The RDSP: 10 Years in 2019

by | May 15, 2018

In December 2008, the federal government implemented the Registered Disability Savings Plan (RDSP), a tax-deferred savings vehicle designed specifically to help people with disabilities, and their families, plan for long-term financial security.

An RDSP allows people with disabilities and their families to save for the future, without paying tax on the earnings while they remain in that account – much like an RRSP but with very different rules around contributions and withdrawals.

The federal government will contribute to the account, a great opportunity for that rare and wonderful thing: free money. Thanks to the hard work of the Plan Institute, provincial disability benefits are unaffected by the deposits, growth, or withdrawals.

Anyone can contribute to an RDSP: family, friends, neighbours, charities, foundations, and organizations. The RDSP holder can decide where the funds are held, what to invest them in, when to draw, and how much.

The account was the first of its kind in the world, providing an opportunity to reduce poverty for the estimated 500,000 people across Canada who could benefit from it.

The 10 year milestone is an important one, as government contributions must remain in the RDSP for at least 10 years after the last government contribution was made to the plan. If money is withdrawn before this time, all or part of the government contribution will have to be repaid to the government.

What are the government contributions?

The federal government will match RDSP contributions through the Disability Savings Bond and the Disability Savings Grant.

The Canada Disability Savings Bond

The CDSB is an income-tested contribution program.

If the beneficiary’s net income is less than $30,000 per year, the federal government will contribute $1,000 to your RDSP each year – without you making any contribution whatsoever.

If the beneficiary’s net income is between $30,450 and $46,605, the government will contribute a prorated amount to your account.

The lifetime maximum for contributions from the CDSB is $20,000.

If you are under 18, the bond is based on your family’s income. If you are over 18, it’s based on your own income.

The Canada Disability Savings Grant

The CDSG is an income-tested contribution matching program.

If the beneficiary’s income is below $93,208:

  • You will receive $3 for every $1 you contribute on the first $500 you contribute – up to $1,500 per year.
  • You will receive $2 for every $1 on the next $1,000 you contribute – up to $2,000 per year

The maximum grant for any one year is $3,500, and the lifetime maximum is $70,000.

If the beneficiary’s income is above $93,208:

  • You will receive $1 for every $1 on the first $1,000 you contribute – up to $1,000 per year.

The maximum grant for any one year is $1,000, and the lifetime maximum is $70,000.

Repayment of Government Contributions

If a person takes money out of their RDSP within 10 years of receiving the last government contribution, they will be subject to one of the following repayment rules (whichever is less):

  1. Return $3 of government contributions for every $1 that is withdrawn from the RDSP, or
  2. Return all of the government contributions received in the last 10 years

BC Residents’ Grant

Endowment 150, a program launched by Plan Institute, Disability Alliance of BC, and the BC Aboriginal Network on Disability Society, is distributing a one-time $150 grant to help low-income British Columbians start growing their RDSP. You can learn more about this program here.

Eligibility

In order to qualify for the RDSP, you must qualify for the Disability Tax Credit (DTC). You may need professional help from a specialist who can help you with your application, such as Disability Alliance BC.

A thorough discussion of how to apply for the DTC can be found here.

If you require support, assistance, and other related RDSP services, please get in touch with Access RDSP.

Julia Chung

Julia Chung

Co-Founder, Sr. Financial Planner at Spring Financial Planning
With twenty years' experience in the financial services industry, education in personal and corporate finance, business and family law, cross border planning, family dynamics, insurance, risk management, operations management, and strategy, Julia is a powerhouse financial planner committed to simplifying complex ideas into concrete, practical application.
Julia Chung

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