Most Canadians contribute to and will ultimately receive benefits from the Canada Pension Plan (CPP). Old Age Security (OAS) is something else that most seniors will receive, at least in part, if their income after age 65 is under $109,764.
These two government pension programs are relatively well-known. There are, however, two other pension programs that are often overlooked. One of these, the Guaranteed Income Supplement (GIS), was established in 1967 to provide additional benefits to low-income OAS recipients. It is Canada's way of ensuring that seniors have at least some base level of income to meet their needs. Roughly 1.4 million Canadians receive GIS, but it is estimated that another 160,000 Canadians qualify but do not receive it.
The basics of GIS:
• If you are aged 65 or older, are single and have an annual income under $15,960 not including OAS and you qualify for OAS, then you also qualify to receive GIS.
• If you are aged 65 or older, are married or living common law and have a combined annual income under $21,120 not including OAS and you qualify for OAS, then you also qualify to receive GIS.
• GIS is received on a sliding scale, with a higher income meaning a lower GIS payment.
• If you are a single senior with no other income, then GIS would pay you $7,980 a year. When combining GIS with OAS, the maximum income would be $14,302. In reality, it is very difficult to receive that large a sum. It would require $0 in income, including CPP. As your income grows, the GIS and then OAS will decline. For example, if a single senior had $10,000 in income, they would receive $2,988 in GIS a year.
• A married or common law couple with a combined income of $10,000 would receive $2,774 each or $5,548 combined.
Want to find out more about the GIS? Check out this government website.
In addition to the GIS, there is one more pension that is part of the overall OAS program. It is called the Allowance.
Who qualifies for the Allowance:
• If you are age 60 to 64 years and your spouse or common law partner receives OAS and GIS and your combined income is under $29,568, you would qualify.
• The Allowance must be applied for each year and tops out at $11,592, if the couple has no other income.
Although it is easy to get excited about the gyrations of the stock market, good financial planning includes encorporating basics like government pension programs. Every Canadian aged 60 and over should be aware of the GIS and the Allowance - and to be sure and apply if they qualify.
Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He has an MBA from the Schulich School of Business and is a certified financial planner. He was vice-president of business strategy at a major Canadian brokerage firm.
Follow Ted on his blog at The Canadian Financial Planner.