An RDSP is a savings vehicle designed to ensure the long-term financial security of a person with disabilities. For information purposes, note that the term “persons with disabilities” refers to a person who is eligible for a disability tax credit.

An RDSP can be used for the person with disabilities or for another beneficiary, such as a child or spouse.

Several types of contributions can be made to an RDSP. For example:

  • Cash
  • SharesA share, also referred to as stock, is an equity security that entitles you to an ownership interest in a company.

    The company can distribute a portion of its earnings to shareholders by paying them a dividend.

    The shares of companies listed on an exchange are bought and sold at the exchange.

    When a company ceases to operate, the proceeds from the sale of its assets are used to pay its debts and taxes, and the rest of the money is distributed to shareholders.
  • BondsA bond is a security issued by governments and companies through which an investor lends money to the issuer.

    In general, the government or company promises to pay the investor interest at a fixed rate and at certain intervals (for example, 2% per year). Interest is normally paid twice a year. At maturity, the government or company pays back a predetermined amount that is called the face value. The face value is usually $1,000.

    There are several types of bonds:

    Stripped bond
    Real return bond
    Convertible bond
    Savings bond
    Retractable bond
    Unsecured bond
    Etc. 
  • Mutual fund unitsInvesting in a mutual fund gives the investor units in the mutual fund. 

The RDSP can be used, for example, to pay for healthcare costs or home care for the beneficiary. You can contribute to an RDSP until the end of the year in which the beneficiary turns 59.

Who can benefit from an RDSP?

The beneficiary is the person for whom the contributions are made. It’s the person who will benefit from the plan. To be the beneficiary of an RDSP, an individual must:

Who can be the holder of an RDSP?

Beneficiary’s situationHolder
has reached the age of majority and is competent to enter into a contractbeneficiary
has reached the age of majority but is not competent to enter into a contractperson or body legally authorized to act for the beneficiary
minorthe beneficiary’s father or mother, or any other person or body legally authorized to act for the beneficiary

How do contributions to an RDSP work?

  • Only the holder (or anyone who has written permission from the plan holder) can contribute to the RDSP.
  • The contributions belong to the beneficiary, even if he is not the one who made them.
  • The lifetime contribution limit is $200,000.
  • There is no annual contribution limit.
  • The cut-off date for making contributions is December 31 of the year in which the beneficiary turns 59 years old.

How do withdrawals work?

  • The money in the RDSP belongs to the beneficiary. This money can therefore be:
    • Withdrawn and used by the beneficiary;
    • Withdrawn by the holder and used for the beneficiary (for example, for health care or home care).
  • Amounts withdrawn from an RDSP do not affect the amounts receivable under other government programs (Old Age Security, Guaranteed Income Supplement and Québec Pension Plan).

RDSP and income tax

EventImpact on income tax
Contribute to an RDSPNo tax deduction
Receive a grant in an RDSPNo income tax to be paid as long as the grant remains in the RDSP
Earn investment incomeInvestment income is the money that an investor earns through their investment. This money can be in the form of interest, a capital gain, etc. in an RDSPTax-deferred while in the RDSP
Withdraw funds equivalent to prior RDSP contributionsNo income tax payable
Withdraw RDSP funds equivalent to government grants and investment incomeInvestment income is the money that an investor earns through their investment. This money can be in the form of interest, a capital gain, etc.These amounts belong to the beneficiary and will be added to taxable income. The beneficiary could therefore have to pay taxes on them.

What government assistance is available?

RDSPs are eligible to receive two types of government assistance:

  • The Canada Disability Savings Grant (“CDSG”)

    The CDSG can be as much as $3,500 per year (or $70,000 lifetime), depending on the amount contributed and the beneficiary’s family incomeFamily income is the total of all of a family’s income (salaries, investment income, etc.), including that of minor children..
  • The Canada Disability Savings Bond (“CDSB”)

    The CDSB is offered solely to low-income and modest-income Canadians. It provides a maximum of $1,000 per year (or $20,000 lifetime). No contribution is required to receive this bond. You simply need to open an RDSP.

Here’s some useful information:

  • Government disability plan grants and bonds are paid until the year in which the beneficiary turns 49.
  • The amounts invested in the RDSP must therefore stay in the plan for at least 10 years. If funds are withdrawn earlier, then the grants and bonds must be paid back.
  • A beneficiary may be eligible to receive one or both types of assistance.

Example

Let’s take the example of a couple that has a child with disabilities.

  • Their family incomeFamily income is the total of all of a family’s income (salaries, investment income, etc.), including that of minor children. : $ 80,000 per year
  • Their contribution: $1,500 per year, from the time the child is one year old until he is 20 years old.
  • Total contribution is $30,000.

Since the couple’s income is above average, they aren’t eligible for the CDSB. However, when the child turns 18, it’s his income that’s taken into account.

At 18 years of age, the child’s income is low This link will open in a new window. He is therefore eligible for assistance. The following are the amounts that the government adds to the RSDP over the years:

  • Grant of $3,500 per year (calculated on the basis of the contribution and family income). The lifetime maximum is $70,000.
  • Bond of $1,000 per year as of age 19. The lifetime maximum is $70,000.

Assuming an annual return of 3%, the parents’ $30,000 contribution will allow their child to accumulate $364,418 by age 49:

  • Contributions: $30,000
  • Grants and bonds: $90,000
  • Return on investments: $244,418

Amount accumulated in an RDSP after 49 years with an annual investment of $1,500 over 20 years

Accumulation of contributions in an RDSP
Amount accumulated based on an annual return of...
Age Cotisations Grants Bonds 2% 3% 4%

1 year

$1,500

$3,500

$-

$5,100

$5,150

$5,200

2 years

$1,500

$3,500

$-

$10,302

$10,455

$10,608

3 years

$1,500

$3,500

$-

$15,608

$15,918

$16,232

4 years

$1,500

$3,500

$-

$21,020

$21,546

$22,082

5 years

$1,500

$3,500

$-

$26,541

$27,342

$28,165

6 years

$1,500

$3,500

$-

$32,171

$33,312

$34,491

7 years

$1,500

$3,500

$-

$37,915

$39,462

$41,071

8 years

$1,500

$3,500

$-

$43,773

$45,796

$47,914

9 years

$1,500

$3,500

$-

$49,749

$52,319

$55,031

10 years

$1,500

$3,500

$-

$55,844

$59,039

$62,432

11 years

$1,500

$3,500

$-

$62,060

$65,960

$70,129

12 years

$1,500

$3,500

$-

$68,402

$73,089

$78,134

13 years

$1,500

$3,500

$-

$74,870

$80,432

$86,460

14 years

$1,500

$3,500

$-

$81,467

$87,995

$95,118

15 years

$1,500

$3,500

$-

$88,196

$95,784

$104,123

16 years

$1,500

$3,500

$-

$95,060

$103,808

$113,488

17 years

$1,500

$3,500

$-

$102,062

$112,072

$123,227

18 years

$1,500

$3,500

$-

$109,203

$120,584

$133,356

19 years

$1,500

$3,500

$1,000

$117,507

$130,382

$144,930

20 years

$1,500

$3,500

$1,000

$125,977

$140,473

$156,968

21 years

$1,000

$129,517

$145,718

$164,286

22 years

$1,000

$133,127

$151,119

$171,898

23 years

$1,000

$136,809

$156,683

$179,814

24 years

$1,000

$140,566

$162,413

$188,046

25 years

$1,000

$144,397

$168,315

$196,608

26 years

$1,000

$148,305

$174,395

$205,512

27 years

$1,000

$152,291

$180,657

$214,773

28 years

$1,000

$156,357

$187,107

$224,404

29 years

$1,000

$160,504

$193,750

$234,420

30 years

$1,000

$164,734

$200,592

$244,837

31 years

$1,000

$169,049

$207,640

$255,670

32 years

$1,000

$173,450

$214,899

$266,937

33 years

$1,000

$177,939

$222,376

$278,655

34 years

$1,000

$182,517

$230,077

$290,841

35 years

$1,000

$187,188

$238,010

$303,514

36 years

$1,000

$191,951

$246,180

$316,695

37 years

$1,000

$196,811

$254,595

$330,403

38 years

$1,000

$201,767

$263,263

$344,659

39 years

$205,802

$271,161

$358,445

40 years

$209,918

$279,296

$372,783

41 years

$214,116

$287,675

$387,694

42 years

$218,399

$296,305

$403,202

43 years

$222,767

$305,194

$419,330

44 years

$227,222

$314,350

$436,103

45 years

$231,767

$323,781

$453,547

46 years

$236,402

$333,494

$471,689

47 years

$241,130

$343,499

$490,557

48 years

$245,953

$353,804

$510,179

49 years

$250,872

$364,418

$530,586

Total

$30,000

$70,000

$20,000

$250,872

$364,418

$530,586

What happens should the beneficiary die?

  • The total amount of the grants and bonds received in the preceding 10 years must be paid back.
  • The amount remaining in the RDSP after this reimbursement is paid to the beneficiary’s estate (successionLa succession est la transmission du patrimoine d'une personne décédée à ses héritiers. Le terme est aussi utilisé pour désigner le patrimoine qui leur est transmis.).

Which financial institutions offer RDSPs?

For a list of financial institutions that offer RDSPs, visit the Employment and Social Development Canada This link will open in a new window website.

Insight

To ensure that you’re dealing with an authorized person and firm, consult the register of firms and individuals authorized to practise or call the AMF Information Centre.

End of the insight

Where to find more information