Guaranteed Income Supplement: What to expect when applying

Over the summer we’ve looked at how to deal with Service Canada to get retirement benefits from both Old Age Security (OAS) and the Canada Pension Plan (CPP). As noted here and here, the Government reaches out to qualifying Canadian residents when they reach age 64, in plenty of time to start receipt of benefits at age 65. As the earlier pieces recounted, I received Service Canada letters about both OAS and CPP shortly after I turned 64 this spring. But what about the third leg of the government retirement benefits stool? That’s the Guaranteed Income Supplement or GIS: a supplement to OAS. Unlike the other programs, I did not receive a letter from Service Canada about GIS. According to Doug Runchey, a former Service Canada employee who is now president of Vancouver Island-based DR Pension Consulting, the OAS application includes a question about whether you wish to apply for GIS. If you say yes and are approved, they then send you the GIS application.

What to expect when receiving OAS at 65

Service Canada says as of June 2017, 1.94 million seniors were receiving the GIS, roughly a third of the country’s 5.93 million OAS pensioners. Some describe GIS as “Senior’s Welfare.” For years, Ottawa was notorious for not going out of its way to tell low-income seniors they qualified for GIS, although this has since been rectified. In fact, Service Canada says by late fall of 2017, it will leverage tax filing data to introduce GIS automatic enrollment for low-income pensions automatically enrolled for OAS. In the meantime, you must apply in writing for the GIS in the first year: after that it’s automatic, based on your last tax return, according to Runchey. In the case of couples who qualify for both OAS and GIS, Service Canada says entitlement to the GIS is based on their combined net income the previous calendar year; however, OAS and GIS payments are made to each individual beneficiary. One nice thing is that, unlike OAS and CPP, the GIS is totally tax-free. Certainly those with some combination of generous employer pensions, maximum CPP benefits, significant RRSP or RRIF income and non-registered investments will find they are considered too “rich” to receive the GIS. If you thought OAS clawbacks kick in too soon (at $75,000 taxable income), you’ll see the GIS threshold is much lower. However, for those who are able to put a little aside or have a windfall, the Tax-free Savings Account or TFSA is the place to put the money: As with OAS, TFSA withdrawals won’t result in the loss of any GIS benefits, which is one reason the Government designed the TFSA the way it did. You can get an overview of the GIS program at the Service Canada web site. It says the first requirement to receive GIS is that you also qualify for and are receiving OAS. So that means you have to be age 65: unlike CPP (which can pay reduced benefits as early as age 60), there’s no such thing as early OAS or early GIS, except in certain special circumstances. If you were automatically enrolled in OAS, you should apply for GIS three months before your 65^th birthday. How much can you receive if you qualify? Service Canada’s media relations department says that as of the July to September 2017 quarter, maximum GIS amounts for those receiving the full OAS pension of $583.74 a month are $871.86 a month for a single, widowed or divorced OAS pensioner (so adding the two, $1,455.60 a month); $524.85 if your spouse/partner receives full OAS, $871.86 if your spouse does not receive an OAS pension or the Allowance, and $524.85 if the spouse receives the Allowance. Income from OAS is taxable, but when you consider the Basic Personal Amount ($11,635 in 2017) and the Age Credit once you are 65, odds are that OAS will net out mostly free of tax if there are no other major sources of retirement income beyond what Ottawa sends your way.

What to expect when applying for CPP

The second requirement for GIS is your annual income (or combined income for couples) does not exceed the maximum annual threshold. The income thresholds for GIS are low. Service Canada says for GIS purposes, OAS benefits are not considered part of net income. But CPP/QPP, private pensions, RRSPs, and employment income together cannot exceed the following income thresholds. In the case of a couple with a combined income of no more than $23,376 and where the spouse gets full OAS, the maximum monthly GIS for the other spouse is $524.85. If the partner is not receiving OAS and the combined income is no more than $42,384, the individual will get some GIS; they will get the full $871.86 monthly GIS benefit if they have no other income. In the case of a couple making no more than $42,384 and where the spouse is receiving the Allowance, the maximum monthly GIS for the other partner is $524.85. For updated numbers, click here. Runchey says the most misunderstood point about GIS is that many mistakenly believe that if they can just keep their income below $17,699 that they will therefore get the maximum monthly GIS of $871.86. You get the maximum if you have zero income apart from OAS but if you have other income, including CPP, Service Canada says that for singles, the widowed and the divorced, the maximum monthly GIS is reduced by $1 for every $2 of extra monthly income. For couples both receiving OAS, the maximum monthly supplement for each is reduced by $1 for every $4 of their combined monthly income. So if you exceed $17,688 you will not be eligible for GIS at all, while if you’re just under the threshold you may get “a few pennies,” Runchey explains. With various GIS top-up programs administered by the provinces, it’s harder to calculate precisely. Matthew Ardrey, vice president and Wealth Advisor for Toronto-based TriDelta Financial says OAS & GIS are not considered income for the GIS clawback calculation. “Also you receive a deduction of the lesser of $3,500 and total employment income less deductions including CPP and EI for this calculation.” Thus, if a GIS recipient earns more $3,500 net, earned income beyond this point will factor into the clawback calculation. If there is no earned income, there is no deduction, and this deduction cannot be used against other types of income. To stay in good standing with Service Canada, you need to be scrupulous in filing your annual Tax and Benefit return to the Canada Revenue Agency every April. Ottawa wants to make sure you don’t exceed the maximum permitted annual income. GIS payments may also stop if you leave the country for more than six consecutive months or if you’re incarcerated for more than two years. And naturally, Ottawa wants to be informed if either spouse dies. As an exercise, I entered the data of a friend who qualifies for GIS into the Canadian Retirement Income Calculator mentioned last time. Based on my attempts, the calculator did not automatically add GIS to the calculations. Instead, it delivered this message: “Low-income pensioners may receive additional income from the Guaranteed Income Supplement (GIS). If you are a low-income pensioner, you may also be entitled to additional income and other benefits from provincial and territorial programs. Contact us for more information.” No doubt this is a situation where you need to thrash it out directly with Service Canada. It says agents in call centres can provide estimates of payment information, or go here on their web site. Jonathan Chevreau is founder of the Financial Independence Hub and co-author of Victory Lap Retirement. He can be reached at [email protected] MORE ABOUT RETIREMENT:

About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.

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Comments Cancel reply

Richard John Johnston says:

April 8, 2020 at 5:27 pm

During this pandemic I have been off work for surgery. Ei sick benefits ran out in February and ei refuses to transfer me to regular benefits. I can’t receive g I s because I made over the threshold. On top of that I was told by an ei employee I just wanted to get ei, she(east Indian accent) refused to give me a supervisor kept talking over me then hung up on me. I complained and now ei has shut me down. I am 68 years old and have paid ei and taxes. God help me. Canada won’t!

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Greg Sherwood says:

April 9, 2020 at 1:06 pm

Hello,
I know it’s been awhile since you wrote this article but I’d like to say that I don’t see anywhere on the Government of Canada website where it says that one can deduct $3500 from their income before their clawback of GIS begins. My only income is the CPP which is well below $3500 but I still don’t receive the full GIS.
Thanks

Reply
1. MoneySense Staff says:
  
  April 9, 2020 at 4:50 pm
  
  Thanks for letting us know. We will update this as soon as we can. Our goal is to have the most up-to-date information. We do our best to fact check all our content before it gets published and make updates regularly, but some things may get missed. We would like to remind our readers to do their own fact checking before making any personal finance decisions.
  
  Reply
Dan says:

June 18, 2020 at 6:14 pm

CP is not earned income so the 3500 is not deductible against it. The 3500 deduction is against earned income only. Earned income is income you receive for working.

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Dan says:

June 18, 2020 at 6:18 pm

CPP is not earned income so the 3500 is not deductible against it. The 3500 deduction is against earned income only. Earned income is income you receive for working. Your GIS will be reduced by approximately 50% of what you get from CPP.

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terry s gilbert says:

July 30, 2020 at 9:31 pm

I have a question…i receive the supplement to the old age pension. i cannot live on it but have a small investment…if i take money out of my investment will i lose the suppliment

Reply
1. Samuel Kavanagh says:
  
  August 10, 2020 at 3:11 pm
  
  Response from the MoneySense editorial team:
  
  Hello Terry,
  
  Due
  to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected],
  where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply
Raquel Carino says:

October 3, 2020 at 10:38 pm

I’m out of work since January 2020. I had a total knee replacement and I cant work till now because of my situation and my EI is over. I applied for GIS and they said that I am not qualified because my income is high, but that was last year. I dont know where to get help for my rent and expenses, too. I’m 68 years old. I dont received much from my CPP and OAS. Its not even enough for my rent. Pls.help whom I can turn to. Thanks

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Lauretta Achtemychuk says:

July 30, 2021 at 2:43 pm

Up until this month I was receiving $1118.16 OAS and GIS combined monthly. This month July 2021 I received $988.28. I am not understanding why the change.

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1. Courtney Reilly-Larke says:
  
  August 31, 2021 at 3:01 pm
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with a qualified advisor.
  
  Reply
Isaac Aderinboye says:

March 18, 2022 at 7:37 am

I want to mail my documents to GIS I did not know the address. I will be grateful to have the address. Thanks

Isaac O. Aderinboye.

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Alan h says:

December 26, 2022 at 7:09 am

if i have a birthday in late december and turn 65 and I plan on retiring at that time and lets say I have a income of 50,000 how would that affect my gis elgibility for next year. If I plan on having 0 income next year and I do my taxes next year based on 2022 income does that mean I will be ineligile for the gis for 1 year.

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1. MoneySense Editors says:
  
  January 4, 2023 at 9:19 am
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply
Danielle Beaton says:

July 4, 2023 at 11:13 am

How do I get the information to apply for GIS I did my taxes last year.

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Rod says:

July 20, 2024 at 9:52 pm

Why is Rev Canada such a Scam

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Dale Rahn says:

August 22, 2024 at 12:49 pm

I only have OAS @ $718.00 a month and CPP , but I had to cash 5000.00 in RRSP. How much will it effect me per month.

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