Budget proposes to increase income exemption under the GIS program to 100 per cent of the first $3,500 of employment income
Ottawa (27 February 2008) – The federal government’s 2008 budget offers seniors small benefits this year, including increased flexibility for locked-in pensions, an initiative to help keep older workers in the workforce and an increase in employment income exemption under the Guaranteed Income Supplement (GIS) program.
There will be increased choices available to holders of life income funds (LIFs) by increasing the flexibility to withdraw funds. Individuals who are at least age 55 and whose holdings are less than $22,450 will be able to withdraw the account balance in full or convert it to an unlocked tax-deferred savings vehicle. Individuals who are at least age 55 and whose holdings are greater than the threshold for full unlocking will be permitted to make a one-time election to transfer up to 50 per cent of the value of their LIF to an unlocked tax-deferred savings vehicle. There is no dollar limit on this withdrawal or any maximum income threshold. Individuals who are facing financial hardship will be permitted to withdraw up to $22,450 from their LIF, regardless of age. The amount an individual can withdraw will increase in accordance with increases in the average industrial wage.
The budget provides increased support of $90 million to the Targeted Initiative for Older Workers, which assists unemployed older workers in communities with high unemployment. As a result of the new funding, the Initiative will be extended to 2012.
Finally, there is an increase in the income exemption under the GIS program. GIS benefits are provided to low-income seniors who receive benefits under Old Age Security. These benefits are reduced by 50 per cent of other income. Currently, 20 per cent of the first $2,500 of employment income (i.e. $500) is exempt from this “clawback” rule. The budget proposes to increase this exemption to 100 per cent of the first $3,500 of employment income.