Just Ask — What is a Registered Disability Savings Plan?
Hayley Toth | Sunshine Coast Resource Centre
A Registered Disability Savings Plan (RDSP) is a long-term savings plan designed to help people with disabilities save for their future. Approximately one in three Canadians who were approved for the Disability Tax Credit had an RDSP in 2024. That means a significant number of people who are approved for the Disability Tax Credit are not taking advantage of a savings program that can provide substantial government contributions.
To open an RDSP, the person who will benefit from the plan must first be approved for the Disability Tax Credit (DTC). They must also have a valid Social Insurance Number, be a resident of Canada, and be under 60 when the plan is opened. The DTC and RDSP are separate programs, so being approved for the DTC does not automatically open an RDSP. The DTC is a tax measure for people with a severe or prolonged impairment in physical or mental ability. Eligibility is determined by the Canada Revenue Agency, based on information provided by a medical practitioner. If you have never applied for the DTC, this is a good place to start before looking into an RDSP.
Opening an RDSP is done through a financial institution that offers the plan, such as a bank or credit union. Once you have DTC approval, the financial institution can help you set up the RDSP and apply for the grants and bonds. You can contribute as much or as little as fits your circumstances, although there is a $200,000 lifetime contribution limit.
Once an RDSP is open, the government may also contribute to your savings plan. The Canada Disability Savings Grant is based on your family income and how much you contribute to the RDSP. Depending on your circumstances, the government can match your contributions at 100, 200 or 300 per cent. You can receive up to $3,500 in grants each year, to a lifetime maximum of $70,000. The Canada Disability Savings Bond works differently. For people with lower incomes, the government may contribute up to $1,000 a year to an RDSP even if the beneficiary does not contribute any money themselves. The lifetime maximum for this bond is $20,000. Unused grant and bond entitlements can generally be carried forward for up to 10 years. This can be particularly helpful for someone who has only recently learned about the RDSP or just received DTC approval.
Keeping your income tax returns up to date is also important because the government uses tax information to determine eligibility for the grants and bonds. If you have missed filing returns in previous years, the Resource Centre may be able to help through our Community Volunteer Income Tax Program (CVITP). For more information, visit our website at resourcecentre.ca/program/taxes/ or contact the Resource Centre at 604-885-4088. You can also visit us in person Monday through Thursday, 10am to 3 pm, at 5674 Cowrie Street in Sechelt.
Since an RDSP is intended for long-term savings, there are some rules around taking money out. Generally, withdrawals before age 60 can affect government grants and bonds that were deposited into the plan during the previous 10 years. In some cases, a portion of those contributions may need to be paid back. This 10-year rule is important to understand, but it should not discourage people from opening an RDSP. The purpose of the program is to provide long-term financial support, and the government contributions can make a significant difference over time.
It is also worth noting that opening and contributing to an RDSP does not affect most federal or provincial income-tested benefits. When money is eventually withdrawn, the portion made up of government grants, bonds and investment growth is generally taxable, while your original contributions are not.
If you think you or a family member may be eligible, a good place to start is by finding out whether you are approved for the Disability Tax Credit. From there, a participating financial institution can walk you through opening an RDSP and applying for the available government contributions. An RDSP can be an important tool for building long-term financial security, but many people simply do not know it exists or are unsure how to access it. For full details on the RDSP, visit www.canada.ca.
Just Ask is a bi-weekly column in the Coast Reporter.