What is an RDSP?

If you’ve never heard of an RDSP, you’re not alone, many Canadians don’t. But, if you’re disabled, or know some that is, it’s something you need to become familiar with. These grants work very similarly to other types of investments, such as RESPs and RRSPs, and they can be very profitable for those that are eligible. The problem isn’t that the grants are hard to obtain, or that the federal government isn’t willing to put up enough money. The problem is that those eligible simply don’t know they are – because they don’t know about the program.
The RDSP program was introduced three years ago. In order to be eligible, a Canadian disabled person must meet certain requirement criteria. Upon eligibility approval, that individual can then contribute as little as $1,500 and receive back $3,500 from the federal government every year, up to a total of $70,000. Those who are on a limited income can receive $1,000 a year up to a total of $20,000 – without ever contributing a thing. So why aren’t people rushing out to find out if they’re eligible for the program? Again, they just don’t know that it’s out there.
Currently only 5% of disabled Canadians have RDSP accounts, according to a recent BMO survey. There’s another 44% that don’t even know of the plan, and have never heard of it. And why is that? Some have pointed their fingers at banks, saying that they simply haven’t told their customers about it because they have no vested interest in it – they don’t stand to turn a profit. But, that’s not really all that true.
BMO, the creators of the study, holds 50% of the RDSP accounts that are currently out there. Finance Minister Jim Flaherty also credited the banks when speaking recently about RDSP accounts, saying that “a couple of them totally stepped up to the plate.” Others have said that along with lack of awareness, there’s a complicated application process involved. Individuals must first be eligible for the disability tax credit; and these applications can only be filed by specific healthcare professionals. Once the application has been filled out, it then needs to be approved by the Canada Revenue Agency.
There’s also another stingy little side clause in there that states that no individual can withdraw money from their fund before a decade has passed since the last contribution. That’s a tough rule for those who want to use the money for things like their Canada mortgage payments.
So is the RDSP just a vat of money sitting there being wasted?
Currently it certainly seems like it. But it doesn’t have to be. Jim Flaherty, the Canada Revenue Agency, Jack Styan, and of course, BMO, are all doing their part trying to promote awareness and get word out about the program. But, there’s more than just that. Mr. Flaherty has also said that he’s looking to change the “10-Year Rule” to make people’s money more accessible to them. He’s also looking to simplify the application process.
In the meantime, if you’re disabled and have never heard about RDSPs but would like to learn more such as how to apply, how much you’ll be eligible for, and other details, you can check it all out on CRA’s website here. And in the meantime, pass it around, and let people know about the RDSP program.