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The Bank of Montreal has announced itself as the first bank to provide access to the new Registered Disability Savings Plan (RDSP), effective December 22, 2008. The RDSP was introduced in the last federal budget.

“In our view, the RDSP is a terrific savings vehicle that enhances the financial security of people with disabilities,” said Ed Legzdins, senior vice-president, retail investments, BMO Financial Group. “We are encouraging them to call our Investment Centre before December 31, so they can be eligible to receive the federal government’s 2008 contribution.”

BMO is offering a variety of investments “suitable for long-term investors, including guaranteed investment certificates, mutual funds and managed solutions portfolios.”

Contributions to an RDSP are not tax deductible, but investments grow on a tax-deferred basis. When earnings are withdrawn as part of a disability assistance payment, they are taxable in the hands of the beneficiary, who is usually taxed at a lower rate than the contributing family member.

The lifetime contribution limit is $200,000 per beneficiary, and only one beneficiary can be named. There is no annual contribution limit.

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Rate cut on variable rate Ontario Savings Bonds

The province of Ontario has adjusted the interest rate paid on variable rate Ontario Savings Bonds (OSBs), slashing it from 3% to 1.75%. The new rate is in effect for the next six months.

“In spite of fiscal challenges, it is important that Ontario Savings Bonds continue to remain competitive with similar investment instruments,” said Finance Minister Dwight Duncan. “Funds invested in OSBs stay right here in Ontario, helping build a stronger economy for Ontarians.”

OSBs are available to Ontario residents only, and can be purchased from banks, trust companies, credit unions and caisses populaires, and through investment dealers.

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CARP calls for laxer RRIF, LIF rules

One of Canada’s largest seniors’ groups is calling on federal and provincial finance ministers to give retirees more control over their savings.

In its pre-budget consultation letter, CARP has called for the elimination of mandated RRIF withdrawals, the unlocking of LIFs, pension reform and a universal pension plan.

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Real estate funds lock the exits

Real estate has been heralded as a fantastic portfolio diversifier, but direct holdings can have their downside. A pair of segregated funds offered by Power Financial subsidiaries have imposed a moratorium on redemptions.

The London Life Real Estate Fund 2.17G and Great-West Life’s Canadian Real Estate Investment Fund No. 1 have both suspended redemptions effective December 15, 2008. The move was announced late in the day on December 16.

The obvious problem with real estate funds is that a wave of redemptions will cause a liquidity problem. If the value of redeemed assets is high enough, the fund may be forced to sell property.

“This segregated fund has performed well over many years,” said Allen Loney, president and CEO, Great-West Lifeco. “It is important in today’s difficult economic environment that we continue to manage the fund in a way which balances the long-term interests of all participants in the fund.”

(12/17/08)