How to Start and Manage a Registered Disability Savings Plan in British Columbia

This guide outlines how to start and manage a Registered Disability Savings Plan (RDSP) in B.C. It was developed by the Registered Disability Savings Plan Action Group and is supported by the Vancouver Foundation and the Government of British Columbia.

Contents

  1. Proof of Identification Requirements
  2. Disability Tax Credit
  3. Appeal your Disability Tax Credit (if necessary)
  4. File Your Income Tax Returns Annually
  5. Choose Your Financial Institution
  6. Choose Your Holder
  7. Open Your RDSP
  8. Invest Your Money
  9. Re-Apply for the Disability Tax Credit, As Necessary
  10. Learn About Withdrawals/Withdraw Your Money

Getting Started

What is an RDSP?

A Registered Disability Savings Plan (RDSP) is a long-term savings plan for people with disabilities. If you have a disability, you may be eligible to open an RDSP. You may want to have someone help you apply for an RDSP or prefer to have someone apply for it on your behalf. This guide is intended to help you, or someone who supports you, through each step of the process.

What is the benefit of an RDSP?

Even if you don’t have any of your own money to contribute, an RDSP is a good idea to help you save for your future. If you are eligible, the main reason you should open an RDSP is to take advantage of money the federal government will provide on your behalf. If you are under age 50, you may be able to get up to $90,000 in grants and bonds over your lifetime.

  • Bonds (you do not have to deposit money into your RDSP to get these): Individuals with low incomes may get up to $1,000 per year.
  • Grants (a contribution must be made to your RDSP to receive these): Low and modest-income individuals may get up to $3 for every $1you deposit. Matching rates are based on your income and how much you deposit, to an annual limit of $3,500.

Who is eligible for an RDSP?

You are eligible to open an RDSP if you are:

  • Qualified for the Disability Tax Credit (learn more in Step 2)
  • a Canadian resident
  • Under the age of 60

Is it really worth it?

The rules for RDSPs are complicated and getting an RDSP may seem like an overwhelming process. However, if you have low or modest income, the benefits of getting an RDSP are well worth the effort.

Here’s the power of the RDSP for a family with an annual net income of $26,000 a year. If they contribute $900 per year, they will earn $2,300 in federal RDSP grants and another $1,000 in bonds every year. Over your lifetime, you could receive $250,966 from an RDSP:

  • Started at age 30, $900 per year
  • Contributed until age 50 by a family with adjusted income of $26,000 per year
  • At 3% interest until the end of disbursements (age 83) by source:
    • $18,000 in contributions
    • $20,000 in federal bonds
    • $46,000 in federal grants, and
    • $166,966 in earned interest (at 3% per year)

Will the RDSP impact my government income benefits?

In B.C., the RDSP is exempt as an asset and as income, which means that the RDSP will not impact your income assistance or disability assistance (also known as PWD). In addition, the RDSP does not affect Federal benefits such as Canada Pension Plan- Disability (CPP-D), Old Age Security payments and the Guaranteed Income Supplement.

Access RDSP

Access RDSP is a province-wide partnership between Plan Institute, Disability Alliance BC (DABC), and the BC Aboriginal Network on Disability Society (BCANDS), with support and funding from the Vancouver Foundation. The partnership promotes financial security for people with disabilities through the RDSP.

The Access RDSP Program received the Doctors of BC’s 2018 Excellence in Health Promotion Award for their work in assisting to increase financial security for persons living with disabilities in British Columbia.

Access RDSP team members provide free supports and services for people who want to start an RDSP including:

  1. Disability Tax Credit Application Support – DABC advocates provide one-on-one support by helping individuals who are eligible for the RDSP to apply for the DTC, a pre-requisite for the RDSP. Call their Advocacy Access line at 604 872-1278 or 1 800 663-1278, or email rdsp@disabilityalliancebc.org
  2. Disability Planning Helpline – One-on-one support provided by expert advisors on key future planning and RDSP information. Call 1 844 311-PLAN to contact the Helpline
  3. Free Information Sessions – Access RDSP offers in-person and tele-seminar learning sessions, providing RDSP and DTC information for families, healthcare professionals, financial professionals, organizations, and other groups. Learning sessions include information about becoming eligible, opening RDSP accounts, and maximizing the benefits from an RDSP
  4. Indigenous RDSP Navigation – BCANDS Navigators provide one-on-one support by helping Indigenous individuals and families who are eligible for the RDSP to apply for the DTC, a pre-requisite for the RDSP. Connect with one of BCANDS’s Indigenous RDSP Navigators at rdsp2@bcands.bc.ca, 250 381–7303 (Ext: 204), or toll free: 1 888 815-5511 (Ext: 204).
  5. $150 Grant for BC Residents – Plan Institute administers Endowment 150, a $150 one-time grant aimed at helping individuals and families save for the future by jump-starting their RDSP.

For more information about the Access RDSP program, please visit rdsp.com.

Step 1: Proof of Identification Requirements

To open an RDSP, you will need a Social Insurance Number (SIN) and photo identification. If you currently don’t have any identification, you might need to get proof of your identity before you can apply for a SIN and/or photo ID.

Proof of identity

You will need proof of identity (your Birth Certificate or Certificate of Canadian Citizenship) to obtain a Social Insurance Number (SIN) and photo identification.

Social Insurance Number

A Social Insurance Number (SIN) is a number that you need if you want to work or receive other benefits. You will need a SIN to file your tax returns and to apply for the Disability Tax Credit, which is also needed to open an RDSP.

Apply at Service Canada.

Photo identification

Your bank or credit union will require photo identification when you are ready to open your RDSP. If you don’t already have a photo ID (like a driver’s licence), the BC Services Card has a photo option—and there’s no fee.

Step 2: Disability Tax Credit

To open an RDSP, you must be approved for the Disability Tax Credit. This is the most important step in opening an RDSP—if your application for the Disability Tax Credit is not approved, you cannot open an RDSP.

Are you eligible for the Disability Tax Credit?

Do you have a mental or physical disability that is expected to last, or has lasted, one year or more? If yes, you may be eligible for the Disability Tax Credit. If no, you are not eligible for the Disability Tax Credit.

If you answered yes, can you answer yes to any one of the following questions?

  • Are you blind?
  • Do you need extensive therapy or treatment?
  • Are you limited in activities that people need to do regularly? For example:
    • Speaking
    • Hearing
    • Walking
    • Using the bathroom
    • Eating
    • Getting dressed
    • Remembering
    • Banking
    • Finding your way around
    • Dealing with emergencies

If you can answer yes to at least one of these questions, you should apply for the Disability Tax Credit. If you answer no to all three questions, you are not eligible for the Disability Tax Credit or the RDSP.

How to apply for the Disability Tax Credit

  1. Complete Part A of Form T2201
  2. Take the form to your doctor or other medical specialist (review form for instructions). Nurse practitioners are now certified to complete the DTC form
  3. Get the signed form back from your doctor or other medical specialist
  4. Send the signed form to a Canada Revenue Agency Tax Centre. Locations are mentioned on the application form

What you should know

For additional advice, consult these resources:

Step 3: Appeal your Disability Tax Credit (if necessary)

If you are not approved for the Disability Tax Credit, you will get a letter explaining why you were turned down. At this point, you should probably get some professional advice, like a professional tax accountant who specializes in disability tax credits, or an advocate. A professional can help you decide how to proceed.

If you are turned down for the Disability Tax Credit, there are two things you can do:

  1. If there is any information about your disability that you did not include with your application, you can send additional information to your tax services office
  2. You can ask for the decision to be reviewed by the Canada Revenue Agency

Disability Tax Credit (DTC) Tips

  • Even if you receive B.C. Disability Assistance (also known as PWD), you need the DTC to qualify for the RDSP
  • When you see your doctor or other practitioner, tell him or her as much as you can about how your disability affects your day-to-day life. Keeping a journal of how your condition is affecting the basic activities of daily living can help
  • Tell your doctor or other practitioner how important the DTC is for your future. If they know more about it, they may take extra care infilling out your form
  • If you can, attend the appointment with a friend or relative
  • You want to be the person to send the DTC form in. If you don’t agree with what the doctor or practitioner has written, or feel they have missed information, you can then choose to take it to another practitioner, or get help from a professional
  • Make a photocopy of the completed form
  • If you are an advocacy organization, give your client a template letter addressed to the doctor or other practitioner explaining why your client is applying for a Disability Tax Credit

Step 4: File Your Income Tax Returns Annually

The amount of grants and bonds you may get from the federal government depends on your income. To get the maximum grants and bonds, you must file your tax return annually. If you have a low income, there are community supports available to help you file your tax returns.

It is important to note if you are approved for the Disability Tax Credit, it can usually be made retroactive. You may qualify for RDSP grants and bonds for previous years. You, your spouse or your parents may be eligible for tax refunds.

Step 5: Choose Your Financial Institution

Some financial institutions offer the RDSP, others do not. Check the list of participating banks or credit unions on the Employment and Social Development Canada (ESDC) website (link below) and see if the one you use is listed.

Note that some banks or credit unions have different rules about taking money out of your RDSP. All bank or credit unions allow regular withdrawals that begin when you’re older, but only some allow one-time withdrawals, such as to buy a car or a house. See step 10 for more information about withdrawals.

Planned Lifetime Advocacy Network (PLAN) has listed additional things to think about when you choose a bank or credit union. See the link to their guide below. Also, on their websites some banks or credit unions offer advice and information on RDSPs; see the links provided below.

The following financial organizations offer the RDSP, the Grant and the Bond. If you do not see your financial institution on this list, contact them. They may still be able to open an RDSP for you.

In B.C., the following banks and credit unions support the RDSP:

  • ATB Securities Ltd.
  • Bank of Montreal
  • Bank of Nova Scotia
  • Central 1 Credit Union
  • Central 1 Trust Co.
  • Community Trust Company CIBC Desjardins
  • Fonds d'investissements FMOQ Inc.
  • Global Growth Assets Inc.
  • Investors Group Trust Co. Ltd.
  • Mackenzie Financial Corporation
  • Natcan Trust Co.
  • RBC Royal Bank
  • TD Waterhouse Canada Inc.
  • Vancity Credit Union

Step 6: Choose Your Holder

The holder of your RDSP is the person who makes decisions about investments and withdrawals. In most cases, you will be the holder of your RDSP.

If you need assistance managing your RDSP, your bank or credit union may require another person to be the holder of your RDSP. (The holder will only manage the RDSP - you will still receive the money in the account.)

You may be able to choose a person to be the holder of the RDSP (“qualifying family member”) under a temporary federal measure that has been extended until 2023 or you may use a Representation Agreement, or other personal planning tool.

Step 7: Open Your RDSP

Now that you have qualified for the Disability Tax Credit, you are ready to open your RDSP! The next step is to schedule an appointment with your bank or credit union. When you go to your appointment, be sure to bring your Social Insurance Number and your photo ID.

You can also receive direct assistance with all aspects of opening an RDSP, including education sessions, one-on-one support and system navigation in your community.

Step 8: Invest Your Money

Now that you’ve opened your RDSP, you’re ready to start contributing and taking advantage of grants and bonds. You may wish to:

  1. Learn about grants and bonds from the federal government. These are based on your “family income.” If you are a single adult, this means your income. If you are married or in a common-law relationship, “family income” means the combined income of you and your spouse or common-law partner
    • Bonds: A full bond ($1,000 per year) is available if your family income is $30,450 or less. A partial bond is available if your family income is between $30,450 and $46,605
    • Grants: If your family income is $93,208 or less, you may get matching grants of 300% and 200% (depending on the amount you deposit into your RDSP). If your family income is more than $93,208, then a matching grant of 100% (on first $1,000 per year) is available
  2. Think about where you might get money from to invest in your RDSP (such as from your disability payment, gifts from friends, family, etc.). Figure out how much you can contribute each month. You may be able to get $150 from the Endowment 150 Fund
  3. Learn about ways you can save your money in the RDSP. An advisor at your bank or credit union can help you choose the type of investment that is right for you.

Step 9: Re-Apply for the Disability Tax Credit, As Necessary

Even after you have applied for the Disability Tax Credit and your request forms are approved, you may have to do it again after some time. Your approval letter will tell you when you need to re-apply. This may be only one year later, or it might be longer, such as in 10 to 15 years. To re-apply, you just follow the same actions outlined in Step 2 (and Step 3 if you need to).

Learn more about Disability Tax Credit in Step 2.

Step 10:  Learn About Withdrawals/Withdraw Your Money

There are rules about when and how much you can withdraw from your RDSP.

For example, if the government has contributed more money to your RDSP than you have, your RDSP is considered a “primarily government-assisted plan” and you are limited in how much money can be withdrawn in a year. If you have contributed more money than the government however, there are no annual maximum restrictions.

10-year Rule

But remember, there is also a 10-year rule. Whenever money is withdrawn from an RDSP, all or part of the grants and the bonds that have been in the RDSP for fewer than 10 years must be repaid to the Government. You must repay $3 for every $1 that is taken out, up to the total amount of grants and bonds paid into the RDSP in the last 10 years.

In other words – the RDSP is a (very) long-term savings plan. For example:

  • Paul is 20 and has just opened an RDSP
  • He wants to access the full grant and bond contributions without returning any funds to government
  • Paul must wait 30 years from the time of making his first deposit before accessing his (or the government’s) contributions: 20 years contributing to the fund, then 10 years waiting for the holdback amount to diminish to 0
  • Paul will be 50 years of age when he can access his RDSP savings without any penalty

However, if an RDSP holder has a shortened life expectancy (a life expectancy of five years or less), there is some flexibility when making withdrawals from their RDSPs.

Beneficiaries with a life expectancy of five years or less will be able to withdraw up to $10,000 per year in taxable savings, subject to certain conditions. This amount includes grants, bonds and earnings. In addition, beneficiaries can withdraw a pro-rated amount of their plan contributions.

Repayment of any remaining grants and bonds paid into the plan within the preceding 10 years is not required until the death of the beneficiary.

To take advantage of this measure, the plan holder(s) must submit a request to the financial organization, along with a medical attestation. The financial organization will then notify Employment and Social Development Canada of the change to the plan.

Why is there a 10-year rule?

It’s important for us to understand why this rule exists in the first place. There are two main reasons:

  1. To prevent tax “slippage”: a person could use the same money to get government contributions year after year. For example, Paul contributes $1,500 in 2008 and receives a matching $3,500 from the federal government. In 2009, he withdraws $1,500 from the RDSP and then re-deposits it. Paul gets another $3,500 from the federal government. In other words, he would receive $7,000 from the federal government for his $1,500 contribution. That would defeat the purpose of encouraging personal saving.
  2. To make the RDSP a long-term savings plan: The RDSP was not intended to act like a bank account, where a person could make contributions and withdrawals as needed. Nor was it intended to act like an income program, where federal contributions are considered an income supplement each year.

Before you begin withdrawing from your RDSP, check with your RDSP provider about:

  • Types of withdrawal
  • Maximum withdrawal limits
  • The 10-year repayment rule for grants and bonds

Note that when you withdraw from your RDSP, a portion of your withdrawal is taxable. You may want to consult a professional who can provide tax advice.

Finally, you may want to research how RDSP withdrawals affect your ability to get other government-provided benefits. In B.C., RDSP withdrawals do not affect your ability to get provincial disability assistance benefits (called PWD benefits).

Note that RDSP withdrawals are also excluded for the purpose of calculating Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

Learn more about accessibility in B.C.