Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 3 - Evidence - December 4, 2013
OTTAWA, Wednesday, December 4, 2013
The Standing Senate Committee on Banking, Trade and Commerce met this day at 12:07 p.m. to study the ability of individuals to establish a registered disability savings plan (RDSP), with particular emphasis on legal representation and the ability of individuals to enter into a contract.
Senator Irving Gerstein (Chair) in the chair.
[English]
The Chair: Good afternoon, colleagues. Today we will begin our examination of the Registered Disability Savings Plan, or RDSP program, introduced as part of the 2007 Budget. RDSPs provide tax-assisted savings to Canadians with disabilities. To date, more than 65,000 RDSPs have been opened; but, unfortunately, barriers continue to exist for some disabled Canadians.
This afternoon, we have the Honourable Kevin Sorenson, P.C., M.P., Minister of State, Finance, who will give some background on RDSPs generally and on the specific issue of our study: the inability of some mentally disabled individuals to enter into a contract for the purposes of establishing an RDSP. This is Mr. Sorenson's first appearance before a Senate committee, and we are very pleased to welcome him to the Banking Committee. Mr. Sorenson is available for the next hour, but the rest of his officials who have joined him, Mr. Jovanovic and Ms. Taylor, will remain for further questions.
Mr. Sorenson was first elected as a Member of Parliament for Crowfoot, Alberta, in 2000. On July 17, 2013, Mr. Sorenson became Minister Sorenson when he was appointed to cabinet as Minister of State, Finance. Mr. Sorenson replaces the Honourable Ted Menzies, who has since retired. Mr. Sorenson, you have some big shoes to fill, but as a former committee chair in the other place, I know you are more than up to the task. Minister, the floor is yours.
Senator Hervieux-Payette: I have a point of order before the minister begins. I'd like to welcome the minister. Thank you for coming.
I have a serious question to deal with, and I think I need to do it at the beginning of the meeting.
Given the allegations of the RCMP and your failure, Mr. Chairman, to explain your involvement in the independent Senate audit, I request that you withdraw from the chairmanship of the committee until such time as the RCMP investigation has cleared you of any suspicion or until you appear before a public Senate committee and provide a full explanation of your activities in this matter.
The Chair: Senator Hervieux-Payette, I am quite surprised that you would raise that issue at the committee meeting here.
[Translation]
Senator Rivard: Mr. Chair, I am just as surprised as you. Now, how are we supposed to deal with that? Do we vote on the motion?
Senator Maltais: I do not think this is a normal procedure, given that the chair is not guilty of anything and has not been accused of anything. So I do not see the relevance.
[English]
The Chair: I have been elected as committee chair. I move the motion out of order. The motion is out of order. We will continue with the presentation of Mr. Sorenson.
Hon. Kevin Sorenson, P.C., M.P., Minister of State for Finance: Thank you, Mr. Chair, for the invitation to appear here today. Let me commend your committee for the fine work that you do. Certainly, I've had the privilege of chairing committees in the other place: the Foreign Affairs Committee, the Canadian Mission in Afghanistan Committee and the Public Safety and National Security Committee. I understand the importance of committee work. Certainly, all members of Parliament recognize that their committee work is important but the work of Senate committees is very much appreciated as well. To all, I commend you for your hard work, for the many things that you bring forward and the ways that you help make decisions to help us in our governing.
I appreciate the opportunity, more specifically, to discuss the Registered Disability Savings Plan, commonly called the RDSP. I commend you on your interest in this subject.
With yesterday being International Day of Persons with Disabilities, now is a perfect opportunity to highlight our government's commitment to supporting Canadians with disabilities through the avenue of the RDSP. We believe that RDSPs are one of our most important achievements when it comes to helping Canadians with disabilities.
We know that parents of children with severe disabilities face emotional challenges and financial hardships that can be, at times, overwhelming, especially when they consider who will be there to take care of their children in the future. That is why in July 2006, the Minister of Finance appointed the Expert Panel on Financial Security for Children with Severe Disabilities to consider how best to ensure the financial security of children with severe disability. This led to the introduction of the RDSP. Our government brought that forward in Budget 2007, which is designed specifically to help individuals and family members save for the long term and be certain that they have financial security in the long term.
Since the program became available in 2008, the government has made a number of improvements to the program. For example, to make sure that RDSP beneficiaries with a shortened life expectancy can access their savings, Economic Action Plan 2011 provided them with more flexibility to withdraw their RDSP assets without requiring the repayment of the Canada Disability Savings Grant and the Canada Disability Savings Bond.
In 2011, the government launched a review of the RDSP program to ensure that RDSPs were meeting the needs of Canadians with severe disabilities and their families. Based on the feedback from that review, Economic Action Plan 2012 improved the RDSP in a number of ways by providing greater access to RDSP savings for small withdrawals by replacing the requirement to repay any Canada Disability Savings Grant and Canada Disability Savings Bond that had been paid into the RDSP within 10 years preceding a withdrawal from the plan and a requirement to repay the CDSG and the CDSB at a fixed ratio to the amount withdrawn.
It also provided greater flexibility to make withdrawals from certain RDSPs by increasing the annual maximum withdrawal limit that applies to these RDSPs and ensuring that RDSP assets are used to support a beneficiary during their lifetime by requiring a minimum amount to be withdrawn from all RDSPs beginning in the year that a beneficiary reaches 60 years of age. The changes also provided greater flexibility for parents who save in Registered Education Savings Plans for children with disabilities by allowing the investment income earned in an RESP to be transferred on a tax-free basis to an RESP beneficiary's RDSP.
It also provided greater continuity for long-term savings by RDSP beneficiaries who ceased to qualify for the Disability Tax Credit in certain circumstances by extending the period that their plan may remain open. Finally, it improved the administration of the RDSP for financial institutions and beneficiaries by amending certain RDSP administrative rules.
Economic Action Plan 2012 also introduced a temporary measure to allow a spouse, common law partner or parent to establish an RDSP for an adult individual who might not be able to open a plan due to concerns about their ability to enter into a contract. In many provinces and territories the only way that an RDSP can be opened in these cases is for the individual to be declared legally incompetent and have someone named as their guardian, which is a time- consuming process that may have significant repercussions for the individual. This measure will be in place until the end of 2016 to provide provinces and territories time to develop long-term solutions to address RDSP legal representation issues. The government feels that this is the appropriate approach, given that these are matters of provincial and territorial responsibility.
Some provinces and territories have instituted more streamlined processes to allow for the appointment of a trusted person, such as a parent, other relative or friend, to manage resources on behalf of an individual with a disability or have otherwise indicated that their system already provides sufficient flexibility to address these concerns. Other provinces and territories are actively considering options and issues in their respective jurisdictions. The Government of Canada is continuing to encourage provinces and territories not having a streamlined process in place to take action. Mr. Chairman, it is estimated that 500,000 people across Canada are eligible to benefit from RDSPs.
Now let me take time to briefly provide an overview of how the RDSP works. In general, any resident of Canada who has a Social Insurance Number and is eligible for the Disability Tax Credit can open a Registered Disability Savings Plan at a participating financial institution until December 31 of the year in which they turn 59. Legal representatives and parents of children under the age of 18 can also open an RDSP on behalf of a beneficiary. As I mentioned before, for adults with disabilities who do not have a legal representative and where there is doubt about their capacity to establish a contract, a spouse, common law partner or a parent can open, until the end of 2016, an RDSP on the person's behalf.
To help with savings, an individual with an RDSP is eligible to apply for a matching grant from the Government of Canada. When the beneficiary's family income is less than $87,123, the government will triple every contribution made to an RDSP up to the first $500 and will double the contribution up to $1,000. When the beneficiary's family income is over $87,123, the government will match, dollar for dollar, every contribution on the first $1,000. As you can see, this makes grants even more valuable for a family in the lower and modest income brackets.
RDSP beneficiaries could potentially receive a maximum of $3,500 per year or $70,000 in matching grants over a lifetime.
In addition to the grant, the Government of Canada also offers the Canada Disability Savings Bond. When the beneficiary's family income is less than $43,561, the government will contribute a bond of up to $1,000 annually, with a lifetime bond limit of $20,000. The individual does not need to make contributions to receive the bond, but a Registered Disability Savings Plan must be open in order for them to receive it.
In addition to the RDSP, our government is committed to working with people with disabilities to reduce barriers to full participation in the workplace and in their communities. Canada's Economic Action Plan is helping to reduce those barriers and to help Canadians with disabilities achieve greater independence.
In addition to creating the RDSP, our government has invested significantly in social housing for persons with disabilities, improved the accessibility of federal buildings and provided tax relief through the Working Income Tax Benefit Supplement for persons with disabilities.
Recently, we also introduced the Family Caregiver Tax Credit to better recognize the costs incurred for Canadians who are caring for infirm relatives.
Our economic action plan is also supporting labour market participation and a more inclusive skilled workforce through an investment of $222 million per year to better meet the employment needs of Canadian businesses and improve the employment prospects for persons with disabilities.
While we have made important progress in improving financial security and quality of life for persons with disabilities and their families, our work is not yet done. Our government will continue to support Canadian families and persons with disabilities and will continue our efforts to increase awareness of the various resources available to them.
The RDSP is widely regarded as a historic policy innovation. Never before has the Government of Canada taken such a significant step to help individuals with disabilities and their families save for long-term financial security.
With the measures that we have taken, it is perfectly clear that we take the well-being of persons with disabilities with utmost seriousness, and we can back that up. We can back up that statement with examples of concrete actions that we have taken to increase support to this group of Canadians. Our steadfast work on this issue contributes to our main goal of creating growth and long-term prosperity for all Canadians.
Thank you, and I will certainly be pleased to take any questions that you may have.
The Chair: Thank you, Mr. Sorenson, for your opening comments.
If I might start, my question relates to implementation. As I understand it, the RDSPs were set out in Budget 2007. Yet, here we are in 2013, and we have only four provinces — B.C., Saskatchewan, Manitoba, Newfoundland and Labrador — and one territory — Yukon — that have put the means in place for all disabled Canadians to have access to these plans.
As I understand it, under our Constitution, contract law is a matter for the provinces. Could you share with us your thoughts as to why the majority of provinces and territories have not moved on this file as of yet?
Mr. Sorenson: First of all, we're very encouraged by the response we have seen in such a short period of time. We have over 75,700 disability savings plans open today.
My understanding — and, again, I can defer to our department heads — is that all provinces have bought into this system, although not all provinces have recognized the spousal aspect or the family aspect of being able to sign up on behalf of their husband or their child who may be disabled. Some of that falls within the provincial jurisdictions. Maybe Mr. Jovanovic or Ms. Taylor would like to answer that.
Miodrag Jovanovic, Director, Personal Income Tax, Tax Policy Branch, Department of Finance Canada: I think that what's important to note is that the work is the continuing. For instance, in Ontario, the Law Commission of Ontario has been tasked to review this issue and is supposed to come up with recommendations. So it's a work in progress. It's something that requires a lot of analysis.
Also, we're talking here about implementing a streamlined process for legal representation at a provincial level to facilitate access. As Mr. Sorenson said, provinces embarked and plans are still available and accessible across Canada.
The Chair: Ms. Taylor, did you wish to add anything to that?
Lesley Taylor, Chief, Social Tax Policy, Tax Policy Branch, Department of Finance Canada: Yes. I just wanted to make sure that it's clear that in each province and territory, as of 2008, you can open an RDSP. The limitation is for individuals who are at the age of majority — 18 and over — and do not currently have a legal representative. This is an individual who may approach their financial institution and have that financial institution deem that they are not capable of entering into a contract.
So in cases where that individual does not have a legal representative in place, their family would have to go through the process of obtaining that legal representation or guardianship. Many families don't want to go through this process; it can be time-consuming, costly and cumbersome. There are repercussions for the beneficiary — the individual with the disability — in that, in some cases, families don't wish to have that person placed under a guardianship arrangement.
What our temporary process attempts to do is to say that, in those cases where a family may be going through the process of seeking a legal representative or where a province is working on a particular solution that will work in their jurisdiction, until the end of 2016, we allow a person's spouse or common law partner or their parent, even if they are over 18, to become the plan holder of the RDSP on their behalf. Basically, this will be buying time in order for the provinces to take action.
I want to make it absolutely clear that there's nothing barring those individuals from opening an RDSP other than the fact that you need a legal representative at this time or, under the temporary measure, your parent or a spouse.
[Translation]
Senator Rivard: I would like to come back to the issue of eligibility to open an RDSP. Mr. Minister, please allow me to quote a few lines before I ask my question:
The "beneficiary'' of a RDSP is the disabled individual for whom the RDSP is established and who receives amounts withdrawn from the RDSP. The beneficiary must be eligible for the federal Disability Tax Credit, be a resident of Canada and be under the age of 60.
I suppose that the age cap of 60 years has been established because other programs take over. Is that the case or is it quite simply that after studying the program costs, it was decided that it would end after age 60?
[English]
Mr. Sorenson: Right. First of all, you're correct; they must be eligible for the Disability Tax Credit. It doesn't necessarily mean that they have been using the Disability Tax Credit, but the criteria to receive the Disability Tax Credit would be the same criteria that they would use in order to be deemed severely and long-term disabled.
Also, they must be a Canadian resident — either the beneficiary or the other one bringing it in — and have a Social Insurance Number.
The reason for the 60, as I understand it, is that some of those will kick in, but this is a long-term savings plan. It's just been developed. We weren't about to suggest that it should be for those who can have the plan set up for 20 years forward because they will be able to take out as soon as possible. In the year that they turn 59 or 60, at the end of the year, that's when it can be opened. So that would be in for a very short period of time.
[Translation]
Senator Rivard: Is it possible that your department has studied scenarios to see, for example, what the implications would be of raising that age limit to 65 years, 70 years or life? Do you think studies have been prepared on that? Does that exist or has it been done?
[English]
Mr. Sorenson: I think the program was set up such that it would be there as a long-term, long-range plan that would be taken out and be used in the later years. So the 60 years was brought forward. I'm not aware of any study that we are looking at that would extend the 60 years at this juncture.
[Translation]
Senator Rivard: One last question. Will the disability tax credit continue to be a requirement of the RDSP program?
[English]
Mr. Sorenson: Yes, at this point, that is the criteria. There is a fairly clear criterion for any of those who would qualify for the Disability Tax Credit. Rather than a separate standard, I think we just felt that it was important we adopt the same criteria that sets out very clearly the meanings of "severe'' and "long-term disabled'' or "disability,'' so that is correct.
The Chair: Thank you very much. I understand the minister is going to have to leave in five minutes, but I would like Senator Ringuette to ask her question before he goes, keeping in mind he has five minutes. The department officials will stay.
Senator Ringuette: Welcome.
Four provinces and one territory have bought into the system and made the legal changes necessary. Mr. Jovanovic has just indicated that the process with all the other provinces is under way in order to streamline the needed legislation accordingly. We were told that Minister Flaherty wanted us to study this. What is the objective?
If the issue is that the provinces are already in the process of changing their legislation to make this more user- friendly and efficient cost-wise and legally, what's the purpose of spending our time and taxpayers' money to look into this issue that seems to be well into the process?
Mr. Sorenson: I think that's a very good question. I know the studies that the Senate does. You want to have studies that are going to make a difference. And with this study, I think you can do that.
Part of what we would want to see is that, across the country, all provinces and territories would realize the importance of what they're doing and that it may encourage them to move the process along quicker.
Senator Ringuette: So you want to use this committee —
Mr. Sorenson: No. I want you to study it to see if you find that it's important that we have the same type of process across the country.
As I said, we have these disability savings accounts all across the country, but in some parts it may be more difficult to access the plan based on an adult beneficiary that a financial institution may not deem capable of carrying out this contract. There can be huge roadblocks that allow certain disabled people in some provinces to not access the plan like some can in others.
To be quite honest, I think the Senate has the ability, on that one issue, to be able to say that we want to see equivalency across the country.
Senator Ringuette: I've always had the perspective that the Minister of Finance is a heavyweight with regard to national politics and establishing national standards and making things happen. This has been in the process since 2007. I just don't want our committee to be used as, maybe, propaganda. If something should have been done in consultation with the provinces quite a number of years ago, I don't see how we, in a few weeks, can achieve what the Minister of Finance should have done in the last five years.
Mr. Sorenson: Listen, you've asked me on this one issue. This whole savings plan is one that the minister really does believe in and I think most Canadians involved in it are very appreciative. I know on both sides of the house we have the desire to help those who are disabled.
So if there is a part of the plan such that, because of jurisdictions and because of other issues, some provinces need to step up and bring those changes forward, then I think the minister is not heavy-handed in the way he works with our provinces. We have a very good working relationship with the provinces, especially on this issue.
Senator Ringuette: Then this issue should have been resolved years ago.
Mr. Sorenson: Well, it only began in 2008. It was brought forward in 2007 and implemented in 2008, in the midst of a global downturn. Yet, we said we wanted to make this priority. Despite a recession in this country, we wanted to make certain that those who were disabled would be looked after. That's why we came forward with it. I know a lot of finance ministers in a lot of provinces were starting to look at their economy and saying "what can we do?'' They had a lot of things on their plate. All we're saying now is that it's time to continue with this as a priority.
The Chair: Thank you, minister. Thank you, Senator Ringuette. I understand that you have to excuse yourself but your department officials will stay.
Mr. Sorenson: I'm sure you'll find that the answers will be much better when the minister leaves and the department officials stay. Thank you for allowing me the time to be here.
The Chair: Thank you very much. We greatly appreciated your appearing before us today.
[Translation]
Senator Maltais: Thank you, Mr. Chair. Has the minister left?
[English]
The Chair: Unfortunately, he had to go, yes. I made that announcement at the beginning of the meeting. Staff is here to answer your question.
[Translation]
Senator Maltais: So we will address you, Ms. Taylor. To start with, I cannot imagine that someone in good health could oppose this bill. I say that with the thinking that thousands, if not hundreds of thousands of people in Canada do not have the opportunity to have the health we do. Therefore, it is a step forward, a compassionate measure, and I think that everyone in Canada with good health should be more compassionate toward those people.
My question may not be directly linked to the bill, but it is a question I have been asked by a number of people, including parents of disabled individuals.
The way RRSPs currently work in Canada, when a spouse dies, the RRSP is transferred automatically to the surviving spouse. Suppose those two people are the guardians of a disabled person; when the second spouse dies, will the estate soon be able to transfer the remaining RRSPs to a RDSP for the disabled person?
Mr. Jovanovic: Yes, it is already possible. The current rules on transfers to the surviving spouse apply in the case of a disabled child.
Senator Maltais: That means that the survivor's RRSP can be transferred tax-free to the RDSP of the disabled individual?
Mr. Jovanovic: The transfer does not have any tax consequences.
Senator Maltais: Are there any minimum or maximum amounts, or is it simply a matter of what RRSPs remain in the estate?
Mr. Jovanovic: If I am not mistaken, as long as the conditions are met with respect to when it must be done, there would be no conditions on limits. In fact, no, I was wrong. I apologize. The limit of $200,000 applicable to the RDSP continues to apply, of course.
Senator Maltais: Are disabled individuals who inherit their parents' RRSPs subject to the same obligation we are, meaning transferring the RRSPs to RRIFs at age 72?
Mr. Jovanovic: If it is transferred to the registered disability savings plan, then at that point the rules for that plan apply.
Senator Massicotte: Thank you for being here this morning. Obviously, I support this bill, which has a great deal of merit and can help many Canadians.
However, I do note that the taxpayers' contribution is very low. It was $2.5 million in 2008, $3 million in 2011, and $4.2 million in 2012. That leads me to believe that despite the number of accounts that have been opened so far, the program is not very successful, despite the enormous need for disabled individuals and their families.
One of the reasons would probably be the amendments that were made regarding the disabled individuals, those individuals who do not have the authority to open an account.
I have done some reading on this program, which I did not really know about. Early in my career, I spent a year as a tax expert for investors. Despite all the fine speeches that are constantly being made about simplifying the Income Tax Act—every government says the same thing—when I look at the specifics of the program, the conditions of the program, I can understand why it is not more popular. There are a lot of conditions. It is not simple. An RRSP is simple: you make a contribution and receive a deduction. The education program is clear: you make a contribution, and the government provides a grant. In this case, the contributor also gets a subsidy, but it depends on this and that.
I am wondering whether one of the problems is not just that. It is so complicated that the average citizen, the average family is saying that it is too complicated and is not worth the trouble.
Although I have a little bit of experience in this field, I think it is far from easy.
Mr. Jovanovic: I would like to address two of those aspects: the popularity of the program as such and the eligibility criteria.
In terms of popularity, we note that almost 76,000 accounts have been opened, that on average, however, the contributions from individuals and the government in the form of grants and bonds are close to $16,000, which is significant and is very good after a few years.
On average, 12,000 new accounts are opened every year, representing growth of about 16 per cent, and that has been stable for three years now.
The program's main goal is to help families provide medium- and long-term financial assistance to disabled individuals. The hope is also that families that may not be in as good a position to save will benefit greatly, and that is what we are seeing. Sixty per cent of accounts are opened by families earning an average of less than $25,000 a year, and close to 70 per cent are opened by families earning less than about $44,000 a year. From our perspective, we see that more as a success.
Senator Massicotte: Seventy-six thousand for how many disabled individuals in Canada?
Mr. Jovanovic: About 500,000.
Senator Massicotte: That is about 15 per cent. Why is it not 80 or 85 per cent? These people are clearly in need.
Mr. Jovanovic: I suppose there are different considerations, aside from simply the tax incentive. There are people who may also have other kinds of savings, who depending on their specific situation might rather start contributing to a TFSA or make other kinds of investments.
It can be explained by a number of things, but it is clear that the trend is on the rise.
Senator Massicotte: A percentage of a small figure always seems very good. But I understand that the cost to Canadians was$4 million in 2012. Is it a good figure; is it the current value of the tax impact? Is it a good cost for the program in 2012?
Mr. Jovanovic: There are various aspects to the cost. There is the direct cost, which is in the form of —
Senator Massicotte: How much is the annual cost for creating the plan in 2012?
Mr. Jovanovic: I do not know. Perhaps Ms. Taylor has that information.
The annual cost is in the form of grants and bonds and other tax benefits, in terms of tax deferrals. But in the initial cost in terms of introduction and implementation, I could not confirm the figure for you. I do not have it here.
Senator Massicotte: The real cost is the current value, the difference between the payments. It is not a huge figure. It is not because the government finds that it costs too much. The initial intention of the people who created the program was to make a larger contribution to disabled individuals. There are things to do. That is obviously why we should study it. I think there is a lot to be done.
There is something wrong when we say that the disabled program costs only $4 million and that the needs are enormous. That was my comment.
[English]
Senator Nancy Ruth: You've been able to track the provinces and territories where the plans have been sold. I wonder whether you have any data or were intending to collect any data on the kind of disability, the gender and the race of the people picking up these plans.
Mr. Jovanovic: Well, we have some data, but not necessarily on all the dimensions you mentioned. I can give you some actual numbers. For instance, in terms of the proportion of female and male, about 40 per cent are female and 60 per cent are male. In terms of distribution across age, we know that about one fifth of the RDSPs are opened for younger individuals; another fifth for younger middle age; and a bit more than 10 per cent for beneficiaries aged 50 and over. It is well distributed across ages.
Senator Nancy Ruth: There're no data on race?
Mr. Jovanovic: Not to my knowledge, no.
Senator Nancy Ruth: Would that be useful to collect? What's behind my question is the marketing of the plan. I'm sure it's done through community living services and all those other groups that are interested in disability, which covers a number of racial groups. We want to make sure everybody knows about it.
Mr. Jovanovic: Yes, to the extent that it's not clear that the information is collected to start with in the process; so that's another question.
Senator Nancy Ruth: These contributions are not tax deductible.
Mr. Jovanovic: Right.
Senator Nancy Ruth: Can you tell us what the cost would be if they were tax deductible?
Mr. Jovanovic: We would have to do some analysis and calculations. I don't have the answer.
Senator Nancy Ruth: I'd be curious to have you do that because we have some idea of what it would cost the RESPs — it's millions and millions. You're talking about only 75,000 plans here so it may be a considerably smaller loss to the tax department. I would be interested in knowing what that figure is. Maybe that's something we should think about.
The Chair: If you could kindly send that to the clerk, we would appreciate it; and we will circulate it to the committee.
Senator Ringuette: Notwithstanding the ideology behind helping the disabled, if I had a disabled child who was — I don't know — 40, and I wanted to make sure that, when I passed away that there was a certain financial cushion available, but I also understood that, hopefully, across the land, no one person who requires help is left behind whatever their financial means, what would my incentive be to make a contribution to a plan?
If I were a provincial minister of finance, I would certainly make everything possible because whatever income a disabled person would get would probably mean that it would be less of a requirement of my provincial revenues to supply those services. That's why I asked the question before. What's the purpose?
If I were a province, I would do whatever I could to put this in place because, at the end of the day, it would help to save money. The flip side to that is that, if I'm a parent and there's no income tax credit attached to it, then what is my deep-down incentive to open an account?
Mr. Jovanovic: On the potential substitution between private saving and government systems — I think that's where you're going with what the advantage is — I think it's important to note that withdrawals from these plans do not affect income-tested benefits at the federal level. Most provinces also ensure that they don't affect payments like social assistance or other means-tested payments. That is, in a way, to indeed prevent that substitution effect so that it becomes or remains a net benefit for the beneficiary, and that beneficiary would not be seeing a reduction in other benefits.
Now, with respect to your second point about what the advantage is, there is still a significant advantage in terms of bonds and grants. It's very significant. Also, from an income tax point of view, all of the investments accumulating in these accounts are tax deferred and only taxed in the hands of the beneficiaries when withdrawn, and, again, they won't affect income-tested benefits. It ends up being, if you add up all of the advantages, quite generous, actually.
Senator Ringuette: I don't see this operating provincially differently from a senior citizen on your basic senior income who needs to be in a seniors' home. All of their income is given to the seniors' home operator in addition to, most of the time, almost matching provincial funds.
As I see it right now, the biggest incentive would be for the provinces to do it as quickly as possible, but, on the flip side, I reiterate that, as a parent, I have a hard time seeing the current, medium-term and long-term incentive. Maybe there's some review to be done from the federal end of the program.
The Chair: Senator, thank you for that question. I'm pleased to tell you that we will have representatives of the provinces that are proceeding with the program at this time and those that are not, as well as a number of disability groups, so I'm sure they will be able to answer your questions as well.
[Translation]
Senator Rivard: I would like to come back to my colleague's question about a couple with RRSPs and a disabled child with a registered disability savings plan.
If I understood your answer correctly, when one spouse dies, if that spouse has willed the RRSP to the surviving spouse, it is not taxed until the survivor dies. I also think I understood that when the last survivor dies, the RRSP can be transferred to the disabled child's disability savings plan. Is that what you said?
Mr. Jovanovic: Yes.
Senator Rivard: I remember being on the banking committee and having a witness from the Bank of Montreal. He had suggested to Minister Flaherty that, given the high divorce rate and blended families, the last surviving spouse should be able to transfer the RRSP to the children, who would not be permitted to cash it before they reach retirement age without paying tax.
Minister Flaherty said that the idea was interesting, but that it would cost the government too much. The government recovers taxes that have been sheltered when a person dies. The amount is taxed under the tax bracket at the time of death. Generally speaking, people have more income when they die than when they are 20 years old.
Have I understood correctly that if the couple has an RRSP and they die, if they have made arrangements to do so, they can put it in the registered disability savings plan without it being taxed?
Mr. Jovanovic: You have understood correctly.
Senator Rivard: Do you think it is logical that when a person dies at age 75 or 80 with $400,000 in RRSPs, a large part is eaten up by tax and the children are often burdened with debt and have almost nothing for retirement? Would it be possible for those amounts to be paid into an RRSP for the children? I understand the fiscal costs of that, but I think it is something we should come back to and study again.
[English]
The Chair: Thank you very much.
Senator Buth, our concluding question.
Senator Buth: Thank you, chair. I am wondering if I can go back to something that Senator Nancy Ruth raised. The first part of this is this: How is the plan advertised? How do you do outreach to individuals in the communities? What has the communication plan been?
Mr. Jovanovic: Yes. That would be a question to ask ESDC, the minister who manages it, so we can actually make sure that the answer is provided to the committee.
Senator Buth: That would be great.
The other question is: You commented on the gender split — 40 per cent women, 60 per cent men. Do you have any idea why there is that difference?
Mr. Jovanovic: We would have to compare with the proportion of DTC-eligible individuals, and maybe it is consistent with the proportion of Disability Tax Credit individuals. I can't confirm that. If that's the case, then there's actually no bias per se. Maybe there is one; I just can't really confirm.
Senator Buth: If you don't have the information right now, could you just provide that?
Mr. Jovanovic: Yes.
Senator Buth: If we're looking at something like financial literacy or poverty issues, then it would be good to know the reasons why it's not being subscribed to by more women.
Mr. Jovanovic: Yes.
The Chair: I do have a small question from Senator Maltais.
[Translation]
Senator Maltais: I have a quick but somewhat technical question. I think you are the best people to answer it. In light of everything Senator Rivard and I said in the beginning about disabled individuals who withdraw RRSPs transferred by their parents; at age 65, if they make that withdrawal, does that mean that they will be penalized, for example, for the income supplement that they will not be entitled to, or for things like that? Will it reduce the amount of their pension benefits? As you know, we have two pension plans in Quebec. Are disabled individuals sheltered from that?
Mr. Jovanovic: At the federal level, for all federal credits that are tested on income, yes those people are sheltered. At the provincial level, we understand that most provinces have also followed suit. We note here that, in fact, all provinces and territories fully or partially exempt income from registered disability savings plans from programs based on both income and assets.
Senator Maltais: Thank you, Mr. Chair. That answers my question.
[English]
The Chair: Mr. Jovanovic and Ms. Taylor, on behalf of the members of the Senate Banking Committee, we greatly appreciate your appearance and help today. This meeting is adjourned.
(The committee adjourned.)