What Can and Cannot Be Transferred
This is one of the last-resort RESP cleanup strategies, so it makes the most sense after reading the main RESP guide, the fallback overview in what happens if your child doesn’t go to university, and the withdrawal side in RESP withdrawal strategies. Because the transfer depends on registered-room planning, keep the current RRSP contribution limit and spousal RRSP rules nearby too.
When closing an RESP and transferring to an RRSP, understand what each component of the RESP is:
| RESP component | What happens on closure |
|---|---|
| Your original contributions | Returned to you tax-free — no RRSP needed |
| CESG grants | Repaid to the government — cannot transfer to RRSP |
| Investment earnings on CESG | Repaid or subject to AIP penalty — cannot transfer to RRSP |
| Investment earnings on your own contributions | Become the AIP — can transfer to RRSP (up to $50,000) |
Only the investment earnings on your own contributions — not the contributions themselves, not the grants — are the AIP eligible for RRSP transfer.
The 4 Conditions: All Must Be Met
CRA requires all four conditions before allowing an AIP-to-RRSP transfer:
| Condition | Details |
|---|---|
| Plan age | The RESP must have been open for at least 10 years |
| Beneficiary age | The beneficiary must be at least 21 years old |
| Beneficiary not in school | The beneficiary is not currently eligible for EAPs (not enrolled in qualifying post-secondary) |
| Canadian resident | You must be a Canadian resident at the time of the transfer |
| RRSP room | You must have sufficient room — the AIP uses your RRSP deduction limit |
If any condition is not met, the AIP cannot be transferred and you would be subject to the 20% penalty if you take the earnings in cash.
The $50,000 Lifetime Transfer Limit
The AIP-to-RRSP transfer is capped at $50,000 per subscriber, lifetime. This limit applies across all RESP plans you hold as subscriber.
- If your AIP across all plans is $30,000 → transfer up to $30,000
- If your AIP is $75,000 → transfer up to $50,000; the remaining $25,000 is taken in cash as an AIP (with the 20% penalty)
Why the RRSP Transfer Is Valuable: Tax Math
Assumptions: $40,000 AIP, 43% marginal rate
| Option A: Take AIP in cash | Option B: Transfer to RRSP |
|---|---|
| Income tax: $40,000 × 43% = $17,200 | RRSP contribution: $40,000 |
| + 20% AIP penalty: $8,000 | Tax savings now: $40,000 × 43% = $17,200 back in tax refund |
| Total cost: $25,200 | Tax paid later in retirement (likely at lower rate) |
| Net kept: $14,800 | Net kept: $40,000 → invested until retirement |
The RRSP transfer can save tens of thousands of dollars compared to taking the AIP in cash.
CESG Repayment Calculation
When you close the RESP, the grants must be repaid. CRA tracks this separately through the T4A slip issued by your RESP provider:
- Box 40 on the T4A: CESG repaid to government
- Box 40A: Investment earnings on CESG (subject to AIP treatment or returned to government)
Your provider handles the mechanics of returning the CESG to ESDC — you do not write a separate cheque. The repayment is accounted for automatically when the plan closes.
Step-by-Step: How to Do the Transfer
- Confirm eligibility: Verify the plan has been open 10 years, the beneficiary is 21+, not in school, and you have RRSP room
- Check your RRSP room: Confirm on your CRA My Account or last Notice of Assessment
- Request AIP designation from provider: Contact your RESP provider and request an Accumulated Income Payment directed to your RRSP
- Provide RRSP account details: The provider transfers directly to your RRSP — you do not receive the cash first
- Provider issues T4A: You receive a T4A for the year showing the AIP transfer; report it on your tax return using the RRSP contribution deduction to offset the income inclusion
What If the RESP Has Significant Earnings and Limited RRSP Room?
If your AIP exceeds $50,000 (or your RRSP room is less than the AIP), the excess is subject to the 20% penalty. Strategies to minimize this:
- Make large RRSP withdrawals in prior years to free up re-contribution room (not simple or advisable in most cases)
- Contribute to spousal RRSP if your spouse has more room — combined you may have room to shelter the full AIP
- Stage the AIP over multiple years if the plan conditions allow the RESP to remain open without triggering the AIP deadline (the 35-year plan rule)
Frequently asked questions
Can I transfer RESP money to a TFSA instead of an RRSP? No. The AIP (Accumulated Income Payment) can only be transferred to an RRSP or a spousal RRSP. There is no provision to transfer an AIP to a TFSA. If you have no RRSP room, the AIP will be taxed as income plus the 20% additional tax.
What if the RESP is less than 10 years old? If the plan is under 10 years old, you cannot use the AIP-to-RRSP transfer at all. You must either keep the plan open until the 10-year mark or close the plan and take the AIP as cash (subject to full tax + 20% penalty). Keeping the plan open until the 10-year mark is almost always better.
What happens to an RESP after 35 years? An RESP must be closed no later than December 31 of the 35th year after it was opened. If a qualifying transfer or withdrawal hasn’’t occurred by then, the CESG must be repaid and the AIP is taken by the subscriber as taxable income plus 20%. In practice, most RESPs never reach 35 years — the issue only arises if the plan is completely forgotten.
Can a grandparent open an RESP and do an AIP transfer? Yes, as long as the grandparent (subscriber) meets all four conditions (plan age 10+, beneficiary age 21+, beneficiary not in school, Canadian resident, and has RRSP room). The subscriber receives the AIP and transfers it to their own RRSP.