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Old Age Security in Canada

March 29, 2021

Table of Contents

As you approach or prepare for retirement, it’s important to know what kind of Old Age Security in Canada is available, and how it fits in with other retirement income. There are three key pillars of income for Canadians in their retirement:

  • Old Age Security Canada (OAS)
  • Canada Pension Plan (CPP)
  • RRSPs/company pension plans

Knowing exactly how much you are likely to receive for CPP and Old Age Security is essential to be able to plan properly for your retirement.

People sometimes get confused between the Canada Pension Plan (CPP) and Old Age Security (OAS). CPP is a monthly, taxable benefit meant to replace some of your income in retirement. To qualify, you must be at least 60 years old and to have made CPP contributions during your working life. The amount that you receive will depend on your earnings during your working years, how much you contributed to CPP and the age you start receiving it.

The maximum CPP pension amount for 2021 is $1,203.75, but most people don’t qualify for that amount. The average CPP pension amount for new beneficiaries in 2020 was considerably less at $689.17. You can find out how much you are likely to receive by logging into your My Service Canada account or by using the Canadian Income Retirement Calculator. The Old Age Security pension in Canada is quite different from CPP in that qualification depends on how long you’ve lived in the country. You could receive the OAS pension even if you’ve never worked.

What is Old Age Security in Canada?

Old Age Security in Canada is a monthly payment that you can start to receive as soon as you turn 65. Like old age pension payments, the money you receive from Old Age Security is taxable. It is designed to provide most pensioners with an amount to cover basic necessities.

Old Age Security eligibility

Retired Canadians who have lived here most of their life will probably have Old Age Security eligibility. Here are some of the key criteria that will determine if you qualify:

  • At least 65 years of age
  • You must be a Canadian citizen or permanent resident and must have lived in Canada for at least 10 years since turning 18.
  • To receive the full Old Age Security payments, you need to have lived in Canada for at least 40 years since turning 18.
  • If you live outside of Canada, you must have been a Canadian citizen or permanent resident before you left and have lived in Canada at least 20 years since turning 18.

How much is Old Age Security in Canada?

The answer to the question, how much is Old Age Security in Canada, is the same as for the question, how much is the old age pension in Canada? It depends on your personal circumstances and when you start to receive it.

If you’ve lived in Canada for less than 40 years since turning 18, you’ll receive less than the full amount, even if you have Old Age Security eligibility. The full amount of the OAS pension is adjusted quarterly, based on the Consumer Price Index (inflation). For January to March 2021, for example, the maximum Old Age Security payment was $615.37. For every year below 40 that you lived in Canada after you turned 18, you will receive one fortieth less in Old Age Security payments.

How much is Old Age Security for me?

This is an easy calculation: divide the full amount by 40 and multiply that by the number of years you have lived in Canada since turning 18. Here are some examples:

Years spent in Canada since turning 18 Old Age Security payments Calculation

40

$615.37

Full amount

30

$461.25

$615.37/40 x 30

20

$307.69

$615.37/40 x 20

10

$153.84

$615.37/40 x 10

How much is Old Age Security if you defer receiving it?

For every month that you defer your Old Age Security in Canada, your payments increase by 0.6%, which works out to 7.2% each year and 36% if you delay receiving Old Age Security payments until you turn 70. What is Old Age Security worth if you defer receiving it for five years? The current maximum OAS pension payment of $615.37 would be worth $836.90.

How to apply for OAS pension

How to apply for old age pension in Canada (CPP) is very different from how you apply for the OAS pension. Some retirees are enrolled for Old Age Security automatically by Service Canada. Soon after you turn 64, the government will send you a letter to either inform you that you’ll be enrolled automatically, or that you need to apply for it.

You can apply via your My Service Canada account or mail the application to Service Canada. If you want to defer receiving your OAS pension payments, you can do this through My Service Canada or by completing and returning your automatic enrolment letter.

Old Age Security eligibility if you’re a high earner

Old Age Security in Canada has an income limit. If your net income was over $79,054 in 2020, your OAS pension benefit will be clawed back by 15% of the amount above this limit. So, let’s say you earned $89,054 in 2020. You would have earned $10,000 over the limit and would have to pay back $1,500 of your OAS pension benefit ($10,000 x 15%).

If you earned $126,058 or over, you would have to pay back all your OAS pension benefit.  

A better way to improve your retirement income

The Old Age Security payment in Canada is meant to help retirees out financially, however, even the maximum payment is not a great deal of money. If you don’t have much coming in from a company pension plan, RRSPs or the CPP, you may find that retirement is a financial struggle.

If you’re a Canadian homeowner aged 55+, the CHIP Reverse Mortgage from HomeEquity Bank could be the perfect solution for increasing your retirement income. You can borrow up to 55% of the value of your home with no regular mortgage payments. You only pay back what you owe when you sell your home or move out.

Call us today at 1-866-522-2447 to find out how much you could borrow, so you can start living the retirement you’ve always wanted.

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