Special Feature

Budget 2016

News for advisors from the 2016 federal budget tabled on March 22 in Ottawa, including Investment Executive's post-budget webinar with Jamie Golombek.
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Economy & Markets

Ottawa is proposing an increase to the GIS top-up benefit and additional support for senior couples living apart for reasons beyond their control

By Tessie Sanci |

The Liberal government is proposing several changes to Canada's public pension system that will directly affect seniors in this year's federal budget, but one area it's not touching is pension income splitting for seniors.

"Income splitting won't be affected and that's good news," says Jamie Golombek, managing director of tax and estate planning with Toronto-based Canadian Imperial Bank of Commerce's wealth strategies division.

This detail will be important to financial advisors and their clients, says Golombek, who notes that his firm gets questions about this issue frequently.

One of the key changes the government proposed in its budget, which was presented in Ottawa on Tuesday, is an increase to the Guaranteed Income Supplement (GIS) top-up benefit to $947 annually for some single seniors starting in July 2016. This change more than doubles the current maximum GIS top-up benefit.

Single seniors with an annual income of about $4,600 or less, outside of any benefits received from Old Age Security (OAS) and GIS, will receive the full increase of $947. The amount of the increased benefit will be reduced gradually as a senior's income increases and will be completely phased out at an income level of about $8,400.

The federal government is also proposing to void the former Conservative government's plans to increase the age of eligibility for OAS and GIS benefits. Budget 2016 proposes that the age to receive OAS and GIS benefits will remain 65, cancelling provisions in the Old Age Security Act that would have increased the age of eligibility gradually by two years beginning in 2023.

Senior couples living apart for reasons beyond their control, such as a requirement for long-term care, can also expect some additional support. The budget proposes that couples who receive allowance benefits will receive higher benefits based on their individual incomes, as opposed to the current system in which benefits are based on family income.

This will be an extension of current provisions in the Old Age Security Act that allow couples living apart for reasons beyond their control to receive GIS benefits based on their individual incomes.

Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC), applauds the government's efforts to help single seniors, but says he would have liked to see provisions in the budget to encourage people to save.

"There's nothing in terms of new incentives for individuals to save for retirement in tax-deferred plans," Russell said in an interview with Investment Executive. "They're expanding the government programs, rather than tax-assisted savings plans or incentives for individuals."

Further, the IIAC stated in a release that it is "disappointed" that the government is not  "extending the eligible age for RRSP accounts beyond age 71 [or] permitting payroll tax deductions for contributions to group RRSPs."

The budget also reinforced earlier declarations from the federal government about its plans to enhance the Canada Pension Plan (CPP). The budget document notes that the government began discussions in December with provinces and territories about enhancing the CPP. The next step will be to launch consultations with Canadians about the idea.

"I am personally committed to reaching an agreement with my provincial and territorial counterparts before the end of the year to enhance our Canada Pension Plan," said Finance Minister Bill Morneau during his budget speech.

The government is also studying the idea of implementing a seniors price index that would reflect the cost of living for seniors and help OAS and GIS benefits keep pace with rising costs.