Anyone visiting a doctor’s office, maternity ward or prenatal screening clinic in Canada will likely see pamphlets for CST Fund RESPs, encouraging parents-to-be to start saving for their child’s post-secondary education.
I rarely take notice of such advertisements, and have picked one up and filled it out only once in my life. As a result of that weak, nervous, distracted moment in the waiting room, we found ourselves relentlessly hounded by the salespeople of CST. And, a few months later, we found ourselves signed up for 18 years of payments into the fund.
It was only when we began to prepare for our relocation overseas that we revisited this decision - with regret.
It seems that RESP group plans (such as CST) work well when all goes according to schedule i.e., your kids grow up and complete four years of post-secondary education, AND you continue to pay into the plan until that point. Any deviation from this arrangement, however, presents a problem.
We learned that Canadian law does not permit paying into RESPs if you live outside Canada. Moving to South Africa therefore means stopping our payments. However, stopping payments before university is completed also means losing hefty “enrollment fees” charged by CST. We stand to lose about $4000.
The only way around this is to continue paying into the plan at the same rate to which we originally agreed. Our helpful salesperson recommended that we resume payments when we return to Canada, or (his preferred scenario) by providing a fake Canadian residential address while we are overseas. Hear that Revenue Canada?
I’m not saying CST is a scam. I’m sure it works well if you follow the standard course. But the fine print is extensive and extraordinarily cryptic. Even our financial advisor had trouble deciphering the details. So, I am saying beware. Be aware - before you sign up.
Check out this Georgia Straight article for more information.
I would not sign up for a CST scholarship again for my children. The amount actually received from CST was approximately half what was indicated by the enthusiastic salespersons who contacted us yearly. Upon inquiring what went wrong, I was informed by the head office that “investments had not lived up to expectation and more people than anticipated had applied for scholarship money.” I would have done better to have administered my own plan for the children.
Thanks very much for your comments. I am still very irritated by CST (particularly their sales tactics) and am interested to hear from people who are either satisfied or similarly irritated.
Hi! I am enrolled with CST with both my children and honestly have nothing but good things to say. I would like to inform you of one thing, you CAN lower your payments if you want to continue contributing into the plan. As I recall and what I have read and have been told as low as $9.50/child. If your salesman says otherwise, I would contact head office regarding that. It doesnt hurt to continue your plan, especially when you will lose your enrolment fees. But, I was told all about the loses, gains etc if you leave or stay. I was told in my meeting about it only being good in Canada, to keep it in for at least 10 yrs (maturity) then you can cash out, if I terminate it what I would be penalized, if I stopped making payments etc, I also asked about lower and raising my plans when the going got tough. I dont know if this helps you or not. But, I have heard good things in the end from a large amount of people that have been paid out to this date. I was referred to them, have a great salesperson and my annual statement shows growing numbers…so, I can not complain. But, I also see the downfalls if your life changes…but, if you can make it work still…by having your parents, relatives or someone still contributing…I would try that. I really hope I was help.
Hello Interested Momma and thanks for your comment. I’m glad to hear that your CST is working out, and that you feel well-informed. We’ve not yet decided what we will do upon returning to Canada - other than a lot of research! We were definitely not informed of the consequences of leaving Canada, as that was always a possibility for us and we would have paid attention. Good to know that these plans can work out as promised. Thanks again.
I think it comes down to your sales person and how much knowledge they have regarding the program. The child can go out of country but the primary contributor/children must be residents of Canada and can move from Province to Province. It is very unfortunate that you were not informed about it. I truly believe it is a good program. Just like any product there are negatives and positives just like going to a Bank or and Advisor, there are perks…but then again there are alot of negatives too. Banks and Advisors still charge fees (MERs), have admin fees and transfer fees. The only downfall I found with CST is the upfront enrolment fee…but, then again MERs add up also…and you have 0% chance of recovering those, at least with the Group Program you have at least a 50% chance of recovery and up to 100%…that is a perk in itself:) Good luck with your decision and research, it is so hard to know what to do and what is right…everyone wants to sell their product…right???
An interesting thing: I had a scholarship trust thrust down my throat when my first child was born. Like twinutero, I found a bunch of rules and regulations, and lost about 25% of it when I took it out and put it in an Individual RESP. The Individual RESP is for my children, and if they don’t use it, I get both my contribution and growth back from the plan, to either put in my RRSP, or take as cash.
As I learned more about Individual RESPs, I found more flexibility in it. I can add money, stop paying money, and choose how the money is invested. The money goes to MY child (where scholarship group RESPs go to whomever applies…if your child doesn’t go to post secondary, your growth is forfeited).
A friend of mine got some money out of her group plan just a few months ago…with a $800 penalty because her son didn’t go to grade 13. Begs the question whose child does go to grade 13 in 2007?
I hope interested momma has all continue well with her plan. It just didn’t work for me, given the inherent problems in the product. I know these plans continue to be investigated by the Investment Securities Commission, due to the fees, forfeiture of money, and enrollment fees.