July 15, 2010
By W. Michael Thomas, CFP, CLU, CH.F.C., R.F.P.

We are all familiar with RRSPs, and since 2008 with TFSAs and the benefits of each one. However, not many are familiar with the new Registered Disability Savings Plan (RDSP).

The RDSP was unveiled in the 2007 budget and is currently offered by only two of the five Canadian chartered banks. As less than one per cent of the Canadian population is expected to qualify for it, this savings plan has so far flown under the radar compared to the launch of the tax-free savings account (TFSA). For a disabled person, however, the RDSP is designed to help with long-term savings and in this context fills a very important need.

This niche offering can provide those with a qualifying disability a significant sum of money as a result of generous grants and bonds from the Canadian government. RDSP accounts consist of contributions by the plan holder, government grants and bonds, and investment earnings. The main financial benefits of the RDSP are as follows: Canada Disability Savings Grant (CDSG), Canada Disability Savings Bond (CDSB) and tax sheltered investment earnings.

Although it is the most effective investment vehicle for a person with a qualified disability, there are some concerns with respect to ineligibility as a result of recovery or death before age 60, refund of grants and bonds that were not in the plan for 10 or more years, and the availability of the plan, only until one turns 49 years of age.

The 2008 budget did not make any changes to the RDSP, but did promise to review the RDSP every three years to ensure that the plan continues to meet the needs of Canadians with disabilities. For a more in depth look at the savings potential and limitations of this plan, visit the website at: www.servicecanada.gc.ca/eng/goc/rdsp.shtml.
If you have any questions, contact Michael Thomas, a partner with Investment Guild, endorsed provider of the HortProtect Group Insurance Program, and a director of Ontario Horticultural Trades Foundation. 1-800-459-8990, info@hortprotect.com.