Many Canadians assume that federal senior benefits begin at age 65. While that is generally true for Old Age Security (OAS), there are two lesser-known programs that provide important income support before age 65 for low-income individuals:
- The Allowance
- The Allowance for the Survivor
Both programs are part of the Old Age Security system and are designed to bridge the income gap between ages 60 and 64.
What Is the Allowance?
The Allowance is a monthly income-tested benefit paid to individuals aged 60 to 64 who are the spouse or common-law partner of a low-income senior.
To qualify, the applicant must:
- Be 60 to 64 years old
- Be married to, or in a common-law relationship with, a person who:
- Receives OAS and the Guaranteed Income Supplement (GIS), or
- Is eligible to receive OAS and GIS
- Have low combined household income
- Meet Canadian residency requirements
Why the Allowance Exists
Without the Allowance, a younger spouse could face a five-year gap in government income support while waiting to turn 65. The Allowance helps maintain household income during that period.
Key Characteristics
- Paid monthly
- Taxable income
- Income-tested based on combined household income
- Indexed quarterly for inflation
- Stops automatically when the recipient turns 65
What Is the Allowance for the Survivor?
The Allowance for the Survivor is paid to a widowed person between the ages of 60 and 64 who has limited income.
To qualify, the individual must:
- Be widowed
- Be 60 to 64 years old
- Not be remarried or in a new common-law relationship
- Have low personal income
- Meet Canadian residency requirements
Why It Matters
The loss of a spouse often results in a sudden and significant reduction in household income. This benefit provides financial support during the years before OAS eligibility begins.
Key Characteristics
- Monthly payment
- Higher maximum amount than the regular Allowance
- Taxable income
- Income-tested based on individual income
- Stops at age 65
How Are the Payments Calculated?
The Allowance and Allowance for the Survivor are designed to top up income so that recipients receive roughly the same total income as someone receiving OAS and GIS.
- Payments decrease as income increases
- Annual income tax returns are used to assess eligibility
- Amounts are adjusted quarterly for inflation
Exact payment amounts vary year-to-year and depend on income levels.
What Happens at Age 65?
When the recipient turns 65:
- The Allowance or Allowance for the Survivor ends
- The individual must apply separately for:
- Old Age Security (OAS)
- Guaranteed Income Supplement (GIS), if income qualifies
These benefits are not automatic, so applications should be submitted on time to avoid payment gaps.
Planning Considerations
Because these benefits are income-tested, careful planning between ages 60 and 65 is critical.
Income sources that may reduce or eliminate eligibility include:
- Employment income
- Pension income
- RRSP withdrawals
- Investment income
Strategic withdrawal planning and timing of income can help preserve entitlement to these benefits, particularly for surviving spouses.
Considerations
The Allowance and the Allowance for the Survivor are often overlooked, yet they can provide meaningful financial support during a vulnerable stage of life. For low-income couples and widowed individuals approaching retirement, understanding these programs can make a significant difference in overall retirement security.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com