The Investment Funds Institute of Canada (IFIC) is lobbying the federal government to amend Bankruptcy and Insolvency Act better protect beneficiaries of registered disability savings plans (RDSPs).
Currently, matching contributions made by the government to these plans are protected from creditors, but creditor protection should be extended to contributions from individuals, IFIC says in news release published Tuesday.
“The RDSP was created to help provide disabled persons with a stable income stream to help pay for their basic needs. The current law undermines that goal by permitting individually contributed RDSP assets to be seized as part of a bankruptcy proceeding against a beneficiary,” says Paul Bourque, IFIC president and CEO, in a statement.
In its submission to the government, IFIC says that the policy is also discouraging some parents from establishing these sorts of plans. “These consequences appear to us to be unintended and contrary to the policy objective for RDSPs,” IFIC says.
Moreover, this sort of protection already exists for other registered plans, such as RRSPs an RRIFs, IFIC notes. “We believe that people with disabilities deserve equal protection for the funds contributed on their behalf,” Bourque says.
“The government created RDSPs to provide financial stability for disabled persons. However, the current law permits an outcome that can deprive them of that security,” IFIC says in its submission.