BMO Calls for Hike in RDSP Contribution Limit
- Publish Date: 2011/12/13
- Author: BMO Financial Group
Outline: Increase to RDSP lifetime contribution limit is more realistic to meet financial needs of people with disabilities that affords a greater opportunity for extended family members to support a loved one.
Main DigestFirst bank to introduce RDSP recommends lifetime contribution limit increase to $500,000 - BMO Financial Group today provided its comments and recommendations to the Government of Canada's review of the Registered Disability Savings Plan.
Registered Disability Savings Plan (RDSP) - A Canadian program designed to enable individuals with disabilities to build wealth and receive matching federal bonds and grants. The funds within the RDSP grow on a tax deferred basis. Most Federal, Provincial and Municipal social programs exempt these assets when means testing the client's entitlement to their services.
"When Finance Minister Jim Flaherty took the important step of introducing the RDSP, Canada showed the world how smart policy can help provide financial security and independence for people with disabilities," said Hugh McKee, President and Chief Operating Officer, BMO Investments Inc. "The RDSP is a terrific savings vehicle. We believe that increasing the lifetime contribution limit from $200,000 to $500,000 will provide both parents and contributors with even more peace of mind."
About 4.4 million Canadians (14.3 per cent) reported having a disability in 2006; more than 200,000 were children aged 14 and under.
Among its recommendations, BMO has suggested:
- An increase to the lifetime contribution limit from $200,000 to $500,000 - a more realistic amount to meet the financial needs of people with disabilities that affords a greater opportunity for extended family members to support a loved one.
- A change to the so-called 10-Year Rule. Currently people who receive grants or bonds from the government must wait 10 years after the last contribution in order to withdraw money from their RDSP. BMO proposes lowering the period to a shorter term, such as five or three years, and the creation of specific exemptions for circumstances such as financial hardship.
The submission also noted the results of a recent BMO survey that revealed only 10 per cent of Canadians with a disability, or those with a family member with a disability, are knowledgeable about the RDSP and its benefits. "Clearly there is a need to ensure more people who are eligible for the RDSP are made aware of how it can help them," stated Mr. McKee. "BMO is engaged in efforts to inform and educate our clients and Canadians about the existence of the RDSP, including free seminars and workshops that we have held across the country for groups supporting people with disabilities. We encourage all stakeholders to do the same."
What media are saying about the RDSP
"Bank of Montreal, a leader in the field from the beginning... now controls about 50 per cent of the market...The message needs to get out. The RDSP is a great program. Spread the word. Please." - Financial Post, October 26, 2011
"It is a wonderful program... The federal government, banks, non-profit groups and health-care workers should ensure that each and every disabled person who would benefit knows about this superb program." - The Globe and Mail editorial, October 31, 2011
About the RDSP:
The RDSP encourages families and individuals to save for the long-term security of persons with severe and prolonged disabilities. It is available to Canadians who are eligible for the Disability Tax Credit, and can provide "peace of mind" to parents and other contributors who may put a plan in place for a beneficiary with a disability.
- Contributions are not tax deductible but grow on a tax-deferred basis
- Earnings generated on contributions are tax-exempt while in the plan
- When earnings are withdrawn as part of a disability assistance payment, they are taxable in the hands of the beneficiary (likely to be taxed at a lower rate)
- Only one beneficiary can be named per RDSP. A beneficiary can hold only one RDSP
|What is it||A tax-deferred savings vehicle that provides long-term financial security for persons living with a disability. Includes government incentives such as the Canada Disability Savings Grant (CDSG) and Canada Disability Savings Bond (CDSB) that could add up to an additional $90,000 per individual.|
|Who is eligible||Canadian residents under the age of 60 with a valid SIN who are eligible for the Disability Tax Credit.|
|Who can set up an account||An account can be set up by the beneficiary, parents of the beneficiary or any individual or organization legally authorized to act on behalf of the beneficiary.|
|Who can contribute? Contribution limit||Anyone can contribute to an RDSP, provided they have written consent of the account holder.|
|What is the contribution limit||Up to $200,000 lifetime per individual over the life of the RDSP. There is no annual contribution limit.|
|Contribution deadlines||Annual contribution deadline for Grants and Bonds: December 31. Last day for Grants and Bond eligibility: December 31 of the year the beneficiary turns 49 years of age. Last day contributions permitted to the plan: December 31 the year the beneficiary turns 59 years of age.|
For more information about the BMO RDSP, please visit:
The full submission can be viewed at: