What is Guaranteed Income Supplement (GIS)?

Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.

GIS Eligibility

You qualify for GIS if you are:

  1. Already getting the Old Age Security (OAS) pension

  2. Your household income is lower than the maximum monthly amount allowed

2020 GIS eligibilityThe most GIS you can get monthlyIf your household makes more than this amount, excluding OAS, you will get less than $100/monthIf your household makes more than this amount, excluding OAS, then you will not receive any GIS
You are single and you get a full OAS pension$916.38$16,199.99$18,599.99
You and your spouse both get a full OAS pension$551.63 (each)$19,775.99$24,575.99
You get a full OAS pension but your spouse does not$916.38$39,791.99$44,591.99
You get a full OAS pension but your spouse is aged 60-64$551.63$39,791.99$44,591.99

How GIS is calculated

GIS is calculated based on your household’s previous year’s taxable income.

Not all income is included in this calculation—most inheritances, lottery winnings, TFSA withdrawals, your OAS and the GIS itself are excluded.

The following income is included:

  • Canada Pension PlanQuebec Pension Plan

  • Private or foreign pension income

  • Withdrawals from your

     

  • Employment Insurance benefits

  • Interest, capital gains and dividends

  • Rental income

  • Employment and self-employment income, minus deductions for CPP, EI and a $3500 earnings exemption

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CPP & GIS

Income from your Canada Pension Plan (CPP) income is counted as taxable income. Therefore, if your CPP is high enough that it pushes you above the maximum income eligibility then you will not receive GIS.

GIS Application

There is an easy online application to apply for GIS.

Does the GIS help get seniors out of poverty?

The GIS is meant to make life a bit easier for low-income seniors. It’s part of a host of income programs the government created to ensure that seniors are not living in poverty.

These programs, which include OAS, GIS, the Allowance and the CPP have largely succeeded since they were introduced. When the pension system began, Seniors were far more likely to be poor compared to the working population. In 1961, the poverty rate for families with a head member aged 65 years or more was about 44%, compared to just 25% for all Canadian households. The burden was felt most acutely among elderly women who survived their spouse—an incredible three quarters of single seniors were stuck in poverty.

Social historian Gabriel Kolko sums up the situation in Wealth and Power in America:

“Many of the poor are the wrong age to be seen. A good number of them are sixty-five years of age or better …And finally, the poor are politically invisible. …They are without lobbies of their own; they put forward no legislative program. As a group, they are atomized. They have no face; they have no voice.”

While Americans began receiving Social Security benefits during the great depression in 1935, Canadians had to wait until 1967 for the Canadian Pension Plan and the GIS to be implemented.

By the 1970s, poverty among the elderly had fallen dramatically and the pension program was declared a success. In 1976, almost 37% of Canada’s elderly lived in poverty. Today, it’s less than 4%. The poverty rate among seniors who live alone, the most vulnerable group of elderly people, fell to just 8.4%

And the numbers keep getting better: The median after-tax income of senior families (where the highest income earner was 65 years of age and older) totaled $61,200 in 2017, up $2,500 from 2016.

In fact, far more children and working-age people are now in poverty than seniors. For most of Canada’s history, the opposite was true. Canada is an anomaly among other OECD countries.

Canada’s robust pension and supplementary income system played a strong role in lifting seniors out of poverty. Not only did poverty rates drop sharply only after the pension system was introduced, but countries that currently penny pinch on pensions also tend to have higher rates of elderly poverty. Australia, for example, only spends 3.5% of its national income on public pensions compared to the OECD average of 7% and has around 40% of seniors living in relative poverty.

Underscoring the importance of these public pensions is the news that Canadian seniors are increasingly relying on them instead of private savings or corporate pensions—between 1980 and 1996 pensions as a proportion of disposable income grew from 21% to 46%.

How long can GIS last?

As all pension money comes from taxpayers, the more seniors receive, the bigger they drag on our national budget. What happens as massive boomer cohort ages and medical and lifestyle advances allow seniors to live longer?

Seniors are expected to become a full one-fifth of Canada’s total population by 2030. Will there be enough taxpayers to support the current generous pension system? Will the GIS, OAS and CPP remain sustainable and able to pay out the same amounts?

Some solutions that experts have proposed are increasing immigration to broaden the tax base or raising the age of retirement to compensate for the longer lifespans we now enjoy. Alternative solutions also include helping seniors become more self-sufficient by finding work opportunities through retirement.

In fact, the demographic of seniors has already changed. Whereas in the past seniors completely stopped working, today’s retirees often prefer to keep on with flexible and part-time work. Active employment for those 65 and older had climbed to 12.9% in May 2014, up from an average of 6.7% from 1984 to 1988.

Economists suggest that we should ponder two questions:

  1. Is income a good measure of the economic wellbeing of senior citizens?

  2. What relationship should we expect between the incomes of senior households and the incomes of younger households with similar standards of living?

It’s unclear if today’s seniors actually need so much government support. Seniors are far richer than they were just 30 years ago. And not just because of the pension system but because their private wealth has also grown—especially as women have entered the workforce in larger numbers. Canadians over 75 year old now control over 33% of all financial assets and $1 trillion worth of stocks, bonds, mutual funds and cash. Seniors are nine times richer than today’s 20-somethings, up from just four times richer in the 1980s.

Currently, we only look at annual income when determining provisions for public pensions and supplementary stipends. But it’s possible that income alone may not tell us enough about the true wealth of an individual.

That’s because a large portion of wealth for seniors is derived from selling their family homes—which is not recorded as a capital gain or counted as taxable income in Canada.

The cohort of Canadians who were fortunate enough to purchase their homes during the era of low real interest rates and low housing prices, pre-1975, benefited immensely from appreciating the housing market of the 1970s and 1980s, and then from around 2003 or so and onwards.

In some countries this wouldn’t be a big deal, but Canada’s real estate values, especially in Toronto and Vancouver (where 23% of Canada’s population lives) have skyrocketed over the last decade. A detached home anywhere close to the city centres in either of those cities can easily fetch several million dollars tax-free.

It’s therefore possible for seniors to still qualify for GIS and OAS but have $1-$2 million in the bank. While any investment income like interest or dividends from that cash will be counted as part of taxable income, the chunk of change itself is not. In the future, to keep our pension system sustainable, it’s possible that we may choose to include additional measures of wealth, besides income.

Ultimately, GIS is a boon for seniors who did, or could not, build up wealth. We don’t want to return to a pre-GIS era, described aptly by Thomas P. O’Neill, Jr., former Speaker of the House in the United States:

Life for the elderly is filled with uncertainty, dependency and horror. When you get old, you are without income, without hope. Only the lucky few have pensions.“

Elderly still at risk for poverty

Despite the strides we have made, there still exists a significant population of seniors who are particularly at risk for poverty and economic security. These include:

Women

Women tend to earn less during their working life because their choice of occupation tends to be lower paying and because they are more likely to take time out of the workforce to care for children. So not only are they able to save less, but they contribute less to CPP. So while women are eligible to receive the full amounts of GIS and OAS, they are less likely to receive benefits from the CPP, which is based on work history.

The median annual CPP benefit, for example, is $8,200 for men and $6,500 for women in British Columbia and eldery men in British Columbia also earn twice as much in retirement than women: $17,700 versus $9,300.

That’s unfortunate, since women actually need more money than men, because they live longer. Women who outlive their husbands and seniors who live alone are four times as likely to be poor than those who live with a spouse. While many women are above the technical poverty line, largely thanks to GIS, they are often just barely above it

Seniors who rent and do not own a home

Owning a home in the last century was one of the surest ways to build wealth over a lifetime. Once the mortgage was paid off, living expenses dropped dramatically. Because Canadian property prices, as we said above, have risen steadily over the long-term, seniors could generally count on selling or renting out their home to pay for long-term care homes and other expenses.

Canadians without this asset are at a serious disadvantage, especially in recent years, as rental rates have soared. About 42% of seniors who rent have issues finding appropriate and affordable rental housing, compared to just 29% of the working age population. Not only do their housing expenses rise every year, but they have to draw on personal savings or investments to pay for large line items.

Seniors with health issues

Although Canada has a tax-payer funded healthcare system, it doesn’t pay for everything. Dental, prescription medication, private caregivers and old-age homes are still generally paid out of pocket, unless one has good private insurance. Obviously, seniors have more urgent health needs than the younger population as a whole, especially as they live longer than ever before and experience more chronic health issues. These additional expenses place a real burden on a budget.

Overall, however, these vulnerable groups, while present, represent the minority of the senior population. They provide a good reminder though that no matter how wealthy some seniors in our society may be, a significant subset is dependent on essential programs like the GIS.

Last Updated May 14, 2020

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