Canada is a country that is devoted to ideals of supporting its population in old age. Canada’s retirement system, though not perfect, has a number of benefits attached to it. One of those benefits is the Old Age Security pension.
As with the Canada Pension Plan, the Old Age Security (OAS) pension is an important part of Canada’s retirement income system. Old Age Security payments are available to any Canadian citizen or legal resident of Canada that is over the age of 65 and has lived in Canada for at least 10 years after the age of 18.
It’s important to note that the OAS pension is not designed to be an income replacement. The government still expects you to fund your retirement mostly on your own, with the help of registered and non-registered accounts. However, the income from the government as a result of OAS can still be quite helpful as you live during retirement. It gives you a bit of a boost.
Who Receives the Full OAS Pension?
To receive a full OAS pension, you must have lived in Canada for at least 40 years after the age of 18. Those who have lived in Canada less than 40 years, but more than 10, can still receive a partial pension. So how much you can receive for a full pension? As of right now, the maximum benefit is $578.53. These rates are reviewed 4 times a year to adjust for changes in the cost of living, based on the Consumer Price Index. It’s also possible to receive your benefits as early as age 60 if you are low-income and qualify. Realize, too, that the amount you receive phases out according to your income. Once you reach a certain income level, you are no longer eligible for OAS payments.
It’s also possible for you to receive OAS if you live abroad. You can even arrange to receive your payments in your local currency, if you are eligible. Check with Service Canada for more information regarding what you need to do in order to arrange OAS pension payments if you plan to live outside the country.
Tax Implications of the OAS Pension Payments
There are some tax implications to be aware of with Old Age Security. Every year, the government figures out a certain income level for repayment of what you receive. If you are above that income level, you then have to repay 15% of any income over that limit. This is known as the OAS clawback. It can be painful to deal with the clawback if you haven’t made plans to deal with it. Lower income earners may also be eligible for the Guaranteed Income Supplement (GIS), which is an additional monthly payment.
Make sure you understand the implications involved with OAS pension payments, and prepare yourself for the possibility of a clawback. You can consult with a tax specialist or a retirement specialist to help you figure out how best to deal with the tax implications.
Old Age Security and the Canada Pension Plan, at a combined annual payout of about $25,000 per couple, are an excellent foundation to your retirement planning.