Throughout our “Top Ten RDSP Barriers” series, we often compare the RDSP to similar savings vehicles such as RRSP’s or RESP’s. For the most part, this comparison serves us well and exposes the inequities between disability and non-disability related policies. The issue of emergency withdrawals again highlights differences between RRSP’s and RDSP’s.
Why can’t people borrow funds from their RDSP the same way they can from an RRSP?
In the 3-Year Survey responses, we’ve heard from many of you who would like the opportunity to have access to your RDSP funds for unexpected or emergency reasons; such as health related costs, a new home or vehicle. Currently, new homebuyers can borrow from their RRSP for a down payment, or if a person wants to go back to school, they can withdraw RRSP funds without penalties. In both cases, the borrower must pay back a portion of the funds within a timeframe or face penalties.
The Policy in a box:
- There are no exceptions for borrowing funds from an RDSP
What are the risks if emergency RDSP withdrawals are not allowed?
If people are uncertain of how they’ll get access to their RDSP when they need it most, they may decide not to open an RDSP in the first place. Low to modest income individuals with disabilities in particular, may avoid grants/bonds altogether or prefer using Tax Free Savings Accounts (TFSA’s) instead of an RDSP, due to the fact that they have more control over their money.
Families have suggested that if a 1-time RDSP withdrawal were allowed and if the government contributed more than the RDSP recipient, then the individual could then pay back a portion. Another idea is that in order to prevent abuse, the government could also withhold future grants/bonds until the “loan” was paid back. Or limit withdrawals to personal contributions and the grant/bond, or “growth” related to them.
What do you think? Is borrowing from your RDSP important to you? What are other possible solutions to accessing RDSP funds? Please comment below about this issue, and if you haven’t already…