RESP Canada Learning Bond (CLB) – Why Aren’t More People Claiming it?

by Mike Holman

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Part of the Canadian RESP program is a grant, inappropriately named the Canada Learning Bond (CLB).  The “Canada Learning” makes sense, but I have no idea why the word “bond” was used.

In actual fact the CLB is a grant and the big difference between this grant and the regular RESP grants is that no contribution is necessary.  If you qualify, you just have to apply and you can get up to $2,000 deposited in your RESP account per child.

The money is not all paid at once.  Depending on eligibility, the child will receive $500 initially and then $100 annually for the next 15 years.

To qualify your family net income must be at or below $42,707 and the child must have been born on 2004 or later.

In my opinion, the Canada Learning Bond is the only part of the RESP program that actually serves the (lower income) Canadians that it was intended to help.  Most lower income families don’t have the cash to make contributions to an RESP, so they don’t participate in the regular RESP grants.

The sad thing is that the majority of Canadians who qualify for the CLB don’t apply for it and don’t get it.

I wrote this article because I wanted to help call attention to this situation and urge any readers who know someone who might qualify for the Canada Learning Bond to help them get it.  Keep reading to find out how to help.

There are a number of obstacles preventing someone from claiming the CLB.  Here are a number of points which will hopefully address these issues:

  • Aren’t aware of CLB - Solution:  You can tell them.
  • No money to make a contribution – Solution:  They don’t need to make a contribution.
  • Don’t know how to set up an account or invest - Solution:  Set up a GIC RESP at your local big bank.  This article explains how to set up the easiest, quickest RESP with no fees.
  • Refuses to go into a bank – Solution:  Someone else can set up the account as the subscriber and as long as the primary caregiver of the child has a low enough income, the CLB can be paid into the account.  A grandparent for example.

This article explains some of the Canada Learning Bond rules in more detail.

The Omega Foundation is trying to help

There is an organization called the Omega Foundation, which is dedicated to raising awareness of the Canada Learning Bond among Canadians who qualify for the money, but haven’t claimed it.  I did an interview with May Wong from this organization and she gave some pretty interesting answers.

Most of my readers are not eligible for the CLB.  What can they do to help raise awareness?

Our experience has been that just about everyone knows someone who’s eligible for the CLB, whether it’s a friend, a neighbour, a student, a client, an employee or as you mentioned, a family member. We encourage your readers to think about who they could tell and who they could assist to get the CLB. We also encourage them to visit www.smartsaver.org for more information on the CLB and how to get it. Web information is available in 16 different languages. The CLB is too good an opportunity to keep secret. We all benefit when more kids have the opportunity to advance their education. The Canada Learning Bond can ensure that more young people will have some money to get them started. 

What are the current participation levels of the CLB program?

At the end of 2010 (most recent stats available), the national take-up rate of the CLB was 21.8% with provinces and territories ranging from a low of 1.7% in Nunavut to a high of 24.7% in BC. At the end of 2010, there were over one million kids across Canada who were eligible, but didn’t have their CLB yet.

What is the government doing to increase participation?  They obviously have access to information which could identify families that are eligible for CLB, are they sending letters etc to those families?

The Government does send letters to eligible families periodically just to confirm their eligibility for the CLB. The Government also supports the work of community-based programs like SmartSAVER through its Education Savings Community Outreach program to engage families more directly. In November 2011, the Government partnered with SmartSAVER to send vouchers to all eligible families in the city of Toronto to inform families of the amount to which they are currently entitled. Vouchers were sent to 60,000 families representing almost 80,000 eligible Toronto children who are entitled to a total of $62 million right now.

From your research, why aren’t more eligible people enrolling?  Is it because they aren’t aware of it?  distrustful?  lack of knowledge of investing/financial institutions?

 

Awareness is a key challenge.  Even those who you might think would be the first to know – educators, community service providers, even financial advisors – tell us they’d never heard of the Canada Learning Bond before! This makes it even more difficult for eligible families to find out about the CLB and how to get it for their kids.

Would a name change help?  I never understood why they call it a “bond”, when it is essentially a grant.  That seems to add to the confusion.

A different name might have helped explain it, but changing the name now might just add more confusion!

In my book about RESPs, I made mention of the fact that eligibility for the CLB (as well as any other additional RESP grants) is based on the net income of the primary caregiver, not necessarily the person who opens the account.  In other words a grand parent or uncle/aunt can open up an RESP for the child and still receive the CLB.  Is this another rule that is just not well known or understood?

 

We hear from a lot of grandparents, aunts and uncles who, once they understand this, are really enthusiastic about getting the CLB for a child. We think it’s a great way to help more kids get their education savings started.

Has your group had much success in increasing CLB participation?

We’re certainly trying. The CLB participation rate in Toronto, where SmartSAVER focuses its work, was 30.9% at the end of 2010 and it’s rising. We’d like to think our work has helped, but we still have a long way to go. One thing that’s been really encouraging has been seeing the interest in SmartSAVER from hundreds of other communities across Canada and from people like you, who reach a different audience who can spread the word even further.

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{ 14 comments… read them below or add one }

1 Traciatim

Programs like this are pretty interesting. Where someone who makes $41000 get’s a free $2000 toward school, and someone who make $42000 gets nothing. In the end the net effect will be increased tuition costs for everyone. The person making $41000 is also eligible for twice the amount of additional CESG.

So lets’ say for instance each family has 1 child and puts $500 per child per year from birth to 17 and earns 4% on their cash. When the child goes to school the one with the extra help has 22147, while the one without has 17336. That means because their parents earned 2.4% more cash from the time they were born their friend gets 27% more money to go to school with.

I’m not so sure I like this system.

2 Mike Holman

@Traciatim – Unfortunately when you have a program that has an income threshold, there are going to be families that “just” miss the benefit. However, I don’t think that makes it a bad program – you have to set the threshold somewhere.

Don’t forget – The benefit is not $2,000 all at once, it’s $500 initially and $100 annually for the next 15 years. It’s not that likely that the two families in your scenario would stay close to either side of the income threshold for 16 years and one family gets the full benefit and the other family gets nothing.

Thanks for the good comment.

3 Traciatim

I’m sure the cut off will be adjusted over time like many other income tested benfits are. The benefits should be prorated based on income on a sliding scale like many other low income tested benefits like the CCTB, GST/HST tax credit, GIS, and like services. It shouldn’t be a hard cut off like that.

In my example I did calculate 500 up front, and then 100 per year. I also included 100 per year in CESG, and 100 per year in additional CESG for the ‘low’ income and 50 per year additional for the ‘high’ income person.

4 Andy R

Thanks to reading blogs like this, I was aware of the bond and did apply. We have our RESP through BMO. After waiting for over a year with no bond deposit to the account, I inquired with BMO. The customer service rep. stated that I simply must not have been eligible. Knowing that I was, I followed up with a call to the appropriate gov’t dept. only to find that BMO had neglected to register some of the key information.

Now keeping track of the continuing installments is likewise a paperwork nightmare.

I only ended up at BMO because my previous investment counselor wouldn’t take RESP accounts due to the paperwork nightmare.

Moral of the story – like everything else gov’t it is a paperwork explosion and very difficult to track if you are getting what they say you can get if you are aware of what is available in the first place. Did that make sense?

Oy!

5 GM

Once your institution applies for it, do they have to apply for it each and every year over and over again?

Why wouldn’t the gov’t allow the person with the RESP apply for it? It always has to be the institution administering it, so you have to trust them to do it. Which causes all kinds of problems.

6 Mike Holman

@Andy – Glad you persevered and got the grant. There are a lot of potential logistical issues with the CLB. Soon, I’ll be doing an indepth article on how to get the CLB which will include all the problems that might happen and how to get around them.

@GM – No, you only have to apply once and the government will evaluate your eligibility each year and pay the grant if applicable.

Trust me, it’s easier for everyone if the institution makes the application for the CLB.

7 Tina

The Community Income Tax Volunteer Program tries to make clients aware of government programs like this when we do their tax returns. I will be happy to pass the word on to my fellow volunteers. Thanks so much for posting!

8 Mike Holman

@Tina – Thanks for doing that.

9 Steve

Mike – looking for one clarification:

Above you mentioned to qualify your family net income must be at or below $41,544

But further down you noted that:

In my book about RESPs, I made mention of the fact that eligibility for the CLB (as well as any other additional RESP grants) is based on the net income of the primary caregiver, not necessarily the person who opens the account.

In that case, a stay-at-home mom would have a negligible income and be well under the 41K threshhold.

Would she be able to apply for the CLB successfully? Or is it dependent as you noted at the top on the family net income?

10 Mike Holman

Hi Steve – I didn’t write that clearly enough.

It’s the net FAMILY income of the primary caregiver that is relevant.

So a stay-at-home mom would qualify only if the spouse made a low enough income to go under the threshold.

11 Steve

Bummer.

That’s what I was anticipating you would say. Didn’t hurt to ask though. And thanks for all your work making RESPs easier to understand.

S

12 GM

Once again Canadians are punished for being married.
Nothing new there.

13 Rocky

GM: I totally agree.

14 Jan

I am a volunteer with a community a service group. Many of the families we visit are single-parent, very low income in subsidized housing. Usually they are aware of the importance of post secondary education for their children but lack disposible income for saving vehicles like the RESP. And often because English is not their first language or because of limited life exeriences, they are uncomfortable/unfamiliar with financial institutions like banks. I went to my own neighbourhood CIBC bank today and spoke with a “financial advisor” to see how we could make things easier for a family interested in the CLB. The advisor was courteous but definitely not familiar with the CLB. I shared what I had learned from the government web site, stressing that this was something that demanded no money from the child’s applicant. He was politely amazed (non-believing?) that a bank would assist in such a program that required no applicant co-payment. He next talked with the bank manager who suggested he call the customer information line, after which he agreed that my information was correct – all a person needed was the child’s SIN and two pieces of identification from the applicant (Ontario health car not acceptable for some reason). Then the bank would open an RESP account, apply for the CLB and the funds would be deposited. Upon questioning, he did acknowledge that whether the applicant made personal contributions or not, CIBC would charge about $13 a year to administer the account.

All of this would still be confusing to some of our families.

I have not talked with any other banks offering CLB registration. Do you know of any that might make the process simpler, more friendly?

Thanks for your help.

Jan

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