Stephanie Whittaker (left) is one of 280,000 Canadians eligible for the new Registered Disability Savings Plan. Her parents, Ron and Susan, both in their 60s, have been waiting to be able to contribute to the promised supplement that will ensure that Stephanie has a guaranteed source of additional income in her later years. Photo by Mark van Manen/Vancouver Sun
It's not hard to imagine a finance minister cast as Scrooge at this time of year. But Jim Flaherty is breaking that mould. In December, he loosened his often tight-fisted grasp on the federal treasury to play a reformed Scrooge in the genuinely upbeat scene with Tiny Tim.
The occasion was the effective launch of a new method of tax-assisted savings on behalf of people with disabilities.
Flaherty's 2007 budget included a provision for Registered Disability Savings Plans, but they were only a theoretical possibility until Dec. 22, when the Bank of Montreal became the first institution to offer a product that lets customers buy in.
This move came awfully late in the tax year, but Flaherty - a committed champion for this cause - extended the deadline to March 2, thus greatly enhancing the odds that eligible contributors can take advantage of it.
The new plan differs from registered retirement or educational plans in several important ways.
First, while each plan must benefit a person who is under 60 years of age and has a severe disability, anyone can contribute. Thus it's a way for parents, siblings, more distant relatives or friends to provide for someone unable to support themselves.
There's no annual limit to how much anyone can contribute, although the lifetime limit on any beneficiary's account is $200,000 deposited by family or friends.
Although these contributions aren't tax deductible, all income the investments generate is.
And, best of all, Ottawa will, depending on the disabled person's family income, match some or all of the contributions (see chart).
When the time comes to take money out of these plans, the feds promise the withdrawals won't trigger clawbacks in income-tested benefits such as the GST credit or Old Age Security payments.
This plan has two worthy aspects. First, it buys peace of mind for a disabled person's loved ones, particularly aging parents who can't help but wonder what will happen to their child when they're gone. Then there will be a down-the-road benefit of putting cash in the hands of people who otherwise would - at least if income support programs continue to be structured as they are - almost certainly be living in poverty.
But this may actually be the start of a new way of looking at income support for the needy, says Al Etmanski, the president of the Vancouver-based Planned Lifetime Advocacy Network.
It was Etmanski and his group who conceived of this tax-assisted plan and patiently sold it to the politicians who could make it happen.
He notes that not only is Canada the first country to adopt such a scheme, there is also another important first. Whereas other policies related to income-support scarcely tolerate any form of wealth-acquisition by their clients, this one seeks to foster it.
"This has the potential to renovate the welfare image, and move towards a new one where the acquisition of assets is seen as okay," he says. "I expect it to have a ripple effect (on other income-support programs)."
Stephanie Whittaker (left) is one of 280,000 Canadians eligible for the new Registered Disability Savings Plan. Her parents, Ron and Susan, both in their early 60s, have been waiting to be able to contribute to the promised supplement that will ensure that Stephanie has a guaranteed source of additional income in her later years. - Photo by Mark van Manen/Vancouver Sun