Subscribers to our site know we’ve covered a number of important government benefits topics in recent weeks. We’ve done this to respond to a few reader questions but also dig deeper than other articles currently available, to help our members with their retirement planning projections.
If you haven’t already checked out these comprehensive posts, we encourage you do so since it will make the retirement income puzzle that much easier to understand:
What is the Canada Pension Plan (CPP) benefit and how does that work?
What is Old Age Security (OAS) and what is the OAS clawback?
In today’s post, we’ll cover the relationship between OAS and the Guaranteed Income Supplement (GIS) benefit and for the most part, why we want you to avoid GIS.
What is Guaranteed Income Supplement?
How might you qualify for GIS? What is the maximum income to qualify for GIS?
We’ve got those questions above covered and much more in today’s post!
What is Guaranteed Income Supplement?
Simply put, the Guaranteed Income Supplement (GIS) is a monthly payment – if you qualify. GIS is based on income and is available to low-income Old Age Security (OAS) pensioners. This benefit is not taxable.
You can get GIS if:
- you are 65 or older
- you live in Canada
- you get the Old Age Security (OAS) pension, and
- your income is low whether you are single, widowed, or divorced.
Given the monthly payment is subject to change and the income threshold may also be subject to change, we’ve made a direct link to this Government of Canada page so you can see exactly what GIS benefits might currently be.
In many cases, the Government of Canada will let you know by letter when you could start receiving your first payment. In other cases, you might have to apply.
How do you know if you are eligible for GIS?
Remember that GIS is in addition to regular Old Age Security benefits.
The GIS provides benefits in addition to the OAS pension, to seniors whose income or combined income with their spouse is very low. You only need to apply once for the benefit and will not need to re-apply, as long as you file an income tax return each year. If you do not file an income tax return, or if more information is required by the government, you will be sent a renewal application form in the mail.
To be eligible for the GIS, you must first meet the eligibility requirements for the OAS pension. Also, the combined income of you and your spouse or common-law partner, cannot exceed a specific amount determined by the federal government.
OAS recap
Old Age Security (OAS) is a benefit paid monthly to most Canadians aged 65 or older. The OAS Program is administered by the federal Department of Employment and Social Development Canada through Service Canada. Eligibility for OAS benefits depends on the following three factors, and is different depending on whether you live in or outside Canada:
For people living in Canada
- You must be 65 years of age or older.
- You must live in Canada and be a Canadian citizen or a legal resident at the time your pension application is approved.
- You must have lived in Canada for at least 10 years after turning 18.
For people living outside Canada
- You must be 65 years of age or older.
- You must have been a Canadian citizen or a legal resident of Canada the day before you left Canada.
- You must have lived in Canada for at least 20 years after turning 18.
However, if you do not qualify in either of these categories, you may still be eligible for benefits depending on agreements that may exist between Canada and the countries that you have lived in or presently live in. Depending on how long you have lived in Canada after the age of 18, you may receive either a full or partial pension.
We encourage you to check out this comprehensive post about OAS to learn about OAS benefits and see if you might also qualify for GIS.
How do you Qualify for GIS?
If you are the spouse or common-law partner of someone who is receiving the GIS benefit, you may be eligible to receive the Allowance benefit. To qualify:
- you must be 60 to 64 years old (you can include the month of your 65th birthday),
- your spouse (or common-law partner) must be receiving the OAS pension, and is eligible for the GIS,
- you must be a Canadian citizen or resident,
- you must live in Canada and have done so for at least ten years since the age of 18, and
- you and your spouse’s (or common-law partner’s) combined income must be less than the maximum amount (set by the government every year).
Lots of requirements we know, so we encourage you to check out this Government of Canada link to see if you might qualify for the allowance.
If your spouse or common-law partner has passed away, and you have a low income, you may be eligible for Allowance for the Survivor benefits. To qualify:
- you must be 60 to 64 years old (you can include the month of your 65th birthday),
- your spouse (or common-law partner) must be deceased, and you have not remarried or entered into a common-law relationship,
- you must be a Canadian citizen or resident,
- you must live in Canada and have done so for at least ten years since the age of 18, and
- your yearly income must be less than the maximum amount (set by the government every year).
The amount of the Allowance benefit or the Allowance for the Survivor benefit you will receive is determined based on your income or combined income (whichever is applicable), up-to the maximum amount set by the government.
For more information about this Allowance for the Survivor benefit please read this link.
How much will you receive from GIS?
For April to June 2021, if you are a single, widowed or divorced pensioner.
Guaranteed Income Supplement (GIS) amounts – April to June 2021
If you are a single, widowed or divorced pensioner Your situation Maximum monthly payment amount Your annual income must be If you are a single, widowed or divorced pensioner $923.71 Less than $18,744
If you have a spouse or common-law partner
If you have a spouse or common-law partner Your situation Maximum monthly payment amount Your annual income plus the annual income of your spouse/common-law partner must be If your spouse/common-law partner receives the full OAS pension $556.04 Less than $24,768 If your spouse/common-law partner does not receive an OAS pension or Allowance $923.71 Less than $44,928 If your spouse/common-law partner receives the Allowance $556.04 Less than $44,928
If you would like to see a more exact (and updated) amount, you can see the income tables from the Service Canada website.
What if I have other income in addition to OAS?
GIS is really meant for seniors who collect OAS and have very little other income.
One key factor about GIS, is that it’s scaled and eliminated at the thresholds listed above. For example, for a single person, the table says that GIS pays a maximum of $923/month but the requirement is that annual income must be below $18.7k.
What if that pensioner had an income of $15k (eg. CPP + taxable investment income)? Then the monthly GIS benefit drops to around $155/month. As you can see, the drop-off is fast and shows that GIS is really meant for seniors who collect OAS and have very little other income.
Is GIS indexed for inflation or reviewed?
You bet.
The Guaranteed Income Supplement (GIS) benefit is reviewed in January, April, July and October to reflect increases in the cost of living as measured by the Consumer Price Index. Your monthly payment amount will not decrease if the cost of living goes down.
If you are eligible for OAS, and GIS, then should you delay OAS?
At Cashflows & Portfolios, we believe the answer is no.
In fact, you’ll read below that we believe GIS is not something you should strive for earning at all…
While you can receive your first Old Age Security pension payment the month after you turn age 65, and you can receive a higher amount for each month you decide to delay your first OAS payment, recall to be eligible for the GIS, you must first meet the eligibility requirements for the OAS pension. Also, to receive GIS, the combined income of you and your spouse or common-law partner, cannot exceed a specific amount determined by the federal government
So, essentially, for anyone to be eligible for any GIS benefit their income is arguably very low and those individuals likely need every bit of that income for retirement income security.
That’s why in most cases, at Cashflows & Portfolios, we believe it makes sense to take OAS at age 65 including any GIS benefit, and defer CPP where possible to age 70 if you have that CPP benefits available to you.
Why?
CPP payments have a benefit bump of 42% if Canadians wait until age 70 to take their CPP benefit (versus 36% for OAS benefits starting at age 70). So, all things being equal it makes more sense to defer Canada Pension Plan versus Old Age Security.
Essentially, you take OAS, and get GIS, as early as possible, because:
- You need the money, and/or
- You have reason to believe that you have a shorter-than-average life expectancy.
Depending on your income needs, you might also need to take CPP at age 60 as well.
The punchline is if you are eligible for the Guaranteed Income Supplement (GIS) there is no advantage in delaying your first GIS payment. Take OAS and GIS for retirement income security as soon as you can.
Do you still need to file taxes if GIS is not taxable income?
Yes, please do!
The government will use your income tax information from your federal Income tax return, to see if you remain eligible for GIS next year.
Based on their website information, every July, you will receive a letter telling you one of the following:
- your benefit will be renewed and the amount for the next 12 months,
- your benefit will be stopped,
- your benefit will start or resume,
- the government needs new income information.
So, our recommendation like every other good taxpayer – continue to file all your taxes on time!
Also, even though GIS is a non-taxable benefit, it’s important to report the GIS on your income tax return. This way, GIS benefits are included as part of your total income to determine eligibility for other federal and provincial benefits. GIS benefits are then deducted to avoid it being included as part of your net income or taxable income.
What is the Guaranteed Income Supplement (GIS) Summary
There’s still a bit more ground to cover when it comes to GIS but this post is about as comprehensive as it gets beyond Government of Canada direct information – so we hope you found this useful!
What we want you to take away from this post about GIS is this:
- To be eligible for the GIS, you must first meet the eligibility requirements for the OAS pension. Also, the combined income of you and your spouse or common-law partner, cannot exceed a specific amount determined by the federal government.
- GIS is not a taxable benefit but you must still report that benefit received on any income tax return.
- Given the (low) GIS benefit payout amount, we believe this is not a desired benefit per se – it is a basic income necessity for those that need it. Instead, we encourage members to ensure they save for their retirement using a combination of personal retirement savings plans such as TFSAs, RRSPs, and other investment accounts, using any employment-sponsored pension plans as they are available to you, and leveraging CPP and OAS benefits at an age that makes sense, to deliver multiple income streams equating to ample retirement income security.
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Further Reading:
Check out our comprehensive posts on the following subjects:
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