Old Age Security Rules (OAS)

Old Age Security Rules (OAS)

The first old-age pension was enacted by the Federal Parliament in 1927. It was jointly financed by Federal and Provincial Governments but administered by the provinces, as pensions were considered a provincial constitutional responsibility at that time. OAS has been amended many times since inception.

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The Old Age Security (OAS) program is the biggest component in Canada’s Social Security system. It is a monthly sum of funds that helps provide a minimum quality of life for elderly Canadians.

The program is unrelated to employment history, in contrast to the Canada Pension Plan (CPP). OAS is funded out of the general revenues of the Government of Canada, which means that Canadians do not pay into it directly.

 

Eligibility for Old Age Security Pension

Source: Government Of Canada

The Old Age Security (OAS) pension is a monthly payment available to seniors aged 65 and older who meet the Canadian legal status and residence requirements.

1. You must be at least 65 years of age.
2. If living in Canada: You must be a Canadian citizen or legal resident and must have lived in Canada for at least 10 years since you turned 18.
3. If living outside Canada: You must have been a Canadian citizen or legal resident before you left Canada and must have resided in Canada for at least 20 years since you turned 18.
4. If you have lived in a country with which Canada has established a social security agreement.

Canadians working outside of Canada for Canadian employers

Canadians working outside Canada for Canadian employers, such as banks, and the armed forces, may have their time working abroad counted as residence in Canada. To qualify for the OAS pension, you must have returned to Canada within six months of ending employment or have turned 65 years old while still employed.

Deferring your Old Age Security pension

Since July 2013, you can defer receiving your OAS pension for up to 60 months (five years) after the date you become eligible for an OAS pension in exchange for a higher monthly amount.

If you delay receiving your OAS pension, your monthly pension payment will be increased by 0.6% for every month you delay receiving it, up to a maximum of 36% at age 70.

If you choose to defer receipt of your OAS pension, you will not be eligible for the Guaranteed Income Supplement (GIS) and your spouse or common-law partner will not be eligible for the allowance benefit for the period you are delaying your OAS pension.

How much could you receive

The amount of your Old Age Security (OAS) pension will be determined by how long you have lived in Canada after the age of 18.
To qualify for a full OAS pension, you must have lived in Canada for at least 40 years after age 18. The maximum as of March 2018 is $586.66

You will receive a partial pension benefit if you haven’t resided in Canada for the full 40 years. The partial pension benefit is 1/40th of the full pension amount for each complete year you lived in Canada after age 18
OAS benefits are adjusted quarterly, if there are increases in the cost of living as measured by the Consumer Price Index.

OAS Clawback

Your OAS benefit may be reduced by a clawback if your net income for the previous calendar year exceeds $75,910 (2018). If your net income exceeds this amount, you must pay back 15% on the excess income up to a maximum of the total OAS benefit received.

Final Thoughts

The OAS combined with your Canadian Pension Plan(CPP)Registered Retirement Savings Plan (RRSP) and Tax Free Savings Account (TFSA) will for the majority of Canadians finance their retirement needs. Taking the time to plan and understand how each works is a must for an accurate retirement plan.

 

Don’t wait for retirement to enjoy life !!

Comments

    • Thanks Tom,
      In Canada our CPP is in good shape. But the OAS is funded from general revenue, so I am hopeful it will still be as good when I go to collect. The amount of debt all governments have is a concern.

  1. I like that the GIS is available to all Canadians in old age, and together with the GIS and other supplemental incomes, serve as a soft landing to ensure that we have fewer senior Canadians living in poverty.

    Good summary!

    • I agree the three pillars OAS, GIS and the CPP will at least give a minimum quality of life for retirees. Thanks Enoch

  2. Thanks for the summary this complements your CPP post very well!

    $75,910 <— I will try and have less than this in retirement so my OAS is not clawed back too much.

    • Thanks GYM, if you can you should definitely try to stay under the $75,910 clawback. Another reason to love the TFSA !

    • Hi Caroline,

      It is critical to maximize tax efficiency and minimize clawback. A good retirement plan can save you thousands of dollars.

  3. Great info and summary here about OAS, Steve!

    The good thing is that TFSA isn’t counted as income so that would be a great tool to use at the same time!

    I just realized over the weekend that time is seriously flying by super quick and that it’s never too early to start nailing these retirement concepts into my head…… serious though, where is time going these days?? 😩

    • Hi Panda,
      TFSA are an awesome tool for retirement planning !
      I am older so I have to start keeping up to date with the rules and changes with the retirement programs. Time does fly by.

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