Service Canada provides a set of tables to help seniors determine their GIS and Allowance payment amounts. These tables apply only to seniors who are receiving the maximum Old Age Security (OAS) amount. Starting with your yearly income excluding OAS, GIS, and Allowance, you can look up your monthly GIS or Allowance. However, the tables won’t give you a simple picture of how GIS works.
The Service Canada tables make it easy for seniors to look up the GIS payments, but they’re cumbersome for planning out different scenarios. Rather than focusing on yearly income, I prefer to think about monthly income. And for couples, instead of looking at their individual GIS payments, I prefer to look at their combined payments.
Let’s focus on Table 2, which gives GIS payments (including top-up) for married or common-law partners both receiving maximum OAS payments. Here is a simple rule that gives the couple’s combined monthly GIS payments to within $2 given their combined monthly income:
|Combined Monthly Income |
(excluding OAS, GIS, Allowance)
|$0 to $336||$983 minus 50% of Income|
|$336 to $624||$1067 minus 75% of Income|
|$624 to $1822||$911 minus 50% of Income|
Expressed this way, it’s much easier to see the 50% and 75% clawback rates. (This rule only applies to the current quarter (until the end of March 2013) because GIS payments rise with inflation each quarter.)
People with low incomes are often better off saving in TFSAs rather than RRSPs. The reason for this is because income from RRSP or RRIF withdrawals triggers GIS clawbacks. In some cases it even makes sense to collapse an RRSP and move the net withdrawal (after income taxes) to a TFSA. This results in extra income taxes but increases future GIS payments. The table above can be helpful in determining whether such a strategy makes sense.