No RESP-ect for group scholarship plans
September 7 2008 by Ellen Roseman
I drew lots of flak about my column last week about a new report for the federal government about RESP industry practices. Canadian Capitalist also wrote a post about this report.
People thought I was criticizing the whole idea of saving for post-secondary education. They also thought I was too hard on the old-fashioned group scholarship plans.
So, let me admit that I had RESPs for my two boys with Canadian Scholarship Trust. (The self-directed plans weren’t around when they were young.) Both have now finished a four-year BA program, so I got my money’s worth, so to speak.
But I often hear complaints from readers about the rules governing group scholarship plans. You pay the enrolment fees up front — and 20 per cent of gross contributions went to fees in 2006, according to the report — but you lose that money if you have to close the plan before maturity. It’s deducted from your refund.
Also, you lose out if your child starts university at a younger age (see comment below) or if your child takes only a year or two of post-secondary education and drops out.
I suspect that the new tax-free savings account, coming next year, may cut into the RESP market. You can save for anything you like without paying tax on the investment income (up to $5,000 a year) and you don’t have to worry about children going to college or university or staying enrolled past the initial years. The money isn’t earmarked for a specific purpose.
Of course, you don’t get the same forced savings effect. And you do give up the 20 per cent Canada Education Savings Grants that come with RESPs. But for some contributors, the much greater flexibility of the TFSA will be worth the tradeoff.
AR
Sep 7 2008
This is of huge interest to me because I am currently in dispute with CEFI (Children’s Education Trust Inc.). The Ombudsman for Banking Services and Investments has been helping me.
This argument about tax deductions I find rather irrelevant. If you can afford to pay into an RESP (I am a divorced parent of three children), I think the big question is whether you are going to get any money back.
I have paid in over $21,000 in fourteen years - CEFI cancelled my plans because I said I wanted my money back - and they did not help me in any way over the years.
They sent me two cheques (for my two children) that totalled $13,000. I think what they are doing should be a criminal offence. It really is daylight robbery.
I would not recommend an RESP to anyone at this point. Does the government know what these companies are doing to people?
VS
Sep 7 2008
I just read your article about group RESPs. Let me tell you about my son’s RESP plan.
I was persuaded to put in $2,000 a year for my son until he went to university. My son got into university early at the age of 15 instead of 18.
I called Heritage and asked about the options. I was told I had to start to taking out money from the RESP this year, because if I didn’t, I would not be able to take money out of the fund once my son finished high school.
Therefore, I sent a request and got a cheque back for the money I put into the plan, but it wasn’t enough. For a total of $6,200 I put in the plan, I got back only $5,000.
I understand NOW that there is a penalty. However, I want to know whether there is a way to get some of the $1,200 back. A kid should not be punished for being smart and going to university earlier.
The government grants and income will come back to me during the next three years. And I just found out that my son can only get it if he can manage to get to the 2nd, 3rd and 4th year. It still sounds reasonable, however, not as good as planned.
I have the urge to let all other RESP investors know this. We, as parents, save hard for our kids’ education. I think it is really not ethical for companies to take this kind of advantage.
FR
Sep 7 2008
So, you didn’t do all of your homework and only tell the downside of scholarship plans.
As an investor and a father who has put 3 children through the USC plan, I couldn’t have been happier with both the savings and growth I got back.
As for the fees, at least the option is there for me to get them back, unlike the money grabbing banks who hide them as MER’s.
James Deeks, RESP Dealers Association
Sep 7 2008
With regard to your column about group RESPs, we must take issue with some of your comments.
1. You begin your column by stating that “Banks and investment dealers have launched more flexible registered education savings plans (RESPs) in the past decade.” This statement ignores the reality that all RESP providers, including scholarship trust plans, have launched more flexible plans over the past decade to reflect increased flexibility in the legislation governing RESPs.
2. You say “you buy a group RESP from a commission-paid salesperson, who tells you only about the positive side of things.” On what evidence do you base this assumption? Group plan salespeople are trained and licensed, and must present a full picture of the benefits and risks of a group plan. This process is carefully supervised by all scholarship trust plan dealers and regulated by securities regulators across the country. How can you ignore this fact and make such a negative assumption?
3. You say “you would lose all investment income your RESP contributions have earned. You would also lose the federal top-up grants, which must be repaid and cannot be earned back later if you make new RESP contributions for the same child.” This is not entirely factual — and in fact, relates to the increased flexibility of group plans.
Depending on the plan, there may be options for the investor to move to an individual plan (retaining 100% of their contributions net of fees, income and grants), or to convert to a fully paid plan. But these rules are also carefully explained to investors at the outset.
4. You say “Tougher disclosure rules are needed to protect consumers”. The report that was prepared for Human Resources and Social Development Canada did not state this. It implied that better disclosure was required, to foster better understanding.
The phrase “protect consumers” is your wording and suggests that group RESP providers are doing something illegal, or at least nefarious, and neither is true.
Ee agree with the report. We would like to provide simpler and easier-to-understand materials to consumers, but securities regulators insist on very detailed and complicated information.
There are many statements in the HRSDC Report which we disagree with, question or object to, based on fact. We are eager to meet with HRSDC to clarify these items, and will defer discussing them publicly until we have that meeting.
But in the meantime, it’s quite unfair and damaging to the group plan industry to have a respected newspaper columnist take such a negative view of an industry and a product that works so successfully for hundreds of thousands of investors, and that is regulated as carefully any other investment product.
Ellen Roseman
Sep 7 2008
Here’s my response to the comments from James Deeks:
Hi Jim. Thanks for writing. I’m sure your association would take issue with some of my comments. I’m a columnist, after all, and I have a point of view that comes out in some of my columns.
Over the years, I have had many complaints from readers about group RESP plans — often people in the same situation pinpointed in the report. They can’t keep up their payments and they don’t understand they will get back only a small amount of principal because of the many fees that are deducted first.
If the salespeople explained the pros and cons thoroughly at the beginning — and if the right disclosure was published in the accompanying documents — these subscribers would not be quite as surprised or upset when they lose their savings.
I had two Canadian Scholarship Trust plans for my kids. I sat through several presentations by CST reps and found they were typical of sales pitches — one-sided, positive and pushy. In those days (mid-’80s), they wouldn’t talk to a parent unless the other parent was present.
I’ll address your specific points:
1) I’m sure that group plans are more flexible than they used to be. But I’m also sure they’re not as flexible as the self-directed plans sold by financial institutions. For example, you still have to take annual payments from group plans — and you may lose out if your child drops out early from a post-secondary program. With self-directed plans, you can take out all the money in the first year, if that’s what you want to do.
2) Salespeople are always positive. I know they have to address the negatives and in some cases, they get customers to initial certain clauses in the contract. But they wouldn’t be salespeople if they didn’t make you want to buy. I still remember being told I had to sign that very night or lose out on the deal I wanted. Hope that isn’t being done any more.
3) The Informetrica report talked about the fact that group RESP providers didn’t often explain the options to clients who ran into financial trouble. They often closed the plans when other solutions were available.
4) I’m a consumer advocate, so I talk about protecting consumers. Yes, that was my wording. The report did use other wording. But I believed the intent was the same, since it talked about the misunderstandings that prevented strapped subscribers from continuing with their plans and avoiding termination.
The report also talked about the fact that some people shouldn’t get into these plans at all — since they ended up dropping out and losing some of their capital to fees. It reminded me a little of the subprime mortgages sold in the US to people who couldn’t really afford to buy a house. Were lenders doing them a favour by making sure they qualified for a mortgage anyway? Pardon the subprime analogy if it’s offensive, but I do think the report was strong in its advocacy for lower-income consumrs who needed protection.
KC, industry executive
Sep 7 2008
Ellen, good article about scholarship plans. Everything is accurate, but as is often the case, there is information that perhaps was omitted.
Scholarship Plans are set up as deposit contracts that have a start and an end date. Like any interrupted contract, there are penalties that are incurred (loss of fees paid, interest forfeiture).
But it is not as bleak as you might think. Most plans are set up with processes that can be selected that can suspend deposits when economic or personal circumstances make it difficult to maintain ongoing contributions. Contributions can also be reduced and previous contributions can be concentrated to minimize the impact of plan interruption, greatly reducing the downside.
It’s true that these plans are not intended for those who lack the commitment to see them through to maturity. Ideally speaking, when a challenge arises, the scholarship plan representative can work with the investor to find ways to keep the plan active, even if lower contributions are necessary.
Finally, every investment product has a potential downside. Alternate RESP options that use equities as an investment platform, as an example, can lose significant value, rather than grow as one might expect.
In the end, while the sheer reach of banks and insurance companies may have resulted in a reduction of the scholarship plan industry’s overall market share, most of these companies have grown dramatically. I would suggest that the combined total of all of the other players (banks etc.) have a long way to go before they can say they have returned the billions of dollars in invested capital and education assistance payments that the scholarship plan industry has over the past 40 or so years.
The scholarship plan industry has and will continue to evolve. The bottom line for me is that tens of thousands of young adults have a post-secondary education and bright futures as a result of their parent’s decision to invest in a scholarship plan!
DP, RESP seller
Sep 7 2008
The group plans started the RESP industry back in 1960 and have been improving each year. I believe the banks and other institutions only started selling RESPs in 1998 after the CESG was introduced. Is that because there just wasn’t enough money to be made by these big institutions?
If it wasn’t for these group plans, then many of the children from lower income families that you talk about may never have had a chance at a post-secondary education. If they are lucky enough to go to university without an RESP, just think how much they would have to pay back in OSAP loans and interest.
You make it sound like being paid on commission is a bad thing. I could tell you from experience it can be very difficult working on straight commission. Because working on commission is so difficult, in order to succeed in this business you must be extremely well trained. Since we are so well trained we make sure we disclose the up front membership fees, as well as any other fees associated with the plan.
I am just wondering if the banks disclose the true cost associated with investing RESPs in mutual funds (i.e. MERs) and if they refund any of the fees when a child goes onto post-secondary education.
You also say “You would also lose the federal top-up grants, which must be repaid and cannot be earned back later if you make new RESP contributions for the same child.” This is true, but don’t the same rules apply if your plan is with the bank in a self-directed plan? Do you know if any CESG has been lost because professional financial advisers invested your money in the stock market?
Both self-directed plans and group plans have positive and negative points. No plan is right for everyone. What I do not appreciate is when only one side of the story is given. It is easy to find the negative in almost everything. Be more objective and don’t only look for only the downside. Just my opinion.
GDF, another RESP seller
Sep 7 2008
Your article on Scholarship plans is one-sided and unfair. You imply that organizations like banks and insurance companies are doing business with middle and upper income families, while scholarship plan organizations focus primarily on low income households.
Ellen, most families having children are not rich. They are average working people with both parents holding a job while trying to raise a family and save for future education in the easiest way possible with the least amount of risk.
The reason banks have such large assets in the RESP world is because they have relationships with just about every Canadian family, including low income ones. Let’s not forget that they are also on every street corner and shopping mall you can think of. It is not very difficult for the bank to capture tons of business from the public with that kind of exposure. Should your readers understand that because the banks get more business they are the better choice? I don’t think so.
Banks promote their family of mutual funds as the investment vehicle for just about anyone who wants to save for their children’s education with average MER’s of 2.65%. Go to a bank and ask to see for yourself, like I have. By the time junior is off to college or university, the total fees paid by the family to the bank is about 300% higher than with scholarship plans and that’s before we even calculate the erosion of compounding interest by this annual fee that is charged.
Your article says “1.9% of plans close” prematurely. That means 98.1% remain open, which is far better than the statistics for mutual funds that banks and financial planners offer.
Your article goes on to say salespeople in the scholarship industry are paid commissions for doing their job, but so are financial planners who offer RESP’s. For that matter, so are most people who are in the sales business. You also imply that “commission-paid” sales people are not to be trusted because they only tell you about “the positive side of things”. Are you suggesting that, since financial planners are “commission-paid” salespeople as well, they too are not to be trusted?
The truth is the vast majority of any regulated sales force acts within the rules and in the best interest of the consumer. Scholarship plan sales representatives are closely regulated and scrutinized and salespeople are required to fully disclose in writing both the positive and negative aspects of their products.
Consumers are given plain disclosure regarding up front fees before they commit to anything and have a “60 day free look period” to review their decision should they change their minds at no cost to them. That is how good the scholarship industry feels their products are.
This next one really irks me when you say “fees will be returned to you only if your child makes it to college or university”. Ellen, at least they attempt to give something back vs. banks and insurance organizations who will not give you back any of your fees (which are far more by the time junior is off to university or college), regardless if your child goes to post-secondary or if the mutual fund investments drop in value in any given year.
Your article makes is sound like scholarship plans are doing something wrong by offering a return of fees when your child pursues post-secondary. Maybe the banks and financial planners should too.
I have great respect for your work, Ellen, but I must say that this time around you are telling the public only about the negative side of things which is unfair to the average consumer who wants “both” sides of any investment in order to make an informed decision. You are not helping by implying that Scholarship plans are not the way to go.
There are hundreds of thousands of satisfied Canadian consumers who have used these plans to get their children through post secondary successfully over the last 40 years and I think that side of the story should be told as well.
I hope this fills in more of the picture that you did not paint in your article for the sake of the average consumer trying to make sense of the various RESP options available to them.
PS…I have been involved in the marketing of scholarship plans for over 15 years and I understand what the marketplace has to offer. All RESP’s are good, just not the same. The difference between RESP’s is what the consumer needs to know, plainly and up front in order to decide which product meets their specific needs best. Go to your local bank and see what picture they paint for you Trust me, it can sound very rosy.
Canadian Family Money
Sep 7 2008
I am preparing to launch a new personal/family finance blog and chose RESP as my first topic.
Specifically, I have done some models of RESP vs. TFSA: http://canadianfamilymoney.posterous.com/resp-vs-tfsa
I’m not sure how representative are the assumptions I have made, but in general, RESP is better if: (1) you are a committed saver, and (2) you are very confident that your child will get some form of post-secondary education. In particular, the minimum 20% match of CESG instantly boosted your ROI.
Being a self-directed investor since day one, I admit I was skeptical and ignorant about group scholarship plans. However, judging from some of the comments above, I am willing to give group scholarship plans a chance and study them in depth.
Canadian Capitalist
Sep 7 2008
Thanks for the mention. I find it interesting that the cheerleaders for group RESPs are comparing their plans to the most expensive mutual funds out there. Even if you did, it is no certainty that group RESPs are less expensive — if you claim group RESPs are 300% less expensive than 2.5% MERs, show us how.
PM, another RESP seller
Sep 11 2008
All Canadian Scholarship Trust sales reps have it drilled into them to be ‘brutally’ honest with their prospects.
There are long-term benefits of a group RESP, but someone starting and stopping their regular scheduled RESP contributions within the first few years will lose their enrolment fee, which is taken from their early deposits.
We are trained to respond to the “Well, this all seems too good to be true!” with the explanation that it is — but only for those that stick with their deposit schedule for the agreed upon ‘units’ of Education Assistance Payments.
We are then trained to start their RESP contributions at an affordable amount and increase later, if and when they can. We encourage them to do this as often as they like, as we do not charge any extra fee for these additional incremental additions to their savings.
CST will bend over backwards to find ways to mitigate the financial loss to parents who do find themselves in seriously changed financial circumstances and thus are unable to maintain their original savings amount and/or schedule.
We will assist them in many ways: change from annual savings to monthly, adjust the effective date of their agreement to give them a ‘holiday’ from making their deposits, reduce units and ‘bank’ their surplus enrolment fee for credit if/when they are able to purchase more units at a later date.
You might also be interested to learn that, if they’ve been saving for at least 7-8 years, they can stop their deposits completely. (We convert their plan to a fully paid up schedule with the same number of units.) This means they do not incur any penalty whatsoever. We make all these adjustments without charging a fee.
The perception that the group RESPs have high fees is misleading. I would invite you to ascertain the actual dollar figure of the total fees at the end of their plans –for example, $100 per month saved for 204 months.
That would clearly disclose which form of RESP has the higher fees.
Canadian Capitalist
Sep 11 2008
The group scholarship plans talk about a refund of enrollment fees. But they don’t mention the fact that the value is eroded by inflation.
http://www.canadiancapitalist.com/2008/09/09/the-mer-on-group-scholarship-plans
Frank
Sep 18 2008
My first child has a plan with CST, but my newborn will have a self-directed plan.
I found the CST agents very pushy and quite ambiguous about how the whole thing works. I am embarrassed to say that I have a graduate degree in finance and I am not sure I get the concept fully.
The agent was upfront as to what proportion of early deposit were management fees, but only once the direct question was asked. Also, when I asked about what happens to those fees if you pull out early, the agent went into a long song and dance about how so many options exist such that this “should” never happen.
Another thing that I do not like is that you do not get any annual indication of how the plan is performing - so I guess you need to wait till 18 years go by to find out if you made more than what ING would have given you. But of course you will make more than 3% - since that is what is being redistributed from the plan members who lost their management fees for pulling out early.
The straw that broke the camel’s back was when I got a call telling me that for new accounts there is no guarantee that you will get all your management fees back at the end of 18 years - then the very next day the agent called me and said to forget our previous conversation.
I guess Warren Buffett has the best philosophy - do not invest in what you do not understand.
RESP
Sep 21 2008
There is definitely a lack of transparency with regards to RESPs. Self directed RESPs do seem like the only way to go these days, but as you mentioned you do forfeit the CESG. It becomes less of a trade off however the higher your income.
BabyMomma
Oct 5 2008
It seems that there are a lot of fees associated with RESP’s. I’ve been shopping around lately for my daughter and I’ve gotten contracts to take home and read over. Very interesting restrictions that not many people know about.
wit’s end
Nov 12 2008
I too was taken by the Canadian Scholarship Trust Plan, but am paying the consequences now for trusting them. We are trying to take what is righfully our children’s money and move into a program with our financial advisor for better payback, but the penalties are extreme:
Plan Total Contribution Enrollment Fee % of total Contribution
1 $2265.75 $1060.00 47%
2 $1299.87 $313.60 24%
3 $6619.20 $3152.00 48%
4 $2994.40 $2210.15 73%
I feel used and cheated and most of all I feel for my children. We try to do the right thing and are misguided.
All I can say is beware, they are not all they say!!!
After all, what family in their right mind would sign up for a program like that if they fully understood the fine print?
resp needs regulate
May 22 2009
We are aware of the issues in the group RESP industry last year. My son is only three years old and we don’t want to continue our mistakes.
Even though we knew we would lose some money, we still tried to transfer our investment to another account in the bank. During the transfer process, you can’t imagine what ugly things the company did. Even now, we still didn’t get our money to our new account.
For sure, we will give our lesson to all of our friends and people we know. What makes an industry survive doesn’t rely on how they argue with customers but how they provide qualified service to customers.
Guys, if you continue what you do today, you will destroy yourself in the future. Trust me, no industry can survive if they ignore clients’ rights.
gene
Sep 18 2009
Yep, I am just as disappointed with the Canadian Scholarship Trust Plan.
For 19 years paid into it and now that my daughter is going to a school, Catholic District School Board, they refuse to pay out because the head of the school is called a principal and that does apparently not qualify for the money she needs to go further in life.
Be warned, research every aspect of where you invest your money. Don’t be a fool like me and trust them. I was even working for them in the past and believe me they know how to get you. I am thankful I quit because I cannot lie to people.
Mark
Oct 3 2009
Hello,
I am in the Scholarship plan industry, and I wanted to make a few points. I see some common themes here, and wanted to clarify some things. First of all, yes everyone should do research and understand what they are investing in. This holds true for going to a bank or financial planner.
One thing I noticed here is that there are a lot of assumptions being made. The first assumption it that the same plans that are being used by children to go to school with right now, are the same ones that are being marketed today. That is categorically wrong. The plans of children, who are currently using a group RESP, are not being marketed anymore. The plans offered today are much more flexible, and some of them even offer more flexibility than what the banks and mutual funds offer.
The second assumption is that all of the Scholarship Plan companies, and their products, are the same. This is not true. Some offer much more flexibility than others, and there is even one that seems to be set up to create as much ‘left over’ interest as possible. This creates a higher payout, and makes for cheaper marketing. It takes a bit of knowledge to pick between them all.
Basically, to lump them all together, old style plan with new, and all the companies together, is unfair at best. Granted, it takes a lot of work to understand all of the companies’ products, and all of their nuances, but to portray an honest picture, that would have to be done.
As far as the people who hop on here and say horrible things about company XYZ - this is the internet. I won’t suggest that these people don’t completely believe what they are saying, but we are only being given one side. I am sure that we could start a blog about any company and we will hear all sorts of negative things. Some true, some not, but all without hearing both sides.
My advice - do your research. Read the prospectus, and question any sales representative like mad. Once you are comfortable, then you can make a decision.
Also, to some of the points being made - the industry has changed dramatically over the years. Some of the stuff that I hear that was done in the past makes me sick. However, the current level of regulation and disclosure leads me to believe that a client would have to put their head in the sand to not understand the fees. (Sort of a sales rep lying to them)
Wish I could help you all out with your questions, but I will retain a little anonymity.
Mark
Oct 3 2009
Sorry, this point was a little vague.
“there is even one that seems to be set up to create as much ‘left over’ interest as possible. This creates a higher payout, and makes for cheaper marketing.”
What I meant was that one of the companies has some strict rules that means less of the children can access their money. This, I feel, is a bad thing. After reading my post, I realized that I was making it suound like a good thing. Basically, if one company pays out way more than another one, it has to be because (in the company that pays out way more) that the rules to get the money are more strict. Again, you have to read to find that out.
Jay Junior
Jan 23 2010
PM, another RESP seller said: “(We convert their plan to a fully paid up schedule with the same number of units.) This means they do not incur any penalty whatsoever. We make all these adjustments without charging a fee.”
This is a misleading statement. We converted our daughter’s plan and there was a fee for that. There is a fee for everything. It’s pathetic!!!
Jay Junior
Jan 23 2010
GDF, another RESP seller –> 300%??? Can you prove that? I don’t think so.
I can only tell the parents out there: Don’t sign up with a Group RESP, big mistake.
I’m better off paying even a 3% MER, but at least I get my questions answered and proper statements.
This is contrary to my old group RESP provider, which has not answered a simple question 36 months after I initially inquired and several emails exchanged in 2010. I still don’t know the answer.
Next step is a complaint to BBB and the OSC.
Jo
Feb 7 2010
I have two children in the Canadian Scholarship Trust Plan. I signed them up many years ago. Every year I get their statements and I scratch my head trying to figure out what in the world the plans are worth, and how they arrive at their various amounts. And I get a sinking feeling in my gut the final amounts will be nowhere near what the original statements estimated them to be. These were supposed to be low risk. Low risk to who? The plan sponsor? And they were sold to me by someone working for a ‘non-profit’ organization. Ya, right.
So the newer plans are better some industry advocates stated in earlier posts? That doesn’t help me or others like me who are stuck with mouldy lemons.
My advice, avoid group RESPs like the plague. Deal with a bank. Any bank. Mutual funds will be no-load so all your money is invested and working for you. MERs will be reasonable too. And you’ll have way more control over your investments in the RESP. And you won’t be penalized for taking the money to another institution, other than a modest transfer fee.
Stephen
Feb 8 2010
I registered my oldest daughter for a Canadian Scholarship Trust Plan 8 years ago. At the time we thought we were making the right decision but I have to be honest, paying $145 in fees for two years just didn’t sit right.
About two years after we started, we had to reduce the payments to $78, because we couldn’t afford to keep up with the higher payments. We were told that the enrollment fees for the canceled units were non-refundable.
Alas, we had already “saved” $1,500, so the thought of stopping seemed silly. Now, 8 years later I have received my statement and I am wondering why I didn’t cancel and cut my losses earlier.
I was absolutely shocked at the statement. Here are some numbers:
Total contributions: $8,200
Total enrollment fees: $2,900
Total principal: $5,300
Annual fees: $68.
Based on these numbers, if I continue to contribute at the same rate, I will have $16,000 saved up for use by my child. Since we reduced the number of units, we automatically lose $1,500. If we are eligible for a 50% refund of the enrollment fees, then we are entitled to $750 back.
That means I will get about $13,750 (excluding grants) from the plan. Correct me if I’m wrong, but $78/month x 17 = $16,000, which to me means that I would have saved more if I had put the cash in a sock under my mattress.
The worst part is that when I called the CSTF office today to get some explanations, I had to wait for 74 minutes on hold. That in itself should be an indication of how this plan treats its “investors”.
I feel like a fool for not having been more careful. I have now cut my losses (over 30% not including interest) and I am moving my money into a self-directed RESP with my Credit Union. No “enrollment” fees, $29 per year, and still eligible for the government grants.
Hopefully, some aggressive saving on my part can mean my kid doesn’t lose out when it comes time to go to university.
Smith
Feb 21 2010
Is there anybody who could help me and explain the following numbers? The numbers are from Canadian Scholarship Trust Plan statements and they “indicate” how much this plan should be worth at the time my kid is going to need it. I just looked at my statements from Dec 31 2006 to Dec 31 2009.
Year: Money
2006: 20000
2007: 14500
2008: 13800
2009: 13000
Perhaps things are obvious? There will be much less than what we invested. And we didn’t even exit the plan.
AT
Mar 19 2010
As did the other gentleman above, I too used to sell these plans myself and believed what I was selling. What they trained me to sell is not what it is to be.
I am now looking at my options and assessing my plan as my 14 year old will be going to post-sec education in 3 years. I guess the maturity of the plan was miscalculated one year later, so in other words she will only be eligible to redeem from the plan after one year of college/university.
I thought that was silly, so I called to see if they can make an adjustment to that. Unfortunately, they don’t have any such thing.
What I would have to do is convert her plan to a open plan (which means there are going to be fees, fees, fees), so essentially will have less at the end. I have 2 other children as well in this plan.
After reading these comments, I strongly want to just get out now while I can to cut my losses. Even to transfer the units to the other sibling, it’s an all or nothing scenario. I wanted to take some units from the oldest one and transfer to the younger since the maturity had been calculated wrong. I do not have that option at all.
Let this be a lesson to you who are considering these types of plans. I was trained incorrectly and have been selling something that in the end isn’t delivering.
Buyer beware.
Chris 9
Jun 8 2010
All I have to say to anyone who is considering putting their money into an maturity plan steer clear of Children’s Education Fund Inc. My family, and our family friends have encountered nothing but problems from this institution. They create rules along the way to ensure they keep for themselves as much of your money as they can.
On the other hand. USC Education Savings Plan has been fabulous, and I have nothing but praise for their concern, customer service, and diligence.
mira
Jun 16 2010
USC Savings Plan has been good for me too, but not CEFI. My understanding was that the Enrollment fee would be returned with the first EAP. Now they are saying that the return is “discretionary”. (Agreement signed in 1994). Banks are better.
Sandra
Jul 30 2010
DO NOT OPEN UP ANY RESP PLAN WITH C.S.T. CONSULTANTS INC. / CANADIAN SCHOLARSHIP TRUST PLAN.
MY HUSBAND AND I ARE BEING PENALIZED $3,700 BECAUSE WE HAVE TO CANCEL OUR RESP PLANS BEFORE MATURITY. THE * ONLY * WAY YOU DON’T GET DUPED IS IF YOU STAY IN UNTIL MATURITY.
GO WITH A BANK - THEY WON’T CHARGE HORRIFIC FEES IF YOU NEED TO OPT OUT EARLY.
pmat20
Aug 1 2010
Hi, I am facing a different type of issue with CEFI. My child did her 3 years of BSc and then joined a professional course (Pharmacy) with the same University.
Now, CEFI is refusing to pay this year on the grounds that the minimum requirement to join Pharmacy is one year of University and NOT 3 years.
Isn’t this ridiculous? How they can dictate when a child should take up a course? Do they have any idea how hard it is to get into these courses?
Won’t a child have another chance to try if he/she cannot get admission to a professional course on the first attempt?
Did any of you had a similar issue with CEFI? Can anyone suggest to me how to deal with it/whom to contact? Any help would be highly appreciated.
Thank you,
Aggrieved Father
Pat
Aug 2 2010
Answer to pma20. You may contact Ontario Securities Commission and the Ombudsman for Banking Services and Investments.
Ron De Petrillo
Aug 21 2010
My issue with USC Education Savings Plans Inc is the inability to tranfer monies to another child.
Frankly, this is simply an egregious money grab on USC’s part with penalties and restrictiveness not in line with the intent of my investment, nor with the explanation and details offered to me at the time.
To think I would knowingly gamble away 18 years of savings and have it all blown away (less principal) is ridiculous.
They should certainly allow transferring of monies between children as is the intent of such a savings program.
If anyone here has had successful recourse please reply.
Thank you,
Ron