Old Age Security (OAS)
What is OAS?
Old Age Security (OAS) is the largest pension program in Canada, funded by the Government of Canada’s general revenues. Therefore, unlike Canada Pension Plan (CPP), you do not pay into the program. It is available to eligible seniors aged 65 and older.
As of 2013, Service Canada introduced a process to automatically enroll eligible seniors. In 2017 it was expanded to include the Guaranteed Income Supplement.
If you are eligible for OAS, Service Canada will send you a notification letter the month following your 64th birthday. The OAS pension comes in the form of a monthly payment and is not based on employment history. You can be eligible for OAS if you have never worked or if you are still working.
In addition to the OAS pension, there are also OAS benefits:
- Guaranteed Income Supplement (GIS): Potentially eligible if you live in Canada and have a low income. To learn more, click here.
- Allowance: Potentially eligible if you are 60 to 64 years of age and your spouse is eligible to receive both OAS pension and the GIS. To learn more, click here.
- Allowance for the Survivor: Potentially eligible if widowed and are between the ages of 60 and 64. To learn more, click here.
Deferring OAS
You are able to defer your OAS pension for up to five years after the date you become eligible for OAS (between age 65 and 70). If you choose to defer, you should do so at least two months in advance of your 65th birthday in order to provide adequate time for Service Canada to process your request.
When deferring your OAS pension, you receive 0.6% more for each month you delay receiving OAS payments. You are only able to defer OAS payments by five years (age 70), at which point your OAS pension is worth 36% more than when you first became eligible. If you wish to defer your OAS pension, you can do so by:
- Following the directions on your My Service Canada account, or
- Signing and returning the automatic enrolment letter that was originally sent to you by mail.
If you delayed your OAS pension, you are eligible to apply for OAS benefits up to 11 months prior to the date in which you want your pension to start.
How Much to Expect
Your OAS pension is determined by the number of years you have lived in Canada after the age of 18. As of June 2018, the maximum monthly payment was $589.59. The government adjusts the monthly payment every three months in accordance with the Consumer Price Index (CPI), which measures changes in the cost of living. There is also a claw back mechanism built into OAS pensions, which ultimately reduces OAS payments for high-income earning Canadians. OAS payments can potentially be reduced (or clawed back) to zero.
You can also choose to have taxes withheld from monthly payments to avoid owing tax at year end. In order to do so, you must fill out the voluntary income tax deduction form and mail it to Service Canada. You can access the form by clicking here.
Full Versus Partial OAS Pension
It is possible to qualify for a full OAS in either of two ways:
- Resided in Canada for at least 40 years after turning 18 years old.
- Were born on or before July 1st, 1952, and
- On July 1st, 1977, you resided in Canada, or
- After turning 18, you resided in Canada for a period of time prior to, but not on July 1st, 1977, or
- On July 1st, 1977, you possessed a valid Canadian immigration visa.
You must have also resided in Canada continuously for the 10 years immediately preceding approval of your application. If you were not present at some point during the 10-year period, qualifying for a full pension is still possible if:
- You resided in Canada for a year or more immediately prior to the approval of your application, and
- You had periods of residence equal to at least three times the periods of absence during the 10-year period.
In the case that you do not qualify for a full pension, you can qualify for a partial pension. For each full year of residence in Canada after the age of 18, you will receive 1/40th of the full OAS pension.
Sources:
https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security.html
https://www.bankofcanada.ca/rates/price-indexes/cpi/
http://www.cbc.ca/news/business/taxes/canada-pension-plan-vs-old-age-security-the-differences-explained-1.1239963
http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/old-age-security-oas-clawback/
https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/payments.html