Of the 311,000 active registered disability savings plans (RDSP) started since the program’s inception in 2008, $3.3 billion in contributions have been matched by Ottawa with $5.1 billion in grants and $2.1 billion in bonds.
Still, two-thirds of the government funds set aside to help Canadians with disabilities save for retirement go unclaimed, according to the latest tally from Statistics Canada.
Canada’s only financial firm that deals exclusively in RDSPs wants to change that.
“If you go to your local bank, they usually don’t even know it exists,” says Michel-Alexandre Riendeau, CEO of Montreal-based Terry Capital Inc.
With $100 million under management in Quebec, the company has just been licensed to provide RDSPs in Ontario, Alberta and B.C. under the domain name rdsp.ca.
“The main mission for us is to educate people,” he says.
What is an RDSP?
Anyone who is approved for a disability tax credit (DTC) can have a registered disability savings plan to invest and save for the long-term.
Depending on family income, every $1 contribution could be matched by $3 in federal government grants. Grants can total up to $3,500 each year to $70,000.
In comparison, Ottawa matches registered education savings plans (RESPs) with a grant of up to 20 per cent.
“The amount is incredible. We’re talking up to 300 per cent in grant money compared to an RESP,” says Riendeau.
Contributions can be made until the end of the year in which the beneficiary turns 59 and not taxed when they are withdrawn. However, the government portion, investment income earned in the plan, and proceeds from rollovers are taxed in the hands of the beneficiary when withdrawn.
Plan holders must wait 10 years after their last contribution to make a withdrawal.
Hypothetically, an RDSP opened at 20 years of age can grow for 15 years and provide the holder income at 45 years old.
“Some people with disabilities won’t be able to work, or work as much, so the RDSP is their only way out,” says Riendeau, who adds that many Canadians with disabilities and their families under-estimate the unique long-term financial challenges and rising costs.
”A lot of our clients hope to get some private care later on, not just the government assistance, which isn’t always the best,” he says.
Terry Capital has partnered with Mackenzie Financial to provide mutual fund investment portfolios tailored for an RDSP.
“Over 10 to 30 years the grants and bonds and everything together can grow very quickly,” he says.
The firm is compensated by Mackenzie through annual mutual fund management fees generally between one per cent and 2.5 per cent of the amount invested.
Making an RDSP a family affair
Hutch Theriault from Gatineau, PQ opened an RDSP for his son, Ryker, in 2023 on the advice of his doctor.
Ryker is a typical 16-year-old who likes cross-fit, fishing, water skiing and gaming but suffers from Type 1 diabetes.
“We’re hoping it can be a good nest-egg for him in case there is a cure somewhere in the world. He’ll have money to possibly pay for it privately if the government can’t cover it,” says Theriault.
Ryker’s treatment currently includes costs beyond provincial insurance and sometimes requires up front expenses.
“The cost of medication, the pump and accessories that come with monitoring diabetes, is quite expensive. If he doesn’t have insurance when he’s an adult, he’s going to need this kind of money to be able to sustain his life,” he says, adding that doesn’t even consider future funding for drugs.
“We have insurance now. How expensive is insulin going to be going forward.”
Theriault also worries about whether Ryker’s future health might restrict his ability to earn a living.
“He might be limited to the kind of employment he might get,” he says.
Hope for a secure retirement
Wren Hicks from Montreal contributed to a registered retirement savings plan (RRSP) while working in customer service until attention-deficit/hyperactivity disorder (ADHD), autism, and a chronic spine condition made it impossible to hold a full-time job.
She opened an RDSP in 2022 and has since been diagnosed with complications relating to long COVID and is on permanent disability.
“I didn’t even know an RDSP existed. I was told about it from a friend of a friend who worked with people with disabilities,” she says.
Hicks says her RRSP savings would have never covered her financial needs, but tax rules permit the funds to be rolled into an RDSP as contributions.
“It’s wild because there is so much money I could have had access to,” she says.
At 37, she says the RDSP allows her to hope for a secure retirement she otherwise might not have had.
“It’s like this vague idea of not having to worry about money, but it’s so far away,” she says.
