The Old Age Security (OAS) pension provides retirement income security for seniors because it maintains its value over time, even as prices increase.
In July, Service Canada confirmed it will deliver the $500 one-time payment to older seniors (75+), during the week of August 16, 2021.
This summer’s one-time payment of $500 will support older seniors’ higher expenses. It will apply to 3.3 million seniors who are eligible for the OAS pension in June 2021 and were born on or before June 30, 1947. No action is required by seniors, who will automatically receive the payment if they are eligible.
This lump sum payment will be issued to you in the same manner as your OAS monthly benefit. It will be sent as a separate deposit or cheque during the week of August 16, 2021. If you receive your OAS pension by direct deposit, this payment will be deposited to the bank account that is on your file; if you receive your OAS by cheque, this payment will be mailed to you.
This payment is a taxable benefit and will be included on the T4A (OAS) tax slip issued next February 2022.
In July 2021, OAS benefits did automatically increase 1.3%, bringing the maximum monthly OAS pension amount to $626.49, up from $618.45. The Guaranteed Income Supplement (GIS) and the Allowances were also adjusted for inflation.
Budget 2021 also included a permanent increase of 10% to the OAS pension, to be implemented in July 2022 for seniors aged 75 and over. This will provide an additional $766 to full pensioners over the first year (about $63 per month) starting July 2022.
Guaranteed Income Supplement
The Federal Guaranteed Income Supplement (GIS) is available to low-income seniors living in Canada who are receiving the OAS. An application must be filed to receive this supplement; it is not done automatically when you file a tax return.
About 35% of OAS recipients also receive GIS.
Once you have applied for the GIS, you do not need to apply again. Each July, Service Canada reviews your income and sends you a letter indicating your combined OAS and GIS income; or advises if you are not eligible for the GIS for the next 12 months.
I assist many clients each year with the GIS application. Once we complete their tax returns, often we notice their income has been reduced because of retirement or less employment income or their RRIF (registered retirement income fund) is depleted. This may result in lower income and may be low enough to qualify for the GIS.
For single, widowed, or separated/divorced seniors 65+, your income excluding the OAS needs to be less than $19,000 to receive the GIS.
If you have no income other than OAS, the maximum GIS is about $935/month. For every additional dollar of income from pension, RRIF, interest or other taxable income, the GIS is reduced by 50%. If you earn 100/month of other income, the GIS is reduced by $50/month.
For couples (both 65+), the combined income excluding OAS needs to be lower than $25,000 to qualify for GIS.
There are other GIS qualifying situations for seniors when one spouse is 65+ and the other is 60-65; that level of income to qualify is quite a bit higher: $45,000. There is also a GIS available to widowed seniors age 60-65 with low income.
The GIS is not taxable, but it does affect other income tested benefits including Manitoba Pharmacare, nursing home fees, and other provincial credits calculated on your income tax each year.
To minimize or avoid any GIS reduction, you can reduce interest income by using TFSA (tax free savings account) instead.
Can you work and receive GIS?
Yes, if you earn less than $5,000, your GIS is not affected at all. If you earn $5,000 and $15,000, the GIS is reduced only by 25%; once your employment income exceeds $15,000, the GIS may be eliminated.
If your income is reduced because you stop working or work less, or your pension income or other retirement income is reduced or stopped, you can request Service Canada to set your benefit payment by estimating your income for the current year instead of using last year’s income.
Your GIS may be affected if you marry or enter into a common-law relationship or if you separate or if your spouse dies. All these situations will affect your GIS and you need to let Service Canada know.
If you and your spouse have to live apart because one of you moves to a long term care facility (or in hospital, and panelled for long term care), you should let GIS know so they can recalculate the GIS based on your individual incomes instead of combined income.
We help many clients in various situations apply for the GIS or to request an adjustment when their situation change. The forms can seem complicated, so please ask for help!
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact Ste Anne Tax Service at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or info@sataxes.ca