Retirement

What is OAS? An Overview of the Old Age Security Pension

What is OAS? An Overview of the Old Age Security Pension

In Canada, the retirement income system is comprised of two key benefits: the Canada Pension Plan (CPP), and the Old Age Security (OAS) pension. Both benefits have been around for decades, providing Canadians with a fundamental level of income security in their retirement years. In this article, we’ll explore the ins and outs of the Old Age Security pension.

By the time you’ve finished reading, you should have a good understanding of the OAS, including who is eligible, how the benefit is calculated, as well as its limitations. I’ll also share a few tips on how to maximize the OAS benefit you receive. First, let’s take a quick look at the history of this federal government pension plan.

History of the OAS

The first old age pension plan in Canada was established in 1927, providing a means-tested income for Canadians over 70 with little to no income. In 1952, the Old Age Security Act came into force and required the federal government to share the cost of provincially-run, means-tested old age benefits.

A number of years later In 1965, the age of eligibility was reduced to 65, from age 70, a change that was phased in over a 5 year period. Fast forward to today, the OAS exists in its current form, along with a few added benefits, including the Guaranteed Income Supplement (GIS), as well as an age and survivors allowance.

Who is Eligible for the Old Age Security Pension?

Unlike the Canada Pension Plan (CPP), OAS benefits are not tied to your employment history. In other words, you can collect OAS at age 65 regardless of whether or not you’ve ever been employed. For Canadian residents, the following criteria must apply:

  • Must be at least 65 or older;
  • Lived in Canada for at least 10 years since you were 18;
  • Be a Canadian citizen or resident when your OAS application was approved

For Canadians living outside of the country, the rules differ slightly. The same age requirement exists (65 or older). In addition, you must have lived in Canada for at least 20 years since you turned 18 years of age, and you must have been a Canadian citizen or resident immediately prior to leaving Canada.

Some Canadians who have lived outside of Canada may not meet either of the above requirements. That said, if you’ve worked for a Canadian employer outside of Canada, you may be able to include this time in your years of Canadian residence. In order for this to be considered, you must have returned to Canada within 6 months of ending your employment or turned 65 while you were still employed.

How is the OAS Calculated?

You’ll be eligible for the full OAS pension amount if you lived in Canada for at least 40 years after you turned 18. If not, you’ll receive a reduced benefit. A partial OAS benefit is calculated as follows: 1/40th of the full pension for each year you lived in Canada after the age of 18.

For example, let’s say you lived in Canada for 30 years as an adult. In this case, you may qualify to receive 75% of the full OAS benefit, for having lived in Canada 30 out of 40 years. Other factors, such as your annual income, can also impact the amount of OAS benefit you will receive. I’ll get into this in more detail a bit later.

What is the Maximum OAS Benefit?

The maximum Old Age Security benefit for an individual is $613.53, for the 4th quarter of 2019. Benefits are adjusted quarterly (January, April, July, October) every year to account for changes in the Consumer Price Index (cost of living). The maximum OAS benefit does not include additional benefits, such as the Guaranteed Income Supplement, which is available to qualifying, low-income Canadians. Let’s take a closer look at the Guaranteed Income Supplement.

Guaranteed Income Supplement (GIS)

The Guaranteed Income Supplement is a non-taxable income benefit which is paid to low-income OAS recipients living in Canada. To qualify for the GIS, you must meet all of the following criteria:

  • You must be receiving the OAS;
  • Your annual income must be lower than the maximum annual threshold;

Currently, the maximum annual (income) threshold is set at $18,599. What this means is that if your income (not including your OAS benefits) is $18,600 or higher, than you won’t qualify for the GIS. On the other hand, if you received the maximum OAS benefit, and had no other income, then your monthly GIS payment would be $916.38. Keep in mind, CRA calculates your qualifying income each year, so your GIS could change from year to year if your income level changes.

Other OAS Benefits

In addition to the Guaranteed Income Supplement, the government offers two other OAS related benefits that you may qualify for. The first is an allowance for low-income individuals between the ages of 60 and 64. If your spouse or partner receives the GIS, you may be eligible for an allowance. Lastly, the survivor’s allowance provides additional income for widows who are between the ages of 60 and 64.

When to Apply For Your Old Age Pension

You can apply for the OAS pension the month after your 64th birthday. This gives the CRA enough time to calculate the OAS benefit you’ll receive when you turn 65. OAS payments are paid in monthly installments, on the third business day prior to the end of the month. Let’s use October 2019 as an example. October 31st lands on a Thursday, so both CPP and OAS will be paid on Tuesday, October 29th, the third last business day before the end of the month.

Understanding the OAS Clawback Threshold

While OAS benefits are not dependent on the number of years you were employed, the benefit you receive will begin to be clawed back once you exceed a certain annual income. For the 2019 tax year, any income exceeding $77,580 will be subject to a clawback, in 2020/2021. This is known as the OAS recovery tax. Benefits continue to be clawed back for income levels up to $126,058, at which time your OAS benefits would be reduced to zero.

The recovery tax is calculated as a 15% penalty on all income that exceeds the minimum clawback threshold ($77,580, October to December 2019), until the OAS benefit is reduced to zero (income of $126,058). For example, if your annual income was $90,000 in 2019, you would pay a tax of 15% on $12,420 ($90,000-$77580 = $12,420), which would be $1,863. Your OAS benefit starting in July 2020 and ending in June 2021 would be reduced by $1,863, or $155.25 per month.

Deferring Your Old Age Security Pension

Did you know? As of July 2013, you can defer your OAS benefits for up to 5 years after the date in which you become eligible. The advantage here is that a deferral will result in a higher eventual monthly payment, as much as 36% higher, if you delay receiving your OAS until age 70. This is an option to consider if your income will be higher than the clawback threshold, resulting in a reduced OAS benefit.

Ways to Maximize OAS Benefits

Here are a few tips on how you may be able to maximize the OAS benefits paid to you. As you’ll see, all of these strategies involve minimizing your taxable income, to maximize the amount of OAS you will qualify for. As a reminder, OAS benefits begin to get clawed back as soon as your taxable income rises above $77,580.

  • Income split. Talk to your accountant about opportunities to split income with your spouse. The goal here is to keep income for both spouses under $77,580, to ensure there is no OAS clawback.
  • If you’re drawing income from personal investments, it might be wise to defer RRSP or RRIF withdrawals, in order to avoid increasing your taxable income. Instead, look to pull from your TFSA or non-registered plans first, as they won’t affect your income level.
  • When you do your taxes, take advantage of any available deductions, in order to reduce your taxable income. If you’re over 65, but not yet 71, you may even want to consider making RRSP contributions if needed. Of course, always consult a tax professional as everyone’s situation is different.
  • Find ways to lower income from your investments. Investments that pay dividend income, or realize capital gains ie. dividend-paying stocks, ETFs, some mutual funds, are more tax-efficient than investments that only pay interest income ie. term deposits, GICs. Shifting towards tax-efficient investments will reduce your taxable income, while at the same time keeping more money in your pocket.

Final Thoughts on the Old Age Security Pension 

For generations, Canadians have been able to rely on Old Age Security to provide them with a basic retirement income when they reach the age of 65, while additional benefits, like the Guaranteed Income Supplement, offer a much needed safety net for very low income Canadians. Remember that the CPP and OAS alone will not be sufficient to fund your retirement. I highly recommend that you spend time doing your research on the OAS, to figure out the benefit amount that you can expect to receive. From there, assess your other retirement income options, such as an employer pension plan, and savings from RRSPs and your Tax Free Savings Account. Each one will be key to ensuring a comfortable retirement. 

Comments

  1. george simpson

    Hi if i LOST my OAS for having a higher income due to selling my business Do i have to re apply the next year when my income was only $25.000.00 thanks G

    • Frank Wiginton

      I don’t believe so, you are part of the program and once your income in the given tax year is below the claw back thresholds you will begin to receive payments. Be sure to file your return. Call 1-800- O’Canada to double check.

      • Greg

        I just went through this. My OAS was clawed back due to capital gains in one year. Once my new OAS year started (July to June) and my income had dropped below the threshold of clawbacks my OAS went back up to its normal level.

  2. Alex Hung

    The briefing on the OAS was necessary and I’m sure the older generation deserves this aid for their medical or personal support. The clauses for receiving the OAS is written clearly and is definitely beneficial. The readers can guide their parents or old friends about OAS and help them.

  3. barry christiansen

    PLS. HELP, MY OAS WAS SUSPENDED BECAUSE THEY DID NOT RECIEVE A QUESTIONAIRE IN TIME, IT WARNED ME IF I DO NOT REPLY WITHIN 10 DAYS I WILL BE CANCELLED. I LIVE IN PHILIPPINES WTH MY FAMILY AND DELIVERY TIME CAN BE UP TO 21 DAYS AND REPLY 21 DAYS. I DID REPLY BY REGULAR MAIL AND CALLED CANADA PENSION,EXPLANED SLOW MAIL SERVICE AND WILL SEND AGAIN BY REGISTERED MAIL.CALLED CAN, PENSION AGAIN THEY CONFIRMED THEY DID RECIEVE MY QUESTIONAIRE.AND THIER IS NO PROBLEM NOT TO WORRY.THAT WAS IN APRIL 2011,THEY CUT MY PENSION FOR AUGUST 2011 SO I LEFT PHILIPPINES TO GO TO THAILAND FOR NEEDED HEART OPERATION.NOW I HAVE MOUNTING MEDICAL EXPENSIVES IN NEED OF MY $500.00 TO PAY BILLS.I DONT UNDERSTAND HOW THEY CAN MAKE SENIORS SUFFER HARDSHIPS

  4. theona anderson

    i wanted to know how much will i work limited a year ..correct $4 thousand dollars a year..thank you..

  5. Susan Imre

    My husband get CCP and OAS ,but both is not over $1000/month.Can he apply for Guaranteed Income Supplement?

    • Frank Wiginton

      Hi Susan, He can always apply but if his income is more than $16,700 he will not qualify or your combined income is over $22,000 than you will not qualify.

  6. MrL

    I think this is causing a big problem all over the world.

    Here is Sweden, today the prime minister said that everybody has to work 10 years longer then before in order to retire with some decent benefits, the money is running out in the system and so on.

    It’s going to be a huge problem, if people work longer, MORE jobs has to be created and that is already a problem.

    It WILL end badly.

  7. Joe

    CPP is an earned pension. OAS is unearned welfare. I don’t intend on needing to rely on benefits I didn’t earn. Not saying such programs aren’t vital, but every working Canadian should plan and work towards a retirement income of above the “claw back” limit. Doing otherwise is planning for failure. It’s an essential safety net, but not something to celebrate – it’s a symptom of a financially imprudent culture.

  8. Mary

    Amen & amen to your article! In a perfect world, we would all be able to work toward a “retirement income of about the ‘claw back’ limit,” but the world isn’t perfect. Some of us are victims of loss of our spouse at an early age, loss of employment and no other means of living than to rely on savings & investments, and God forbid that the last market crash took 1/2 of our investments. And, closing in on retirement age, I don’t think a Walmart greeter (or similar) is going to make enough to put us over that claw back limit.

    Mary

  9. alan redway

    When was the OAS clawback first institued?

  10. Mike DOIRON

    I will receive OAS this year being 65 yrs old. My spouse is 55 and still working. Is the amount of OAS reduced because of combine income of spouses.

    • Frank Wiginton

      Hi Mike, Your OAS is based of your taxable income. Your spouses income at this point is not a factor in determining you qualification.
      Remember that dividends from qualified Canadian corporation are grossed up to determine your taxable income which can impact your OAS.

  11. Frank Wiginton

    Tom – a reminder that the OAS is technically not a pension. Individuals do not contribute to it and there is not a pool of money being managed by a pension board the way the CPP is.
    OAS is paid for out of general tax revenues. To call it a pension I think is a little misleading.

    Great article though. 🙂

    • Tom Drake

      Thanks Frank! Good point that it doesn’t really match the definition of a pension (I’ll add an explanation in the post), but the Government of Canada does call it a pension so I was using their terminology.

  12. paulkim

    Hi, I would like to share other three other benefits of OLD AGE SECURITY (OAS) are

    1. The Guaranteed Income Supplement (GIS)— The GIS is a monthly benefit available to eligible Canadian residents who receive an OAS pension and have little or no other income. Just like OAS, you have to apply for GIS.

    2. The Allowance —If you are between 60 and 64 and your spouse or common-law partner is entitled to receive an OAS pension and is eligible for GIS, you should apply for the Allowance.

    3. The Allowance for the Survivor —If you are between 60 and 64, have little or no income, and your spouse or common-law partner has died, you may qualify for the Allowance for the Survivor.

    • Jo

      Hello

      I am very confused, my spouse works part time due to health reasons, 57 years of age, curious to know can he apply for oas at the age of 60? his spouse 53 years of age is not working also and has 0 income, we were going to cash in some RRSP;s to help with cash flow but prefer not to, what other options do we have.

  13. Bryan Jaskolka

    Thank you for mentioning the clawback. You’re right, it’s very difficult for people to come up with the repayment funds if they haven’t already made concessions for them within their budget. While there are many good overviews of OAS online, I often end up commenting, telling people about the clawback because it wasn’t mentioned in the article. I thank you for pointing it out again, as this is a big part of OAS, and definitely one that people need to know about.

  14. Miriam Sherwood

    Hi. I am a Canadian citizen. Lived and work in canada for 11 years. Am I entitled to OAP from. Canada My husband is now deceased also I do not live in canada am I entitled for help. I get $138 na month from them
    Thank you for t
    Your advice

  15. Brenda

    I applied for and was accepted (right wording?) for the OAS 6 months before I turned 65. I was told I would receive it a month after my birthday but to date have not. It has been two months. What steps do I take?

    • Frank Wiginton

      Hi Brenda. Call 1-800-O Canada (Service Canada) to verify everything with them.

      • Brenda

        Hello, l have done as you suggested and all questions answered satisfactorily, with my thanks!

  16. Veroni

    What if a Canadian citizen, senior is just receiving an OAS and can not travel back anymore in Canada due to health reason, and decided to live and stay in her home country, can she still receive her benefits from Canada

    • Frank Wiginton

      Provided she resided in Canada for 20 years or more after the age of 18 she will continue to receive benefits. Depending on where she lives she can elect to receive it in the local currency and avoid forex fees.

  17. Veroni

    Thank you Mr Wiginton, however, is there a kind of form for electing where the senior prefers to live outside Canada?
    Veroni

  18. Veroni

    I have a question on what if the senior, can citizen, got sick during her vacation and unable to travel back here in Toronto, now that she is being hospitalized, she has no health insurance outside the country, is there any benefit that she can get from OAS, to at least cover her hospitalization?

  19. fbgcai

    Tom you should note that OAS is NOT a true pension (i.e. one does contribute to it) therefore the payout comes from general government revenues and hence why it subject to clawback.

    This contrasts with CPP which is a money pool held separately from government funds (at least in theory) from which pensions are paid based on how much you contributed to the pool.

    Big difference.

  20. Léo

    Hi

    Can i get OAS after my 65 even if i will be retired in my 60?
    If yes why in this link frank’s OAS is 0 in 67 in the first row of table.
    http://www.rrq.gouv.qc.ca/en/planification/sources_revenu_retraite/Pages/sources_revenu_retraite.aspx

    Thanks

    • Frank Wiginton

      Frank’s OAS is $0 in the first line because he is not 65 yet. The earliest you can qualify for OAS is 65.
      You can retire at any point but you can’t start OAS until 65 and you can delay OAS up until 70 (this may be a good idea if you are still working and your net taxable income will end up clawing back your oas.)

  21. Sabrina

    Hi, I would like to know. I have worked off and on. I can not work and my husband works full time. Now once we retire will I be able to get oas even though I have not worked much in the past?

    • Frank Wiginton

      OAS is not dependant on work or income. It is based on Residency. You will qualify for full OAS if you have at least 40 years of residency in Canads between the ages of 18-65 and your net taxable income is below the clawback threshold.

  22. Jean egan

    Are you allowed to use split pension income with your wife in order to reduce your taxable income so to avoid the clawback

    • Frank Wiginton

      YES – do split your pension and any RRIF withdrawals to keep your NET TAXABLE INCOME below the clawback threshold.

  23. Greg

    Hello,
    I am 58 years old and my wife is 66 and collecting OAS. Our total income will be under the GIS threshold amount in 2108 so we applied for GIS. Am I also entitled to any additional payments or do I have to wait until I am age 60 to collect the Allowance?
    thanks,
    Greg

    • kurt gerhard tietje

      i lived in canada over just 40 years, i get cpp, -36 %, i get oas, my thai wife lived with me for 16 years in canada, we married in canada, now we live in thailand, for 10 years, if i pass away before my wife, can she receive my oas, in thailand, and part of my cpp, it would be nice, if she woud qualify for the oas, gary in thailand

  24. sue

    My husband and I both turn 65 in the same month. Will we both receive OAS if each persons income is below 75000.00

  25. raven

    Hi Tom
    I am 64 years old and landed in Canada in July 2000 along with my wife-My wife had health issues and her mom was suffering from terminal cancer-No one was there to look after her and my wife was going back and forth many times because of which she lost her residency in 2008.We did appeal to IRCC to consider residency based on sympathetic and compassionate grounds which was rejected.Since then am living here on my own and supporting her too by sending money.Please let me know if I can apply for OAS on SINGLE status category or married or common in law ?your advice on this please-Thanks!!

  26. Hashem

    A friend left Canad in June 1989 after living here for 17 years. I know that today one of the requirements to receive OAS is that you have to live 20 years in Canada.
    I was told that at the time he left Canada, the required period was 15 years. When was that?

  27. Jean

    If you are a non resident income splitting can not be utilized, deferring your OAS past 65 will not increase the benefit

    If you are a non resident and you fall in the clawback window there is inconsistency on the references as clawback seems not to be applied if you are a non resident as experienced by non residents

    Also with reference to the country in which you reside and the tax treaty bethween Canada and your country of residence there is no requirement to file a worldwide income form in order to determine your net income The Canadian government will withhold the 15% or 25% depending of country of residence. You do not have to file an income tax form unless you wish to do so under rule 117 in order to regain your income tax paid if you are indeed eligible

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