Old Age Security

Old Age Security is one of Canada’s largest public assistance program which is funded directly out of the Federal Government’s revenues.  The program provides a monthly payment to Canadians who are 65 years of age or older and meet the residency requirements.

• The OAS pension is a flat rate, payable commencing at age 65. As of 2020, the maximum monthly payment is $613.53
• The payment is increased quarterly to match increases in the Consumer  Price Index. 
• Old Age Security recognizes same-sex and opposite sex common-law partners.
• OAS benefits are taxable income to the recipient 
• NOTE – Due to Covid-19, Canadians will receive a one time payment of $300. Seniors who also receive the Guaranteed Income Supplement will receive an additional $200.

Eligibility

Your employment history has no basis on qualifying for the Old Age Security pension as it does regarding Canada Pension Plan. Eligibility to receive OAS depends on your residency and how long you’ve lived in Canada. 

If you are applying from inside Canada, you must:

• be 65 years old or older;
• be a Canadian citizen or a legal resident at the time you submit your Old Age Security pension application
• You have lived for at least 10 years since the age of 18.

If you are applying from outside Canada, you must:

• be 65 years old or older;
• have been a Canadian citizen or a legal resident of Canada on the day before you left Canada; and
• have lived in Canada for at least 20 years since the age of 18.

How can I receive a full pension?

In order to receive a full pension, an individual would qualify if they’ve lived 40 years in Canada after the age of 18. If the applicant does not qualify for a full pension, they may be eligible for a pro-rated pension after a minimum of 10 years of residency in Canada after the age of 18.

The partial or pro-rated pension is calculated at the rate of 1/40th of the full OAS pension for each complete year of residence in Canada after the age of 18.

Voluntary Deferral

Since 2013, eligible Canadians, 65 years of age or older, can defer receiving their OAS pension for up to maximum 5 years. (60 months) Deferring the payment will increase the monthly benefit.

• The benefit will be enhanced by 0.6% a month, equivalent to 7.2% per year.
• The deferral can only be between the ages of 65 to 70.
• Maximum Deferral will result in a 36% monthly benefit increase at 70. (5 years x 7.2% per year)

Example of Deferral

Jeff turned 65 in June 2019. He decides that he will delay receiving his OAS pension by one year and start taking it at 66. His OAS benefit will increase by 0.6% per month up to 7.2% per year (0.6 x 12).

If Jeff’s monthly payment is $563.32  – his increased monthly payment will be (563.32 * 1.072) = $603.87

Absence from Canada

A pensioner can apply for Old Age Security from outside of Canada pending that the individual

• has lived in Canada for at least 20 years after reaching the age of 18. 
• lived and worked in a country that has a social security agreement with Canada and you meet the 20 year residence requirement

If an individual does not meet either requirement,  the individual may be able to receive OAS only for the month they left Canada and six months after that. Payments would start again once the individual arrives back in Canada.

• Example: If you left Canada in February, you would receive payments until the end of August. After August, the payments would stop until you return to Canada.

Direct Deposit

Through direct deposit, you can elect for your OAS pension to be automatically deposited into your bank account in Canada or the United States. If you live in the United States, your funds would be automatically be converted to US dollars. Your OAS payments can be made anywhere in the world in the local currency if possible. If it’s not possible then the payments are converted to Canadian dollars.

Cost of Living Increases

The monthly benefit from Old Age Security is indexed to the Consumer Price Index. Each January, April, July and October, the benefits are reviewed. The monthly benefit will not decrease if the cost of living goes down.

Old Age Security Clawback

Old Age Security has a mechanism called the clawback which involves your net worldwide income. If your net worldwide income exceeds the threshold amount which for 2020 is $79,054 Canadian dollars, you’d have to repay part of your OAS pension back. If your income exceeds the maximum recovery threshold below, your whole pension is clawed back to zero. As of July 2020, it is $128,137.

• You must pay the claw back if
  • your annual net worldwide income was more than $79,054 (for 2020, in Canadian dollars); and
  • you live in a country where the non-resident tax on Canadian pensions is 25% or more.

Net Worldwide Income

Your net worldwide income is the total of all the income you have earned from both inside and outside Canada minus allowable deductions. You must include in the calculation the following types of income:

• pensions
• social security
• interest
• dividends
• rental property
• capital gains
• business
• employment

Non Residents

Non Resident seniors who receive OAS payments must submit an Old Age Security Return of Income (OASRI) so that the CRA can determine if you have to pay a clawback and in order to ensure that your OAS payments are not cut off.

• If you reside in a country that has a tax treaty with Canada, you may be exempt from filing this form.

Clawback Rate

The clawback rate of 15% applies to the portion of net income, including OAS benefits, that exceed the OAS clawback threshold for the year. The repayment is based on the difference between net income and the threshold amount.

Example: The threshold for 2020 is $79,054.
If your income in 2020 was $86,000, then your repayment would be 15% of the difference between $86,000 and $79,054:
$86,000 – $75,910 = $6,946
$6,946 x 0.15 = $1,041.90

You would have to repay $1,041.90 for the July 2020 to June 2021 period. It is divided monthly, $86.83.

Income Taxes

Canadian Residents

Old Age Security pension is considered to be taxable income and must be declared on your income taxes. 

Non Residents

If you live outside of Canada and are not considered a Canadian resident for income tax purposes, a non-resident tax of 25% is withheld from your monthly payment, unless reduced by a tax treaty between Canada and the country you reside in.