Lifetime Disability Assistance Payments (LDAP) are scheduled payments that can be made to the beneficiary from their RDSP. There are various types of RDSP payments; all with different kinds of restrictions that discourage early RDSP withdrawals. The LDAP is one of these and it forces a very inflexible withdrawal scheme.
LDAP’s are issued when the government’s contribution (i.e. grants/bonds) are more than personal contributions to an RDSP. Alternatively, when government’s contributions are less than personal contributions – Disability Assistance Payments (DAP) are issued and not the LDAP. Therefore, the LDAP is issued to those who rely on the grants/bonds as being the main contributor to their RDSP, and this includes people who are low-income.
Why is the LDAP calculation important?
Most people without disabilities plan for retirement based on how much they have in an RRSP. In the same way, people with disabilities are deeply concerned about the amount of money they can access from their RDSP. However, for people with disabilities there are additional considerations for additional costs associated with living with a disability.
The Policy in a Box:
- The LDAP is the amount of funds in the RDSP divided by the number of years the beneficiary is expected to live
- The payment amount is determined by a mathematical formula based on a life expectancy of 83 years
- RDSP beneficiaries receive LDAP’s after the age of 60, and when government’s contributions are greater than personal contributions
- Once payments begin, they must continue regularly (annually or monthly)
- If the person has a shortened life expectancy (within 5 years) the LDAP formula does not apply and they can take out payments of any size (while still adhering to the 10 year rule)
The problem?
Inflexibility of regular withdrawal amounts and the predicted life expectancy
The LDAP determines how much money you can receive from your RDSP and is based on a formula that carries one big assumption: people with disabilities have an average lifespan of 83 years. As many of you have already pointed out in the survey- what about people with complex health needs and/or people who have a shorter life expectancy than 83 years? Recently the government has added some flexibility around the LDAP, whereby an individual is able to activate the LDAP sooner, if and only if a doctor confirms that they have 5 years or less to live.
For example, Samantha had an RDSP set up for her when she was 10 years old, and her parents have deposited $1,500 into her account every year for 10 years allowing her to get $35,000 in Grants. When Samantha and her family finds out that she has less than 5 years to live, her doctor certifies this diagnosis (to Canadian Revenue Agency) and Samantha starts taking out payments of any size from the plan.
So for Samantha and her family, the 5-year exception to the LDAP is very helpful. But what about the 83 age-limit for those who don’t know their life expectancy and who will require the LDAP in the future because their RDSP is made up of more grant/bond money than personal contribution?
What do you think? Do you think the LDAP should be adjusted further? If so, how?
We’d like to hear your experience and thoughts about the RDSP. Please comment below about this issue and if you haven’t already let us know what you think by taking a few minutes to fill out our RDSP 3 Year Review Survey here!