Tag Archives: planning

What is the Guaranteed Income Supplement, GIS, and Will I Get It?

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Canada has two income support programs for older persons which have similar sounding names: the OAS and the GIS. The Old Age Supplement, OAS, is a payment made to older Canadians based on how long they have lived in this country. But what is the GIS and who gets it?

Guaranteed Income Supplement, GIS, is a Minimum Income Guarantee

First just let me say I hope you don’t ever get the GIS. I’m not being mean. It’s just that only people with a very low income get it.

The strange name for this payment is an attempt to summarize why it exists. The GIS was and is intended to “top up” an elderly person’s income to a minimum level. It is intended to “guarantee” elderly people have enough money to survive on. (Not live on, mind you, just survive.)

The amount of GIS a person can receive is based on their income from all sources.

In 2013, the GIS is intended to ensure a single elderly person has an income of  $16,679.99 plus the OAS.

Why was the GIS Introduced?

One major reason that GIS was needed is that many pensions, especially private employment pensions, are not indexed for inflation. When inflation was in the 8-12% range for several years, that meant a person’s pension dropped in real value by 20-60%! A pension that seemed quite reasonable at retirement could no longer pay even the basic bills.

According to the History of Pensions, in 1967, in an attempt to reduce elderly poverty the GIS was introduced as a temporary measure. It soon became permanent.

The Maximum Income You Can Have and Still Get GIS Payments Varies for Singles and Couples

The income test changes each year based on inflation and other factors. Check the Service Canada website for the most recent limits.

The following limits were in effect in October 2014:

For single persons including widows and widowers:
“If your yearly income exceeds $17 088, you do not qualify for the Guaranteed Income Supplement.”

For married and common law partners, both receiving the OAS:
“If your combined yearly income exceeds $22 560, you do not qualify for the Guaranteed Income Supplement.”

For married and common law partners, where the other partner is not receiving the OAS:
“If your combined yearly income exceeds $40 944 you do not qualify for the Guaranteed Income Supplement.”

Am I Eligible to Get the GIS?

To be eligible to receive the GIS, you need to

  • be eligible and receiving the OAS
    (that means you have to have been a resident of Canada for a certain number of years after you turned 18; be 65-67 or older; etc.)
  • have a low income below the threshold. If married or living common law, there is a different threshold for the combined income of the spouses or partners.
  • apply each year by sending in a form or by completing and filing their federal annual income tax return by April 30

The eligibility rules for sponsored immigrants are complicated. If you are in this category, please contact Service Canada for a detailed explanation.

What “Income” Does the CRA Count When Deciding Who is Eligible to Get the GIS?

The “income” the CRA uses to decide if you are eligible to receive the GIS is a bit different than the “income” you report on your tax return.

According to the Service Canada website for GIS calculations, income includes
all the sources of income reported on your tax return

  • earnings-related retirement pension income
  • foreign pensions
  • interest income
  • dividend income
  • rent income
  • wages (you are allowed to earn $3500 a year though and to contribute to CPP and EI without penalty)
  • worker’s compensation payments, etc.

If in doubt, you can contact Service Canada to inquire about the details.

Is the GIS Taxed?

Unlike the OAS, the GIS is not taxed!

Can I Get the GIS If I Leave Canada?

No. You can get payments for 6 months after you leave Canada, but after that payments cease.

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Have you or a friend or relative discovered any quirks on the GIS system? Please share your experiences with a comment.

Back to School and Registered Education Savings Plans

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I’ll admit it: Saving for our children’s education was not a priority for me. In fact, I didn’t open an RESP until my oldest child was 9. We had a mortgage to pay, some large expenses the average Canadian family does not have to pay, and RRSPs and TFSAs to fund. We’d also heard quite a few horror stories about group RESPs so we weren’t sure where to start.

When I was ready to commit, I started by reading through the useful and informative articles on Mike Holmes website Money Smarts. I strongly recommend others do the same.

His introductory article How To Set Up The Safest, Simplest And Cheapest RESP Account  is particularly useful to time-strapped worried parents.

What Happens to Your Children’s RESPs if You Die Before They Use Them?

Kati Basi, in a guest post at the Blunt Bean Counter, says:  “Many of my clients assume that their children (as the beneficiaries under their RESP) would automatically receive the RESP upon their death, just as if the children were beneficiaries under their Registered Retirement Savings Plan (“RRSP”). This assumption is, for the most part, dead wrong.” Read how to protect your children’s RESPs, especially the grant money, in “New Will Provisions for the 21st Century – RESPs .“ Then update your will or ask the person who funded your children’s RESPs to update theirs.

Group Scholarship Plan RESPs Versus Bank RESPs

Before banks started offering no fee RESPs where investors could buy GICs or mutual funds, and long before self-directed brokerages allowed RESPs, the only choice most parents had was to enroll in a Group Scholarship Plan. These plans are much riskier than bank RESPs. You don’t get all of your money back if your child does not go on to post-secondary education. You also may have to pay very large fees if you want to transfer your plan elsewhere.

Ellen Roseman details a good example of these unexpected costs in Roseman: [Group Scholarship Plan] RESPs are easy to start and hard to leave.

CBC News provides an in depth look at these group plans in Group RESPs: reading the fine print: Popular plans aren’t for everyone .The plans are not actually evil they just sometimes seem that way particularly if a person signed up for one without really understanding how they work.

Using the RESP Money for Education

Big Cajun Man describes some of his personal experiences with taking money out of his children’s RESPs to pay for their university enrollment. While the government’s required paperwork was short, he was startled at how much other paperwork TD required. So was I! You can read the details at RESP: and More Trees Died.

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Are you contributing to a RESP for your child or children? Or is your plan helping your children pay their way through school? Are you happy with the process? Please share your experiences with a comment.