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

by Mike Holman

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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