Kanata Financial. Future Generations Education Savings Plan. February 18, 2016 AFOA PRESENTATION MONTREAL

Transcription

1 Kanata Financial Future Generations Education Savings Plan February 18, 2016 AFOA PRESENTATION MONTREAL

2 INTRODUCTION

3 ABOUT US Our Core Services: Kanata Financial is an Aboriginally-owned Financial Services company that works with First Nations and First Nation organizations to develop and deliver customized financial service products. Located in Six Nations, Ontario, and Manitoba, Kanata Financial has developed two products specifically developed for the First Nations market: 1) Future Generations Registered Education Savings Plan (RESPs) 2) Kanata Financial Electronic Funds Transfer The purpose of this presentation is to introduce the audience to Registered Education Savings Plans and demonstrate how a RESP Program can help First Nations.

4 ABOUT US Our Core Services: Kanata Financial Group Inc. is an Aboriginal company operated by an Aboriginal Executive: Steve Charest - Metis owner and operator of the King and Benton Group of Companies which includes real estate development, First Nation construction companies and environmental service providers. Christopher Ashkewe Ojibway and has worked for BMO Aboriginal Banking, Bank of Montreal, Aboriginal Business Canada, a number of First Nations and, finally, Kanata Financial. Arnold Bomberry- specializing in training and human resource development. Tim Catcheway- worked previously for Assembly of Manitoba Chiefs and current head of Kanata s Manitoba operations.

5 ABOUT US Our Journey to Sandy Bay: Kanata Financial has worked with a number of advocacy groups in the development of its RESP Program and, as a result, the business model has evolved: The Kanata RESP program was originally designed to help affluent FNs leverage Trusts or Investments to supplement education programs. Can t focus on richyou must help most disadvantaged! FN organization have limited resources- they would need help! Why is money invested into non- Native investments? Do not commoditize our children! Can the money be invested back into First Nations? The RESP program has evolved to help the most disadvantaged FN people access funds for education. Moreover, an investment opportunity exists to reinvest funds back into First Nations.

6 ABOUT US Our Journey to Sandy Bay: Kanata Financial spent over a year reformulating its business model and now has developed a RESP program that can address the needs of First Nations and First Nation parents. o o o o o A product that costs First Nation organization or parents $0 to open (provided they receive a Universal Child Care Benefit ; Low fee investments; A system that will help institutions open RESP en masse for its members by helping to manage the administrative process; thereby, reducing the administrative burden on the organization; The system can work for both parents and institutions with equal impact; The funds if the Community or Organization is willing- can be reinvested into Communities. This will amplify the impact of the RESP funds

7 ABOUT US Kanata Financial Thesis Kanata is presenting to the Aboriginal Financial Officers Association to: Help AFOA and its members understand how to access supplemental education funding for its institutions and members by navigating existing (and simple) Federal education programs. Moreover, a strategy will be presented that will demonstrate how these RESP funds can be reinvested back into First Nation communities.

8 RESPs An Introduction

9 What are RESPs? The Canadian Investor definition of RESPs is as follows: A savings plan sponsored by the Canadian government that encourages investing in a child's future postsecondary education. Subscribers to an RESP make contributions that build up tax-free earnings - tax-free because subscribers cannot deduct payments made to the plan from their income. *The main benefit to non-native Canadians is that the investment is tax free and not taxable until the child attends postsecondary (presumably against a student income, thereby negating any taxation). However, as it relates to First Nation, the major advantage of RESPs is that: The government contributes a certain amount to plans for children under 18 under the Canada Education Savings Grant (CESG).

10 What are RESPs? The Characteristics of a Registered Education Savings Plan o The RESP is held in the Child s name (not the institution, not the parent and not Kanata Financial); therefore, no matter where this child ends up, they will have access to money; o The money is unlocked when the child attends any post-secondary unit. Kanata s eligible activities include college, university, apprenticeship, and anything with greater than six months accreditation; o If the child does not attend post secondary, any grant money returned to the Government; o The money can be used for any school expense- i.e. computer, car, tuition, food, travel, textbooks. o RESPs can be opened with $0

11 Future Generations Education Savings Plan What are RESPs? First Nations people may not require a tax sheltered savings. Therefore, the primary advantage of RESP becomes its ability to leverage two existing education grants available to all Canadians: The government contributes a certain amount to plans for children under 18 under the Canada Education Savings Grant (CESG). 1. The Canadian Learning Bond (CLB); 2. The Canadian Education Savings Grant (CESG). By opening an RESP, First Nations people can qualify for two Federal education savings grants even if $0 is deposited.

12 What is the Canadian Learning Bond? What is the Canadian Learning Bond This bond is intended to help low-income families pay for higher education expenses. The Canada Learning Bond is funded by the Canadian government as part of a program to help less privileged families send their children to college. This bond has a maximum benefit of $2,000 per child. What is meant by Low Income Household : Low Income is defined by anyone who has taxable income under the $44,701. The rule of thumb is if you qualify for the baby bonus (i.e. universal child care benefit), you will qualify for the CLB. Therefore, due to Reserve tax benefits and socio-economic factors, many First Nations household will qualify for the Canadian Learning Bond.

13 What Is The Canadian Learning Bond? How the Canadian Learning Bond Works: When the RESP is opened, the paperwork for the Learning Bond can be completed. If the applicant is eligible, the following will be deposited: 1. $25 accounting opening; 2. $500 initial contribution; 3. $100 for every retro active year the child qualifies for (for example, if the child is 10, they qualify for 10 years of $100 (or $1000 more) $25 from CLB to open account (i.e. fees) RESP Opened Paper work for CLB and CESG Completed First Nations RESP Account Extremely simple process described in detail further in this presentation Paperwork can be filled out in less than five minutes $500 initial CLB contribution deposited + retroactive years up to $2,000.

14 What is the Canadian Education Savings Grant? What is the Canadian Education Savings Plan The Canada Education Savings Grant (CESG) is a Government of Canada program, administered through Human Resources and Skills Development Canada, to assist with savings for Canadian children's higher education. Under the CESG program, the government will contribute an amount to a Registered Education Savings Plan (RESP) according to a formula which is dependent on the amount contributed and the income level of the family in which the contributions are made What Amount of Support is Available: The grant payment is at least 20% of the total annual contributions up to $2500 per child. For lower income families, the grant may be up to 40% on the first $500, and 20% on the balance over that amount. The maximum lifetime grant limit is $7200. Who Qualifies: Same as CLB- anyone with a household income under $44,701.

15 What Is The Canadian Education Savings Grant? How the CESG works: When the RESP is opened, the paperwork for the CESG is completed (same as CLB). If the applicant is eligible, the following will be deposited: 1. CESG helps people making contributions deposits > $0; 2. For every $1, the Federal Government will contribute $.20; 3. An example: If Chris contributes $100, the total contribution + CESG = $120. $140 if 40% triggered. CLB RESP Opened Paper work for CLB and CESG Completed First Nations RESP Account Extremely simple process described in detail further in this presentation Paperwork can be filled out in less than five minutes CESG Contribution $1 = $.20

16 How to Open an RESP The Individual 1) 2) Educate yourself; speak to Provincial certified RESP salesperson A subscriber must open the account on behalf of child Definition of Subscriber A subscriber is defined as the person is primary care giver to the child and legally recognized as such. A litmus test is who receives the UCCB or child s living allowance. In most circumstances, this is the child s parents. 3) The subscriber completes RESP forms and CLB/ CESG Forms 4) RESP Account opened, CLB deposited, and CESG (if contributions made) Identification The child will need one piece of Identification to open the RESP and access CLB SIN Card. If the child does not have SIN, it is easy to apply for and use Birth Certificate to secure SIN Card.

17 How to Open an RESP An Organization The Unfortunate Reality Canada s First Nation population is overrepresented in the Child and Family Service System. For example, Manitoba has over 10,000 Aboriginal children and over 7,500 First Nations children in the care of Child and Family Services. This cohort is the most vulnerable segment of the Canada s population. The Kanata Mandate Following the advice of FN Leadership, Kanata has developed a system to help First Nation CFS Organizations to apply en masse for RESP accounts to assist the children under their care access a minimum of $2,000 each for their education.

18 How to Open an RESP An Organization 1) 2) RESP broker or provider to meet and present to board of directors Develop Project Manifest- to secure ID, complete criminal checks, complete 3) Kanata prepares paperwork for and gets applications ready. 4) Executive Director signs accounts and RESPs opened. Consolidated statements sent annually. Primary Care Giver as Subscriber As the primary care giver, a First Nations CFS can sign on behalf of all children under their care (provided they receive the Gov t living allowances). This offers an administrative advantage because one individual can sign on behalf 100 children. In the Child s Name It is important to remember, that even if an organization opens the RESP on behalf of the child, the investment remains in the child s name.

19 Terminology Review The RESP Review Subscriber : a person legally allowed to open a RESP for a student; whether it is the parent, primary care giver or a child and family services. ; Nominee: a student who the RESP is opened for; the nominee can change if the student does not wish to attend post-secondary. Canadian Learning Bond: Once and RESP is opened it automatically triggers the a $500 deposit and $100 per year it is opened up to $2000 Canadian Education Savings Grant: A 20% increase to the contributed amount up to $7,200 (I.e. a $100 contribution leverages another $20)

20 Case Study Sandy Bay First Nation Kanata Financial has entered an agreement with Sandy Bay First Nation to explore RESPs with its Community Organizations and Community Members. Sandy Bay First Nation is a Community of 3,000 who operate their own CFS Organization with 600 children and a school with approximately 1,000 children. Sandy Bay CFS School Kanata will work with CFS to upload all applications. 600 Children Kanata will present at school and set up booth at parent events to educate parents. 1,000 Children

21 Sandy Bay Example- Pennies Add Up To Dollars By educating their members and implementing a RESP program within their CFS organization, Sandy Bay will be able to leverage the following supplemental education funding: Sandy Bay CFS 600 Children X $25 Account Opening =$15,000 X $500 Initial Opening =$300,000 X $100 Per Retro Active Years (8yrs) =$480,000 Total CFS Education Grants =$795,000 School System 1000 Children (Say 700 qualify for CLB) X $25 Account Opening =$17,500 X $500 Initial Opening =$350,000 X $100 Per Retro Active Years (8yrs) =$560,000 Total CFS Education Grants =$979,500 Therefore, the a Community of 3,000 can leverage $1,722,500 in supplemental education funding by completing paperwork to access existing funds.

22 Sandy Bay Example- Pennies Add Up To Dollars If an organization decided to contribute annually to the RESP Program, the program would then be able to leverage the CESG. In the Sandy Bay example: Sandy Bay CFS 600 Children X $25 Account Opening =$15,000 X $500 Initial Opening =$300,000 X $100 Per Retro Active Years (8yrs) =$480,000 X $100 per month per child =$720,000 (annually) X CESG 20% =$144,000 (annually up to $7200 per child) Please note: The Ontario Government already contributes monthly to RESPs. This will create an Ontario portfolio in access of $120,000,0000. Total CFS Education Grants =$1,649,000

23 Sandy Bay Example- Pennies Add Up To Dollars By using existing programs that many Canadians already take advantage of, Sandy Bay First Nation can leverage $1,722,500 on an investment of $0. Depending on the provider used, there may be minor account opening fees (covered by the CLB $25), but the majority of funds will be made available to the First Nation child once they determine their post-secondary path.

24 FUTURE GENERATIONS

25 Future Generations Presently, Kanata Financial is looking at investment strategies that would be able to amplify the impact of the RESP money. What if Kanata (or another First Nation financial institution) were able to create a fund with a mandate to invest in Canada s First Nations. The Fund would: o o o o Aggregate the individual investment amounts into a single investment facility; The fund would qualify for RESP and RRSP investment (i.e. regulatory approved); Would invest back in the communities where RESP funds secured; Could provide the private capital required to activate the on-reserve economy.

26 Future Generations RESP RESP RESP RESP RESP RESP RESP RESP RESP The individual RESP accounts have been aggregated into one account (Mortgage Investment Corp., Unit Trust, et. al) FUND Funds Deposited to Investment Account w/ FN Mandate First Nations Investment First Nations Investment

27 Future Generations Sandy Bay Example The Sandy Bay Example RESP RESP RESP Sandy Bay First Nation would have $1,722,500 in RESP funds that traditionally would have been invested in non-native funds. By aggregating the funds, the First Nation can access funds (provide a portion remains liquid, diversified, etc.) for economic development opportunities that would qualify for RESP. If Sandy Bay has a housing need, maybe RESPs can provide the capital required to activate the opportunity. Sandy Bay, with a $0 costs, can secure $1,722,500 in RESP Funds to reinvest into First Nations investments. FUND Example: Sandy Bay Housing Corporation First Nations Investment

28 Future Generations Conclusion THANK YOU Kanata Financial would like to thank AFOA for the opportunity to present. Any further questions on RESP can be directed to Steve Charest, Chris Ashkewe or Arnold Bomberry or the Kanata Offices at

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