A Complete Guide to the Registered Disability Savings Plan (RDSP) in Canada

What Is the RDSP?

The Registered Disability Savings Plan is a savings program introduced by the Government of Canada in 2008 to help individuals with severe and prolonged disabilities save money for their long-term financial security. The RDSP is similar in concept to a Registered Education Savings Plan (RESP) in that the government provides matching contributions to encourage saving. However, the RDSP is specifically designed for people with disabilities and comes with its own set of rules regarding contributions, government grants and bonds, and withdrawals. The program is administered through financial institutions and overseen by Employment and Social Development Canada (ESDC).

For newcomers to Canada who have a family member with a disability, or for newcomers who themselves have a disability, the RDSP can be a powerful tool for building financial security over time. The combination of government grants and bonds, tax-sheltered investment growth, and flexible contribution rules makes the RDSP one of the most generous savings programs available in Canada.

Eligibility Requirements

To open an RDSP, the beneficiary (the person with the disability who will benefit from the plan) must meet several criteria. First, the beneficiary must be a Canadian resident and have a valid Social Insurance Number (SIN). Second, the beneficiary must be approved for the Disability Tax Credit (DTC). Third, the beneficiary must be under 60 years of age at the time the plan is opened. Contributions can be made until the end of the year in which the beneficiary turns 59.

The DTC is the gateway requirement for the RDSP, just as it is for the Child Disability Benefit. If you or your family member has not yet been approved for the DTC, you will need to complete the T2201 Disability Tax Credit Certificate and submit it to the Canada Revenue Agency. The approval process typically takes 8 to 12 weeks. Once the DTC is approved, you can proceed to open an RDSP at a participating financial institution.

Who Can Open an RDSP?

The RDSP can be opened by the beneficiary themselves if they are an adult with the legal capacity to enter into a contract. If the beneficiary is a minor (under 18), a parent or legal guardian can open the plan on their behalf. If the beneficiary is an adult who may not have the legal capacity to manage their own financial affairs, a legal representative such as a guardian, trustee, or holder of a power of attorney can open the plan. Some provinces also allow a "qualifying family member" (a parent, spouse, or common-law partner) to become the plan holder for an adult beneficiary who may lack contractual capacity, without requiring a formal legal guardianship arrangement.

Canada Disability Savings Grant (CDSG)

The Canada Disability Savings Grant is the government's matching contribution to an RDSP. The amount of the grant depends on the beneficiary's family income (or the beneficiary's own income if they are over 18) and the amount contributed to the plan. For lower-income families, the government matches contributions at a rate of up to 300%, meaning that for every dollar contributed, the government adds three dollars. For higher-income families, the matching rate is 100% (dollar for dollar). The maximum annual grant is $3,500, and the lifetime maximum is $70,000.

Specifically, if the beneficiary's family net income is at or below approximately $106,717 (2024 threshold, adjusted annually), the first $500 contributed receives a 300% match ($1,500 in grants), and the next $1,000 contributed receives a 200% match ($2,000 in grants), for a total maximum grant of $3,500 per year. If the family net income is above this threshold, contributions are matched at 100% on the first $1,000, for a maximum grant of $1,000 per year.

Carry-Forward of Grant Room

One of the most valuable features of the CDSG is the carry-forward provision. If you did not contribute to an RDSP in previous years, you can carry forward unused grant room for up to 10 years. This means that if you open an RDSP today but were eligible in previous years, you may be able to receive more than $3,500 in grants in a single year by making larger contributions. The maximum grant that can be paid in any single year, including carry-forward amounts, is $10,500. This carry-forward provision makes it worthwhile to open an RDSP as soon as possible, even if you cannot contribute large amounts right away.

Canada Disability Savings Bond (CDSB)

The Canada Disability Savings Bond is a government contribution that does not require any personal contribution to the RDSP. The bond is income-tested and is designed to help lower-income Canadians with disabilities save for the future even if they cannot afford to make contributions. If the beneficiary's family net income is at or below approximately $35,575 (2024 threshold), the government deposits the full $1,000 bond into the RDSP. If the family income is between $35,575 and $53,359, a partial bond is provided. If the income exceeds $53,359, no bond is paid. The lifetime maximum for bonds is $20,000.

Like grants, bond entitlements can be carried forward for up to 10 years. This means that even if you only recently opened an RDSP, you could receive up to $11,000 in bonds in a single year (the current year plus up to 10 years of carry-forward). The bond is particularly valuable for newcomers who may have low income in their initial years in Canada, as it provides free government money without requiring any out-of-pocket contribution.

Contribution Rules

There is no annual contribution limit for the RDSP, but there is a lifetime contribution limit of $200,000 per beneficiary. Contributions can be made by anyone with the written permission of the plan holder, including family members, friends, and organizations. Contributions are not tax-deductible (unlike RRSP contributions), but the investment growth within the plan is tax-sheltered until withdrawal. Contributions can be made until the end of the year in which the beneficiary turns 59.

To maximize government grants, it is generally recommended to contribute at least the minimum amount needed to receive the full annual grant. For lower-income beneficiaries, this is $1,500 per year (to receive the full $3,500 grant). For higher-income beneficiaries, this is $1,000 per year (to receive the $1,000 grant). If you have carry-forward room, you may want to contribute more in a given year to catch up on previous years' grant entitlements.

Investment Options

RDSP funds can be invested in a variety of products, depending on what is offered by your financial institution. Common investment options include savings accounts, guaranteed investment certificates (GICs), mutual funds, bonds, and in some cases, stocks and exchange-traded funds (ETFs). The investment strategy should reflect the beneficiary's time horizon and risk tolerance. For younger beneficiaries with many years until withdrawal, a more growth-oriented strategy may be appropriate. For beneficiaries who are closer to needing the funds, a more conservative approach may be suitable.

Several major Canadian banks and credit unions offer RDSPs, including BMO, CIBC, RBC, Scotiabank, and TD, as well as some investment firms. It is worth comparing the investment options, fees, and service quality at different institutions before opening a plan. Some institutions may have minimum contribution requirements or may offer a limited range of investment products within the RDSP.

Where to Open an RDSP

You can open an RDSP at most major banks and some credit unions and investment firms across Canada. The process typically involves visiting a branch in person with identification documents, your Social Insurance Number, and proof of DTC approval. Some institutions also allow you to begin the process online or by phone. The Government of Canada maintains a list of participating RDSP issuers on its website.

Withdrawals from an RDSP

Withdrawals from an RDSP are subject to specific rules designed to ensure the plan serves its purpose as a long-term savings vehicle. There are two types of withdrawals: Lifetime Disability Assistance Payments (LDAPs) and Disability Assistance Payments (DAPs). LDAPs are regular, recurring payments that must begin by the end of the year in which the beneficiary turns 60. Once started, LDAPs must continue at least annually until the plan is closed or the beneficiary passes away. DAPs are one-time or occasional withdrawals that can be made at any time.

An important rule to understand is the "10-year rule" (also called the "assistance holdback amount"). If any government grants or bonds were deposited into the RDSP within the 10 years preceding a withdrawal, a portion of those grants and bonds must be repaid. Specifically, for every dollar withdrawn, three dollars of grants and bonds received in the previous 10 years must be repaid (up to the total amount of grants and bonds received in that period). This rule is designed to discourage short-term use of the RDSP and to ensure that government contributions are used for the beneficiary's long-term benefit.

Impact on Other Benefits

One of the significant advantages of the RDSP is that withdrawals generally do not affect eligibility for federal income-tested benefits such as the Guaranteed Income Supplement (GIS), the Canada Workers Benefit, or the GST/HST Credit. Provinces and territories have also largely exempted RDSP assets and payments from affecting social assistance eligibility. This means that having an RDSP should not reduce your eligibility for other government supports, making it a safe and effective savings tool for people with disabilities who rely on income-tested programs.

However, the tax treatment of withdrawals should be understood. When withdrawals are made, the portion that comes from government grants, bonds, and investment growth is taxable in the hands of the beneficiary, while the portion that comes from personal contributions is not taxable. Since many people with disabilities have low income, the effective tax rate on RDSP withdrawals is often minimal or zero.

What Happens If DTC Eligibility Is Lost?

If the beneficiary loses their DTC eligibility, the RDSP can remain open for a limited period. Under current rules, if a beneficiary's DTC certification expires or is revoked, the RDSP can stay open for up to five more years. During this period, no new contributions can be made, and no grants or bonds will be deposited. If DTC eligibility is not re-established within five years, the plan must be closed. When the plan is closed, all grants and bonds received in the previous 10 years must be repaid. Personal contributions and any remaining investment growth would be returned to the plan holder.

Reapplying for the DTC

If your DTC certification is about to expire, it is important to begin the reapplication process well in advance. The CRA will send a reminder notice, but you should not wait for it. Contact your medical practitioner to complete a new T2201 form and submit it to the CRA before the current certification expires. Maintaining continuous DTC eligibility ensures uninterrupted access to the RDSP and associated government grants and bonds.

Final Thoughts on the RDSP

The Registered Disability Savings Plan is one of the most generous and underutilized savings programs in Canada. For individuals with disabilities and their families, the RDSP provides a unique opportunity to build long-term financial security with substantial government support. The combination of matching grants, income-tested bonds, tax-sheltered growth, and minimal impact on other benefits makes the RDSP an essential component of financial planning for anyone who qualifies for the Disability Tax Credit. Newcomers to Canada should explore this program as early as possible to take full advantage of the carry-forward provisions and begin accumulating government contributions.

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