Company unveils first fully digital employer-sponsored plan and aims to help workers advance long-term savings goals
To help employers show their support for working parents as they struggle through the COVID-19 crisis, Canada Life has introduced a new self-directed registered education savings plan (RESP) employee benefit.
Aside from offering employees access to applicable government education grants, tax-sheltered earnings on contributions, and other traditional benefits of RESPs, employees who use the new self-directed RESP offering also stand to benefit from Canada Life’s low investment fees, a convenient payroll-deduction option, and ease of a fully digital experience.
Figures from Statistics Canada show that in 2018-2019, the cost of tuition for Canadian students attending undergraduate programs full time averaged $6,838, up 3.3% from the previous academic year. Another report from the Canadian University Survey Consortium revealed that among students graduating from post-secondary studies in 2018, 57% reported that they had to get financial support from parents, family, or their spouse; about half of the respondents said they had education-related debt, which amounted to $28,000 on average.
“Tuition and student debt are only going to go up," Ryan Weiss, Vice-President Product and Experience, Group Customer, Canada Life, said in a statement. “RESPs are without a doubt the best way to save for education, but many families who need it most are missing out on free education grant money, in part because they believe opening an RESP is a complex and daunting task.”
A recent report from Statistics Canada paints a concerning picture. According to the statistics agency, the number of parents opening RESPs has risen, but there remains a stubborn gap in adoption between higher-income and lower-income households. Notably, it said parents in the top quartile of income were around two times as likely to open an RESP as those in the bottom quartile.
“We've addressed this concern by making Canada Life's RESP conveniently available through the employee's workplace benefits and simplified the enrolment process with an online application," Weiss said.
Employers may add the RESP to their employee benefits plan at no cost to them; from there, employees may choose either the family or individual plan, to which they may make contributions through payroll deduction, pre-authorized debit, or online banking bill payment.
Employees are also nudged to access any grants they may be eligible for, including the Canada Education Savings Grant (CESG) or the Canada Learning Bond. CESG kicks in $1 for every $5 contributed by an employee, while CLB, aimed at low-income Canadians, provides a $500 initial grant up to a maximum of $2,000 just for opening an RESP account.
“Helping young Canadians afford post-secondary education and minimize student debt is exactly in line with our commitment to the financial, physical and mental well-being of all Canadians, not just at retirement, but across all life stages," Weiss said.
The RESP aligns with Canada Life’s student debt flexible savings program, which lets employers support graduates in saving for retirement, even as they deal with outstanding student debt.