESP’s. I set them up from time to time, more as a favor for the high net worth clients my company serves and I derive no personal benefit from doing so.
If I make an observation about a plan it is because I feel that it may be of some service to those who visit this site hoping to glean either the experiences of other parents or some qualified, professional opinion on the matter.
My level of licensing allows me to recommend any type of investment product and my decision not to recommend collective RESP’s is based on my objective view that they are a fundamentally poor option. In the days when I did derive my income from direct sales activity, it was tempting to offer collectives as the commissions paid are very attractive. I am glad that objectivity prevailed.
Stephen, I totally respect your opinion, I am sure you provide great service to your high net worth clients.
I stick to my choice of not believing in investing RESP in Mutual Funds and paying huge MER for that and not being sure if I won’t lose my money right before I need it. I know MER might not go directly to a person selling me the RESP, but it does go to the bank. And you have to admit banks are not poor. However, I do believe in putting my RRSP into Segregated Funds, and sadly pay huge fees, but that’s just life. Respectfully
Ann, I say that CST exaggerates because they do. I have a cost projections sheet that was given to me by my salesperson and it states that it would cost $96,000 in 2008 for 4 years of post secondary education. With what I know now after having 1 son graduate and another graduate in a year, the cost is only $40,000 each which is a far cry from $96,000. They just want parents to buy more units. They suggest 12 units to cover tuition and accommodation. I would have had to pay $270 per mnth, $3,240 per year for a product that is beyond what I need. No wonder people forfeit their enrollment fees at that cost.
Cathi
Cathi
Very well said, they definately exaggerate, that is why i have 17 units now in just three years and seems to me it is too much? and question coming to my mind what happens if my son stay with me during his educatioin. Will they still get the EAP for accomadation? How this will work.
Thanks
AD
Hi Adeel,
I originally thought you had a lot of money tied up in CST in one of your earlier comments but I thought you had a few kids you were providing for. But it seems the plan is for one son, right? For my first son I cancelled some units back in 1996 so I’m pretty sure you can do that too if you find that you will not be needing all your investment. From my calculations with your payment of $167 per month will equal $34,272 in principal after 18 years minus aproximately $3500 in enrollment fees. You will get half of that back when your son graduates. But to start off with, you will receive in the first year your total principal amount minus the enrollment fees which will make it $30,772. In my case and I’m not saying this will happen to you, I received the principal the first year, half of my principal the second year and half the third year. I’m assuming the same for the fourth year. So if that were true for you then you would get approximately $17,136 x 3 years is $51,408. All together you would get over the 4 years a whopping $82,180. That’s way too high for university costs as I outlined in my previous comment. Our costs were more like $40,000 for 4 years(including acccommodations out of town). And you will not get anything is he decides to not go on after first year. All you get is your principal the first year. No guarantees. Also it doesn’t matter where your son goes to school you will get that amount based on your units. If your son goes to school in Europe you will be ok. You really have no way of knowing what your son will want to do after high school. You have a limited time too. They allow 1 year off I believe. Remember things might have changed with CST since I signed up in 1990. hope this helps. I’m no expert by any means, just telling you what happened to me. Maybe talk to someone at head office. That’s what I did and they were quite helpful. Hope this helps you figure out all the ins and outs of CST. I assume you know about the grant from the Federal government which gives about $200 per year while you son in high school.
Cathi
Thank you all for your comments and special thanks to Stephen Smith for his input. I am expecting a sales rep from C.S.T. Consultants Inc. in less than hour but I wish I could call him and tell him not to bother coming over. It really bothers me that they had all our personal information when they called us last night. I will follow up with them and our hospital to figure out if they actually sold our personal info to C.S.T. Consultants Inc . This will be a good story for CBC the fifth state program
)
Thank you all again for your input.
Cathi, so what if she get a whopping 82,180 and the school will only cost $40000. Isn’t it a good thing that she has money that she can spend on something else. When is too much money a bad thing??? I am saving $100 a month for 3 of my kids. I hope at the end I will get more or less $50000 for each. Honestly, if they live on heir own in Ontario, not Quebec(different cost), it might not be enough. If by some chance it is enough and even more then I need, then great, my kids will start their adult life with education and some savings. What am I missing?
Cathi
I have three kids line up same way $167/month. I gave explain of one my kids as that was easy to explan in the group calculation.
That is surprised me. Here CST says you will get your principal right away at maturity http://www.cst.org/index.cfm?id=14210. I dont know why they did not give you. (Because some condition applied to your case as you cancell the contribution). CST should clear these thing on there website. CST reps can not explain in detail if you ask it is all verbal and no written prove etc. Call head office i have to take day off from work as i have to wait 45 minutes plus to take to someone.
Take example of my one kid. For instanse i get 30000 on the maturity. and 35000 EAP based on the statement they sent to me. How they distribute this EAP each year in school? they send directly to us or school ? How about accomdation if kids stay with us during school?
If i cancel the contribution of my one kid. Will CST transfer the EAP (if available) from one kid to other kid. As i remember CST reps mentioned that we can do that.
In my initial post i mentioned there are lots of variable with CST which is the enemy.
Thanks
AD
Hi Ann
I guess the question is that will this easy to get the remaining money to spend on something else? or there some condition applies e.g age of kid, number of years in school etc. Or they will return all the money with no question ask after 4 years in school?
Thanks
AD
Adeel, from what I understand, if you stay with Group plan, you will get you principal back in the first year (you are correct) and the rest will be divided over four years and given to your child. The money is never sent to school (RESP regulations I believe) So the only thing you have to do is to prove that your child is in school. You get to use the funds however you want. So the only condition is your child has to be a student. If one child doesn’t go to school, then you an transfer it to another child (the whole amount, again it’s RESP regulation) So Adeel, if you have more money then you need, then great, you have a extra for your family!!!
Hello everyone,
I appreciate all the recent comments and am astounded both at the depth of discussion and the number of people reading. It tells me there really is a lack of independent information on RESPs. I’ve learned a lot and have a stack of questions for CST when we return to Canada.
By the way, Ann, we spoke to a number of people at CST (not just the rep) and no one gave us the option of a refund. No one. So I’m very interested to hear that it was presented to you.
I’d like to keep this discussion going, and welcome a hearty argument, but PLEASE, no personal attacks. Thanks.
Ann and Adeel, The point I am trying to make is that there is no guarantee that your child is going to first, go to university and second, finish university. It’s a bit of a gamble when you enroll in CST when he/she is in diapers. So if they don’t go to university you are guaranteed to get your principal back, no interest. So for that $35,000 in Adeel’s case and he hasn’t made a penny on it. Whereas if he had less units instead of betting the farm, he could put the other money in a tax free savings account and then he would have a little more control over his investment. I don’t think its a good investment strategy to tie up a fair bit of cash in units you don’t need. I gave my costs for my two sons in my previous comment March 13th so I think I’ve shown that CST’s projections are very high. But this is my story, not everyone’s story. I’ve been through the system so you take what I’ve learned or leave it.It’s your money. Good luck
Cathi
No Cathi, if your child doesn’t go to school, you can transfer all your interest on your principal and interest on Grants can be transferred to your RRSP. This is an RESP regulation, not a CST rule. So if my kids don’t go to school, I will get my principal and my interest, I won’t get my fees back, but I will still make a nice profit. I am sorry Cathi, you are very wrong about this. For me, it’s no risk at all. If one doesn’t go to school, transfer to another. If none of them go to school, I get everything back, less the fees and Grants. Win win situation.
For those of you that are defending Banks and Personal Investment firms, I would like to see some numbers. Has anyone out there that has invested with a Financial Advisor or bank actually received the money for their kids, and how much interest after fees did they receive in EAP’s. I defend group plans because we had a proven track record of how much has actually been paid out per basic unit. Some people out their actually understand the benefits of attrition. In fact this week, I had a gentleman open an RESP with the company I represent,for that very reason. He wanted his child to benefit from attrition. What many are forgetting is that group plans also offer the option to parents to deposit when and how much they want. The fellow decided he wanted to deposit $1000 every 6 months, with the option to skip a year if we wanted to. I offered him what we call a lump sum deposit. I do agree that many reps encourage people to deposit monthly because their commission is based on the number of units they sell. I personally prefer having a statisfied customer that will not cancel their plan because I have done my job and shown all the possibilities of deposit schedules. I probably make less money than most reps. but I also have a lot less dissatified customers.
Ok Bob and the others….show me your numbers please.
http://www.getsmarteraboutmoney.ca//tools-and-calculators/university-cost-and-debt-calculator/university-cost-and-debt-calculator.html
cost of education
Cathi and Ann
Ann, thanks for the link.
Cathi, i just did little cost calculation for my kid Based on the admission in the waterloo university for 4 years program in computer science and the assumptioin that kid is not living with us.
It comes ups 78000. My kid will be going in 2024 so you need to add more money because of inflation, I guess statement show almost the right amount which is 93000 in my case. (prediction for year 2024).
I believe we both wrong saying that CST exaggerates. We need to understand that they are human being and they can only predict and their basis is statistic canada.
looks like my kids have to stay with us during their education to cover the cost for the specific course and the university
(Now i stop dreaming for honey moon in Cancun for parents) as i was thinking we will have extra money.
Thanks
AD
Ann, They have changed the ruling on returning your interest because in my papers (1990) it was not returned but went back into the pool if your child did not go to university. It does take the risk factor out which is a good thing.
Cathi
guess it’s true Cathi. I know back then these plans were not very flexible. I actually admire people that signed up back in 1970 to 1990. There was risk, you are right. But now, they really introduced a lot of flexibilities. I even think plans that were opened in 1990 can be transfer to individual plans this way you still have access to all your interest. Not that you need it, since your son is going to school. By the way, congratulations to you with that!!!