Ontario’s 2007 Budget contains a number of significant supports for seniors, to help improve their financial security and independence:

• Locked-in Accounts
• Ontario Property and Sales Tax Credits for Seniors
• Pension Income Splitting

Locked-in Accounts

The government is introducing a new life income fund (LIF) that could increase income for seniors in retirement and permit up to 25 per cent of the funds to be unlocked. The new LIF, and other modifications to the rules governing locked-in accounts, will give seniors who hold locked-in retirement savings transferred from employment pension plans increased flexibility in managing their retirement income.

The new LIF will replace all existing LIFs and locked-in retirement income funds (LRIFs). This will give seniors more flexibility by eliminating mandatory annuity purchase requirements and introducing:

• the right to an optional one-time unlocking of up to 25 per cent of locked-in funds no earlier than the early-retirement date under the pension plan from which the money was transferred (in most cases, this is age 55)
• an amended annual payment schedule that will increase retirement income and permit withdrawal of the entire remaining account balance when the LIF holder reaches age 90
• the opportunity to withdraw additional income based on investment returns in the previous year.

Additional changes will allow direct transfers of unlocked small amounts to non-locked-in accounts and unlocking for non-residents of Canada. The changes will also introduce consistent rules for the waiver of spousal entitlements to locked-in funds. Consultations have been initiated on the process for implementing the new LIF and other changes to the rules for locked-in accounts. It is expected that implementation of these changes will begin as early as January 2008.

Ontario Property and Sales Tax Credits for Seniors

Ontario Property and Sales Tax Credits for seniors were established in 1992 to assist seniors with modest incomes. These refundable credits remained unchanged until 2004, when the government enriched them by increasing the underlying property tax credit amount for seniors by 25 per cent, from $500 to $625. The government also increased the income threshold at which senior couples’ benefits begin to be reduced to $22,250 for 2005 and $23,090 for 2006.

The 2007 minimum level of income guaranteed by the Ontario and federal governments for eligible senior couples is rising because of increases to Old Age Security (OAS) and Guaranteed Income Supplement (GIS) payments. This year, the government is increasing the 2007 income threshold for senior couples so that those receiving the guaranteed minimum level of income from governments will continue to receive the full benefit of the credits. The new threshold will be determined when the federal government finalizes OAS and GIS amounts for 2007.

Pension Income Splitting

Beginning with the 2007 taxation year, couples will be allowed to split certain types of pension income for Ontario income tax purposes, subject to relevant federal proposals receiving Royal Assent. This recognizes the special challenges of planning and managing retirement income, and assist pensioners by providing a significant benefit to many couples with pensions.

Allowing individuals to split their pension income with a spouse or common-law partner for tax purposes will provide Ontario income tax savings of about $170 million to Ontario couples with eligible pension income in 2007.