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Budget 1996
Archived - Questions and Answers
The Seniors Benefit
Why is the government proposing a new benefit?
The government is proposing the Seniors Benefit as part of its commitment to Canadians to ensure they have a secure and sustainable pension system now and in the future.
What is the Seniors Benefit?
The Seniors Benefit will replace the existing Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits in 2001. The new benefit will be completely tax free and will incorporate the existing age and pension income tax credits. Benefits will be delivered in a single monthly payment. Payments to couples will be made in separate and equal cheques to each spouse. Both the benefit levels and the threshold will be fully indexed to inflation.
What does the Seniors Benefit mean for Canadians?
It guarantees that current seniors are protected, and near seniors may enter their retirement years without worrying about having to adjust their current planning. For other Canadians, the benefit also guarantees that government pensions are secured for the future. Those who need help will get it and everyone will have adequate time to prepare for the new benefit.
How are seniors protected?
Everyone 60 or over on December 31, 1995 and their spouses, no matter what age, will be guaranteed no less than current OAS/GIS payments. Many will receive more under the new system. In 2001, when the new benefit takes effect, seniors will have a choice between moving to the new system or maintaining their monthly OAS/GIS payments, as currently structured -- whichever is more advantageous to them. Those who maintain their OAS/GIS payments may opt into the Seniors Benefit at any time.
The following information is of interest to Canadians under 60 who will be covered by the Seniors Benefit when they become seniors or those 60 or over who will apply for the Seniors Benefit in 2001 because it will be more advantageous to them.
How much will I get under the Seniors Benefit?
The benefit is designed to fully protect low- and modest-income seniors. Almost all will receive slightly more. Those who receive GIS will get $120 more per year. The vast majority of seniors will be as well or better off. Fully 75 per cent of single seniors and couples will receive the same or higher benefits. Nine out of 10 single senior women will be better off.
Does everyone receive the same amount?
The benefit levels under the Seniors Benefit will be determined by income. For couples, the benefit will be based on the combined income of spouses, as is now, and always has been the case with the GIS. Each spouse will receive a separate and equal cheque.
Why is the Seniors Benefit based on the combined income of spouses?
The incomes of lower-income senior couples are currently combined to determine eligibility for additional help (GIS). It is equally appropriate to combine the incomes of higher-income couples to determine their level of government benefits. This ensures fairness and equality in the treatment of all couples, regardless of how their income is split between spouses.
How will I be affected by the Seniors Benefit?
When the new benefit comes into effect in 2001, single seniors and couples with total incomes up to approximately $40,000 will be fully protected, and many will receive higher benefits. Seniors with total incomes between $40,000 and $45,000, may receive higher benefits or lower benefits depending on their exact tax situation under the current system.
Those with incomes above $45,000 will generally receive lower benefits. The more income they have from other sources, the less they will receive. The very highest income seniors, who already have secure pensions and other income, will receive no government assistance. For single seniors with income above $52,000 and couples with incomes above $78,000, benefits will be eliminated.
Do I have to pay back part of the Seniors Benefit in taxes?
No. The Seniors Benefit will be tax free and seniors will not have to report it on their income tax return. The benefit will not be subject to taxation or clawbacks. The monthly payment seniors will receive is the amount they will keep.
What about inflation?
The benefit levels and the threshold will be fully indexed to inflation. Partial indexing of clawback thresholds will no longer be an issue. This will be an important improvement for seniors who worry about eroding benefits.
Will the Seniors Benefit save the government money?
The Seniors Benefit will help make the public pension system more affordable and sustainable. It will target help to those who need it most. Over the long term, better targeting will slow the rate of growth in public pensions that are paid out of the government's general revenues.
Do I have to apply for the Seniors Benefit?
Seniors will only have to apply once when they turn 65. The level of benefits will be automatically recalculated each year, based on the previous year's tax return. In addition, seniors will be able to request that their payments be adjusted to take into account changing circumstances, such as separation, divorce, the death of a spouse or a permanent drop in income due to retirement.
How will I know what to do in 2001?
The actual choice between the Seniors Benefit and OAS/GIS will need to be made only when the Seniors Benefit is about to be introduced in 2001, not now. In the months before the new benefit is implemented, the government will provide information to all seniors, based on their own situations, to assist them in making the best choice.
What happens to the Spouse's Allowance?
The Spouse's Allowance Program will remain in place and payments will increase by $120 per year.
What if I'm over 65 and my spouse is under 65?
In couples with one spouse under the age of 60, both spouses will be eligible to receive OAS when they reach 65. The Spouse's Allowance Program (SPA) will remain in place, so the younger spouse may be eligible for SPA if he or she is between 60 and 64 and the couple has a low income.
What about my Canada/Quebec Pension Plan benefits?
Neither the CPP nor the QPP will be affected by the Seniors Benefit.
When will the Seniors Benefit begin?
The benefit will begin in 2001. The government intends to introduce legislation to the House of Commons later this year. The proposal will be studied by a Parliamentary committee and hearings will provide an opportunity for public comment and input. In the meantime, interested groups and individuals may send written submissions or comments to the Ministers of Finance and Human Resources Development or their departments.
* Updated October 1997.
