An RDSP Can Add Up to Great Savings
A Registered Disability Savings Plan (RDSP) is a new, registered product available at SCU. Launched in 2008 by the Federal Government, it has a maximum $200,000 lifetime contribution limit. An RDSP is a matched savings plan for Canadian residents under 60 years of age, receiving the Disability Tax Credit, and who hold a valid social insurance number. The government may contribute up to $3 for every $1 you put into the fund. All funds are tax sheltered and are not impacted by federal and most provincial social benefits. There are many variables and options, so call the SCU Wealth Management department to find out more. You can also visit the CRA Website.
Contributions can be matched, based on family income, with up to $70,000 in Canada Disability Savings Grants. The Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) are federal programs that provide payments to RDSPs to encourage long-term savings through an RDSP. Grants and bonds are available to beneficiaries up until December 31st in the year they reach age 49.
The Canada Disability Savings Grant: For every $1 put in an RDSP account, the federal government can (if your family income is below $87,907) contribute up to $3.
The Canada Disability Savings Bond: For people living on a low-income (less than $25,584), the federal government will put in $1000 each year for 20 years.
People living on an income between $25,584 -$43,953 can still receive a partial bond.
Anyone (family, friends, neighbours) can contribute to an RDSP, giving people who want to help a way to do so. Although there is no annual contribution limit, a maximum amount of $200,000 per beneficiary can be contributed during the lifetime of the RDSP. Contributions are not tax-deductible; however, the earnings grow tax free while held in the plan.
Once a withdrawal of any amount is made, all federal grants and bonds paid into the RDSP in the previous 10 years have to be repaid to the federal government. This is known as the Assistance Hold-back Amount (AHA). The purpose of the AHA is to ensure that RDSPs are used for long-term savings and to ensure that government funds contributed are not withdrawn and used as leverage for matching grants in future years.
Only the amounts paid by the government must be repaid – income and growth will be retained in the RDSP for the beneficiary to use. Under the new rule instead of having to repay all grants and bonds that have been contributed to the account over the last 10 years, the ratio is $3 of incentives for every $1 withdrawn.
Benefits to Members
• No impact on federal and most provincial social benefits
• Tax-sheltered growth
• Another investment vehicle
• Carry-forward now available back to 2008 where eligible
*Only available on Credential Asset Management Platform (CAM) with mutual fund options. Mutual funds are offered through Credential Asset Management Inc.
There are many variables and options, so call the SCU Wealth Management department to find out more.