Old Age Security (OAS) is a monthly payment that is provided by the federal government to eligible seniors who are 65 years of age or older. It is one of the main sources of income for retired Canadians, along with the Canada Pension Plan (CPP) and personal savings. However, the amount of OAS you can receive may vary depending on your income, residency, and contributions.
What is Old Age Security in Canada?
OAS is a universal pension that is available to all Canadian citizens and permanent residents who have lived in Canada for at least 10 years after the age of 18. The amount of OAS you can receive depends on how long you have lived in Canada and your income level. The maximum monthly payment for OAS is $707.68 from October to December 2023 and $778.45 from July to December 2022. However, if your income is higher than a certain threshold, you may have to repay part or all of your OAS pension. This is called the OAS recovery tax or clawback. The table below shows the income thresholds and the recovery tax rates for different periods.
| Recovery Tax Period | Income Year | Min. Income | Max. Income |
|---|---|---|---|
| July 2021 to June 2022 | 2020 | $79,054 | $128,149 |
| July 2022 to June 2023 | 2021 | $79,845 | $129,757 |
| July 2023 to June 2024 | 2022 | $81,761 | $133,141 |
If your income is between the minimum and maximum income for a given period, you will have to repay 15% of the excess amount. If your income is above the maximum income, you will have to repay the entire OAS pension. You can choose to receive your OAS pension either monthly or quarterly, by cheque or direct deposit.
Who is Eligible for OAS in Canada?
To be eligible for OAS, you must meet the following criteria:
- You are 65 years or older
- You are a Canadian citizen or a legal resident at the time your OAS pension application is approved
- You have lived in Canada for at least 10 years since the age of 18
If you are living outside Canada, you may still be eligible for OAS if:
- You were a Canadian citizen or a legal resident on the day before you left Canada
- You have lived in Canada for at least 20 years since the age of 18
You may also be eligible for OAS if you have lived or worked in a country that has a social security agreement with Canada. You can find the list of these countries [here].
How much can I get from OAS in 2023?
The amount of OAS you can get in 2023 depends on how long you have lived in Canada and your income level. The table below shows the maximum monthly payment amounts for different age groups and income thresholds.
| Age | Income Threshold | Maximum Monthly Payment |
|---|---|---|
| 65 to 74 | Less than $134,626 | $707.68 |
| 75 and over | Less than $137,331 | $778.45 |
If you have lived in Canada for less than 40 years after the age of 18, you will receive a partial OAS pension. The partial OAS pension is calculated by multiplying the full OAS pension by the fraction of years you have lived in Canada. For example, if you have lived in Canada for 25 years, you will receive 25/40 of the full OAS pension.
If your income is higher than the income threshold for your age group, you will have to repay part or all of your OAS pension. The repayment amount is calculated by multiplying the full OAS pension by 15% of the amount by which your income exceeds the minimum income threshold. For example, if your income is $100,000 and the minimum income threshold is $79,054, you will have to repay 15% of ($100,000 – $79,054) = $3,142. This means your net OAS pension will be $707.68 – $3,142 = -$2,434. In this case, you will not receive any OAS pension and you will have to pay back the excess amount.
How is the OAS Pension Calculated?
The OAS pension is calculated based on the following factors:
- The Consumer Price Index (CPI), which measures the changes in the cost of living. The OAS pension is reviewed and adjusted every three months (January, April, July, and October) to reflect the changes in the CPI. If the CPI goes up, the OAS pension goes up. If the CPI goes down, the OAS pension stays the same.
- The number of years you have lived in Canada after the age of 18. The more years you have lived in Canada, the higher your OAS pension will be. If you have lived in Canada for 40 years or more, you will receive the full OAS pension. If you have lived in Canada for less than 40 years, you will receive a partial OAS pension.
- Your income level. The higher your income, the lower your OAS pension will be. If your income is above a certain threshold, you will have to repay part or all of your OAS pension. This is called the OAS clawback.
How do I Apply for OAS?
You can apply for OAS online, by mail, or in person. You should apply for OAS at least six months before you turn 65, or as soon as you meet the eligibility criteria. You will need to provide the following information and documents:
- Your Social Insurance Number (SIN)
- Your date and place of birth
- Your citizenship or immigration status
- Your marital or common-law status
- Your spouse’s or common-law partner’s SIN, date and place of birth, and citizenship or immigration status
- Your banking information for direct deposit
- Your proof of identity, such as a birth certificate, a passport, or a driver’s license
- Your proof of residence, such as a utility bill, a lease agreement, or a tax return
- Your proof of income, such as a T4 slip, a pension statement, or a notice of assessment
You can find the online application form AdamMag. You can also download the paper application form AdamMag and mail it to the nearest Service Canada office. You can also visit a Service Canada office in person and apply with the help of an agent.
When can I Expect my first OAS Payment?
You can expect your first OAS payment either:
- The month after you turn 65
- The specific date that you have chosen
You can choose to start receiving your OAS pension up to 11 months before or 60 months after you turn 65. The longer you delay, the higher your OAS pension will be. However, after age 70, there is no advantage in delaying your OAS pension. In fact, you risk losing benefits. If you are over the age of 70 and are not receiving an OAS pension, apply now.
What is the OAS Clawback?
The OAS clawback is the amount of OAS pension that you have to repay if your income is higher than a certain threshold. The OAS clawback is also known as the OAS recovery tax. The OAS clawback is calculated by multiplying the full OAS pension by 15% of the amount by which your income exceeds the minimum income threshold. The table below shows the income thresholds and the recovery tax rates for different periods.
| Recovery Tax Period | Income Year | Min. Income | Max. Income |
|---|---|---|---|
| July 2021 to June 2022 | 2020 | $79,054 | $128,149 |
| July 2022 to June 2023 | 2021 | $79,845 | $129,757 |
| July 2023 to June 2024 | 2022 | $81,761 | $133,141 |
If your income is between the minimum and maximum income for a given period, you will have to repay 15% of the excess amount. If your income is above the maximum income, you will have to repay the entire OAS pension.
How do I Minimize OAS Clawback?
There are some strategies that you can use to minimize or avoid the OAS clawback, such as:
- Splitting your Income With your Spouse or Common-Law Partner. This can lower your individual income and reduce the amount of OAS clawback. You can split up to 50% of your eligible pension income, such as CPP, RRIF, or annuity income, with your spouse or common-law partner. You can also transfer unused age, pension, or disability credits to your spouse or common-law partner.
- Delaying your OAS Pension. This can increase your OAS pension amount and offset the amount of OAS clawback. You can delay your OAS pension for up to 60 months after you turn 65. For every month you delay, your OAS pension will increase by 0.6%. However, after age 70, there is no advantage in delaying your OAS pension.
- Reducing your Taxable Income. This can lower your net income and reduce the amount of OAS clawback. You can reduce your taxable income by using tax deductions, such as RRSP contributions, child care expenses, medical expenses, and charitable donations. You can also use tax credits, such as the basic personal amount, the age amount, the pension income amount, and the disability amount.
- Using Tax-efficient Investments. This can lower your taxable income and reduce the amount of OAS clawback. You can use tax-efficient investments, such as Tax-Free Savings Accounts (TFSAs), dividend-paying stocks, capital gains, and flow-through shares. These investments generate income that is either tax-free or taxed at a lower rate than interest income.
Conclusion
Old age pension in Canada can provide you with a steady source of income in your senior years. However, the amount you can receive may vary depending on your income, residency, and contributions. To find out more about your eligibility and payment options, you can visit the Old Age Security and Canada Pension Plan websites, or contact Service Canada. You can also consult a financial planner or advisor to help you plan for your retirement.
FAQ
Q: What is the difference between OAS and CPP?
A: OAS stands for Old Age Security, which is a universal pension that depends on how long you lived in Canada or specific countries after the age of 18. CPP stands for Canada Pension Plan, which is a retirement pension that depends on how long you’ve been working and how much money you’ve contributed over the years.
Q: How do I qualify for OAS?
A: To qualify for OAS, you must be 65 years or older, a Canadian citizen or a legal resident at the time your OAS pension application is approved, and have lived in Canada for at least 10 years since the age of 18.
Q: How do I apply for OAS?
A: You can apply for OAS online, by mail, or in person. You should apply for OAS at least six months before you turn 65, or as soon as you meet the eligibility criteria. You will need to provide your personal information, banking information, and proof of identity, residence, and income.
Q: How much can I get from OAS in 2023?
A: The amount of OAS you can get in 2023 depends on how long you have lived in Canada and your income level. The maximum monthly payment for OAS is $707.68 from October to December 2023 and $778.45 from July to December 2022. However, if your income is higher than a certain threshold, you may have to repay part or all of your OAS pension. This is called the OAS clawback.
Q: What is the OAS clawback and how can I avoid it?
A: The OAS clawback is the amount of OAS pension that you have to repay if your income is higher than a certain threshold. The OAS clawback is also known as the OAS recovery tax. The OAS clawback is calculated by multiplying the full OAS pension by 15% of the amount by which your income exceeds the minimum income threshold. You can avoid or minimize the OAS clawback by splitting your income with your spouse or common-law partner, delaying your OAS pension, reducing your taxable income, or using tax-efficient investments.
Q: How do I qualify for CPP?
A: To qualify for CPP, you must have worked and made at least one valid contribution to the CPP. The amount of CPP you can receive depends on how much and how long you have contributed, and the age you start receiving it.
Q: How do I apply for CPP?
A: You can apply for CPP online, by mail, or in person. You can start receiving CPP as early as age 60 or as late as age 70. You will need to provide your personal information, banking information, and proof of identity, residence, and income.
Q: How much can I get from CPP in 2023?
A: The amount of CPP you can get in 2023 depends on how much and how long you have contributed, and the age you start receiving it. The maximum monthly payment for CPP is $1,306.57 in 2023. The average monthly amount paid for a new retirement pension (at age 65) in June 2023 was $772.71.
Q: How is the CPP pension calculated?
A: The CPP pension is calculated based on your earnings and contributions during your working years. The CPP uses a formula that takes into account your average monthly earnings, your contribution rate, and your adjustment factor. The adjustment factor is a percentage that increases or decreases your CPP pension depending on the age you start receiving it.
Q: How can I increase my CPP pension?
A: You can increase your CPP pension by working longer, earning more, contributing more, or delaying your CPP pension. Working longer and earning more can increase your average monthly earnings, which is one of the factors that determines your CPP pension. Contributing more can increase your contribution rate, which is another factor that determines your CPP pension. Delaying your CPP pension can increase your adjustment factor, which is the percentage that increases your CPP pension for every month you delay.