What is a Registered Disability Savings Plan (RDSP)?

The RDSP is a retirement program intended to provide retirement income to Canadians with the Disability Tax Credit (DTC). This is done through the matching of contributions and annual government grants and bonds (known as the Canadian Disability Savings Grant). An RDSP is a specified disability savings plan meant to help Canadians with disabilities through a long-term savings plan to help people with disabilities approved for the Disability Tax Credit save for the future. When you open a plan, you may also get grants and bonds from the Government of Canada to help with your long-term savings. Contributions are not taxable and deductible from the taxpayer's income, but the monies withdrawn from the RDSP are not taxable as income.

An RDSP differs from a Registered Retirement Savings Plan (RRSP), which is open to any account holder who is the age of majority and whose RRSP contributions are deductible from the contributor income. The amounts withdrawn from RRSPs are also taxable as income. The Government of Canada understands that those who have a disability may not earn qualified levels of income compared to those who are not disabled, which in turn will affect pension plans (including Canadian Pension (CPP) contributions and balances). The RDSP is meant to provide financial security to those who are disabled. This also should not be confused with a RESP (Registered Education Savings Plan), a savings plan for educational purposes.

For those who have a valid Disability Tax Credit, the RDSP should be part of their financial plan. Your dedicated accountant (who has extensive financial planning experience and can also be your financial planner) can help you develop effective financial planning for your retirement by providing long-term financial security.

What is the eligibility for opening an RDSP?

You must be under 60 in the year the beneficiary opens the RDSP and have active status to be eligible for the disability tax credit. An RDSP can be opened by the disabled individual or anyone authorized to act on behalf of the disabled individual. The RDSP account holder must have a valid Disability Tax Credit (DTC) for the duration of the RDSP contributions. If the account holder loses their DTC status before age 60, then the RDSP must be closed within the year that the DTC is lost.

How do I set up my RDSP?

All banks and most investment firms can open a Registered Disability Savings Plan (RDSB)for you, which should not include any account fees to open. If you cannot open an RDSP account on your own (either under age or for other reasons), anyone legally authorized to act on your behalf may open an RDSP.

What Type of Investments are allowed in an RDSP?

Guaranteed Investment Certificates (GICs), mutual funds, portfolio solutions and savings deposits. The issuer of the RDSP can provide more specifics of the type of qualified investments available for your RDSP.

What are the Tax Benefits of an RDSP?

The tax benefits of an RDSP are that the Investment Income or Capital Gains earned within the RDSP are not taxable, providing the beneficiary has a valid Disability Tax Credit and a valid RDSP account. An RDSP is also viewed as a registered savings plan that provides tax-free savings options for those with disabilities.

What are the contribution limits?

While there are no annual contribution limits, the life contribution limit can not exceed $200,000. Contributions may be made by the beneficiary (account holder) and by anyone to whom the beneficiary grants written consent. Contributions may be made to an RDSP, provided that they are made before the beneficiary turns 60. The total amount of all contributions made to all RDSP must not exceed $200,000.

Is there an RDSP Fair Market Value limit?

No, the only limit is that total lifetime contributions do not exceed $200,000.

Who can contribute to an RDSP?

Anyone authorized by the RDSP account holder can contribute to the RDSP. The only restriction is that the total contributions made to the plan in its lifetime can not exceed $200,000. The plan holder must provide written authorization for third-party contributions.

Can I have more than one RDSP?

Yes, with RDSP, the holder of the plan can have more than one RDSP, as long as the combined lifetime amount of all of the contributions to all of your RDSPs does not exceed $200,000 paid into the plan (note above). You can open an RDSP as a new plan at multiple financial institutions.

How much does the government match my RDSP contributions?

If your family (yourself and spouse) income is less than $111,733, for every $1.00 you contribute, the Canada Disability Savings Grant will contribute $3.00, up to your maximum contribution of $10,000 each calendar year.

What happens if I miss making RDSP Contributions in any year?

Is there any other Government Benefit for an RDSP?

Yes, through the Canada Disability Savings Bond (CDSB), the government will deposit the following to the RDSP each year (based on the annual family income (account holder and spouse income):

• $34,863 or less (or if the holder is a public institution), then the yearly Government Contribution is $1,000 (CDSB).
• Between $34,863 and $53,359*—Part of the $1,000 (CDSB) is based on the formula in the Canada Disability Savings Act.
• More than $53,359*—No CDSB bond is paid.

There is no limits to the amount of disability savings grants and bonds paid into the plan.

The annual income limits are indexed at the Bank of Canada inflation rate.

Cancellation of the Disability Tax Credit, what now?

If the Canada Revenue Agency (CRA) has cancelled or not renewed your Disability Tax Credit, then the RDSP account must be closed within the tax year that you no longer have a valid Disability Tax Credit.

Canada disability savings grant (CDSG)

The grant is an amount the Government of Canada pays into a registered disability savings plan (RDSP). The government will pay a matching grant of 300%, 200%, or 100%, depending on the beneficiary’s adjusted family net income and the amount contributed. The beneficiary’s adjusted family net income is calculated as follows:

• from birth to December 31 of the year the beneficiary turns 18, the beneficiary’s adjusted family net income is based on the income information used to determine the Canada Child Tax Benefit for that beneficiary
• beginning the year the beneficiary turns 19 until the RDSP is closed, the beneficiary’s adjusted family net income is based on their income plus their spouse’s or common-law partner’s income
• suppose the beneficiary is under the care of a department, agency, or institution for at least one month in the year. In that case, the adjusted family net income is based on the allowance payable to the department, agency, or institution under the Children's Special Allowances Act.

Canada disability savings bond (CDSB)

The bond is an amount the Government of Canada pays directly into an RDSP. The government will pay a bond of up to $1,000 a year to low-income Canadians with disabilities. No contributions have to be made to get the bond. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year the beneficiary turns 49.

The amount of the bond is based on the beneficiary’s adjusted family net income as follows:

* The beneficiary-adjusted family net income thresholds are indexed each year to inflation. The income thresholds shown are for 2023.

Beneficiary's adjusted family net income:

• $34,863 or less (or if the holder is a public institution)—Bond $1,000
• between $34,863 and $53,359*—Part of the $1,000 is based on the formula in the Canada Disability Savings Act
• more than $53,359*—No bond is paid

To qualify for the bond or to earn a grant, the beneficiary must file income tax and benefit returns for the past two years and all future taxation years when they have an RDSP.

For beneficiaries under 18, their grant and bond amounts are calculated using the combined income of their parents or guardians from filed income tax returns. To continue receiving the correct amount of grants and bonds in the year they turn 19, and for every year after that, the beneficiary must start filing personal income tax returns every year beginning in the year they turn 17.

Carry forward of unused CDSG and CDSB

Before the end of the year, you turn 49 years of age, and you can carry forward up to 10 years of unused grant and bond entitlements to future years as long as you meet the eligibility requirements during the carry-forward years (for example, if you were approved for the disability tax credit and you were a Canadian resident). If an RDSP was opened: 

• in 2023, the carry forward period would be from 2013 to 2023;
• in 2017, the carry forward period would be from 2017 to 2027.

The grant and bond will be paid on unused entitlements up to an annual maximum of $10,500 for the grant and $11,000 for the bond.

Is the CDSB paid retroactively if I have not contributed in past years?

Yes. When establishing an RDSP, the grant is paid on unused entitlements for the plan in the previous 10 years. The annual maximum grant is $10,500. However, you cannot receive retroactive grants after the calendar year you turn 49.

What happens when the beneficiary turns 49?

An RDSP can get a maximum of $3,500 in matching grants in one year and up to $70,000 over the beneficiary’s lifetime. A beneficiary's RDSP can receive a grant on contributions made until December 31, when the beneficiary turns 49, (note the above Canada Disability Savings Grant and the 

What happens when the beneficiary turns 59?

The year the beneficiary turns 59 is the last year in which the beneficiary can contribute to an RDSP.

What happens at the age of 60?

Once you turn 60, you must begin withdrawing from your RDSP.

Withdrawal from an RDSP can be considered to be either:

• Disability Assistance Payments can be withdrawn for the beneficiary's needs and without tax. 
• Lifetime Disability Assistance Payments (LDAPs) withdrawals are those withdrawals from the RDSP at or after the age of 60

What happens if the Beneficiary Dies?

The RDSP must be closed, and all amounts remaining in the plan must be paid out to the beneficiary's estate by December 31st following the calendar year the beneficiary dies. Any funds remaining in the RDSP will be paid to the estate after any required repayment of government grants and bonds. If a DAP had been made and the beneficiary is deceased, the taxable portion of the DAP must be included in the income of the beneficiary's estate in the tax year in which the payment is made.

As you can see, the benefits of the Registered Disability Savings Plan are vast, and the RDSP rules can get a little complicated. We suggest that you schedule an appointment with your dedicated accountant so that you can discuss the benefits and restrictions of the RDSP and how it can work effectively in your retirement planning. To book this appointment, continue as follows: