By Don Cayo of The Vancouver Sun
Severely disabled adults are, with far too few exceptions, poor. And everyone knows that poor people who scrape by on government assistance or minimum wage can never expect to accumulate any assets — money in the bank, or property — that other British Columbians can aspire to and often attain.
Unless … unless family and friends help them set money aside in a special fund — a Registered Disability Savings Plan, or RDSP — that was first proposed by a Vancouver NGO, then championed by the late federal finance minister Jim Flaherty and launched two years later.
Regular readers will know my views on some of Flaherty’s tax policies — all those narrow, politically motivated little breaks for firefighters or soccer moms or other special interests that collectively erode the government’s ability to adopt fairer and more broadly based tax cuts. But as I told Flaherty’s sister Norah, a Vancouver-based business consultant and the mother of a young disabled adult, I think RDSPs are the finest tax legacy of her brother, who died last year just three weeks after resigning from cabinet. She agrees.
“Jimmy also had a son with development problems,” she told me when we chatted Thursday. “He and I talked many times about future prospects for our sons, and how they were different from others who could go on to get a good job and a home and a family.
“So I see an RDSP as a wonderful tool. But why isn’t every family using it?”
Why, indeed? Because even though B.C. was the first province to promise not to claw back RDSP proceeds from support payments to disabled people, and even though the uptake of RDSPs is higher among under-50 adults here than in other provinces, 89 per cent of eligible British Columbians still have no account.
Interestingly, the big barrier isn’t lack of money. For one thing, research shows that, although families with disabled children tend to have lower-than-average incomes, they also tend to save more than most. For another — and this is the clincher — a federal grant up to $1,000 a year is available to low-income people who qualify even if they don’t deposit any money in an RDSP. And if they or a loved one do make a deposit, they can get up to $3 for each dollar added to their RDSP.
This support can add up to $90,000 over a lifetime. If a family with just $26,000 a year in net income scrapes up $900 a year, they can be granted a total of $3,300.
So the problem, Norah Flaherty believes, is in part a lack of knowledge about RDSPs and in part the complex hoops people must go through to qualify.
Like most parents of disabled children, she long ago learned to be an effective advocate for her son.
“I thought it was a shame if all I did was speak for my son,” she said. “I like big things. I like policy.”
As a result, she has taken on leadership of the RDSP Action Group, a coalition of businesses, NGOs and the provincial government. Their aim is to spread the word about the opportunities this plan provides and to help applicants navigate the bureaucracy that can trip them up with everything from forms that doctors often fill out wrong to Canada Revenue Agency’s arcane rules.
RDSPs already provide a substantial nest egg for many disabled people. The provincial government estimates the value of these tax-sheltered savings in B.C. grew by almost $100 million last year to $415 million. Of this, $148 million is in personal contributions and $281 million from federal grants.
But given the substantial majority of eligible people who have yet to take advantage, these totals could grow hugely. The federal grants and the forgone tax revenue on earnings (contributions are not tax-deductible) will always be a drop in the bucket in terms of overall government revenue. But the impact of each individual account on somebody’s life can and will be huge.