Top 10 questions we are asked about: Old Age Security (OAS)

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Michael Callahan, CFP®, CIM®

At Edward Jones, we know that retirement is an important life event with many considerations. One of the most common sources of retirement income for Canadians is Old Age Security (OAS). The OAS retirement pension is a taxable monthly benefit intended to provide seniors with a modest pension. If you qualify, you’ll receive the OAS pension for the rest of your life. That’s why we’ve put together a list of the top 10 questions we receive about OAS.

1. How do I qualify for an OAS pension?

OAS eligibility is based on your age and number of years you were a resident of Canada. It's worth noting that OAS eligibility is not related to your employment history, and you may qualify for an OAS pension even if you have never worked or are still working. There are some differences in eligibility depending on if you are currently living in Canada or abroad. According to the Government of Canada's website:

If you are living in Canada, you must:

  • be 65 years old or older,
  • be a Canadian citizen or a legal resident at the time your OAS pension application is approved, and
  • have resided in Canada for at least 10 years since the age of 18.

If you are living 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 resided in Canada for at least 20 years since the age of 18.

In most cases, Service Canada will be able to automatically enroll you for the OAS pension. Service Canada will inform you if you have been automatically enrolled.

2. How much OAS pension will I receive?

OAS pension amounts vary from one person to the next, and the amount you receive depends on several factors such as the number of years you’ve been a resident of Canada, the age at which you start receiving your OAS pension, and net income from the previous year.

For the period January – March 2024, the maximum monthly amount you could receive for those age 65 to 74 is $713.34, whereas the maximum OAS pension for those age 75 and over is $784.67. Note that OAS benefits are income tested, and your benefit will be reduced (eventually to zero) if your income exceeds the OAS recovery tax threshold (covered in the following question).

As of July 2022, seniors aged 75 and older receive a 10% increase in their OAS pensions. Individuals who have not yet turned age 75 will see an increase in the OAS pension in the month following their 75th birthday.

3. What is the OAS Clawback?

OAS pension benefits are income tested via an OAS recovery tax, often called clawback. When your income reaches a certain level, you will begin losing a portion of your OAS benefit via the recovery tax (i.e., your pension is clawed back). The first thing to note is that it isn’t an all-ornothing scenario. Rather, as your income increases above the threshold, your OAS benefit is gradually reduced. The recovery tax is 15%. In other words, for every dollar of income above the threshold, you lose 15 cents of your OAS pension benefit.

The recovery tax period for OAS benefits received from July 2024 to June 2025 is based on your 2023 income. For this period, the threshold is $86,912. That is, OAS pension benefits are subject to the OAS recovery tax when your income exceeds $86,912, and are exhausted completely when your income reaches $142,609 (for those age 65 to 74 inclusive) or $148,179 (for those age 75 and over).

4. Are OAS benefits taxable?

Yes, OAS pension benefits are fully taxable with no preferential tax treatment. However, the Guaranteed Income Supplement (GIS), Allowance, and Allowance for the Survivor benefits are tax-free.

5. When can I start to receive OAS pension benefits?

The normal start date for receiving an Old Age Security (OAS) pension is age 65. Although an early start is not permitted, you can begin as late as age 70, or anywhere in between age 65 and 70. If you postpone receiving OAS until after age 65, your payments will increase by 0.6% each month (7.2% per year), up to a maximum increase of 42% at age 70. The maximum monthly amount you can receive is reached when you turn 70. There is no advantage in waiting until after age 70 to start receiving your pension. Further, there is no requirement to stop working to receive your OAS pension.

6. When should I start to receive my OAS pension?

There are many factors to consider when deciding when to start receiving OAS. Although much academic literature supports deferring to a late start date, this is a highly personalized decision. Some items to consider include:

  • Your tax rate – OAS is fully taxable, so if you’re already in a high tax bracket (for example, if you are still working or if you have received a severance or other retirement type package), it may be beneficial to defer.
  • Your total income – OAS pension is subject to a recovery tax or ‘clawback’, which means that your OAS benefits are reduced (and eventually eliminated) as your income increases beyond a certain threshold.
  • Your need for income – If you need OAS at age 65 in order to achieve your desired level of retirement income, postponing to a later date may not be a suitable option.
  • Your health – If you’re healthy and expect to live a long life, it may make sense to start receiving your OAS pension later. On the other hand, if you believe you have a shortened life expectancy, it may be more beneficial to start as soon as possible.
  • Your lifestyle – Remember, it’s not just about the numbers. While the math may dictate one course of action, your lifestyle may dictate another as there’s real value in having the money while you’re still able to make good use of it.

You can work with your Edward Jones advisor to determine the optimal date for you.

7. Are there any additional benefits available to low-income individuals?

Yes, there are additional benefits available for low-income individuals, including the Guaranteed Income Supplement (GIS) for those 65 and older, and the Allowance, and Allowance for the Survivor for individuals age 60 to 64. These supplementary benefits for low-income individuals are received tax-free.

  • Guaranteed Income Supplement (GIS) – a monthly payment to low-income seniors aged 65 and older. In order to qualify, you must receive an OAS pension, must live in Canada, and your income must be below $21,624 (2024). Depending on your personal situation, you could receive an amount up to $1,065.47 permonth (2024), with reduced amounts available depending on your household income and personal circumstances.
  • Allowance – a monthly payment to low-income individuals aged 60 to 64 inclusive. In order to qualify, your spouse or common-law partner must be eligible to receive the GIS, you must live in Canada, and your combined household income (you and your spouse or partner) must be below $39,984 (2024). Depending on your personal situation, you could receive an amount up to $1,354.69 per month (2024), with reduced amounts available depending on your household income and personal circumstances.
  • Allowance for the Survivor – a monthly payment to low-income individuals aged 60 to 64 inclusive. In order to qualify, your spouse or common-law partner must be deceased and you must not have re-married or entered into a common-law relationship, you must live in Canada, and your income must be below $29,112 (2024). Depending on your personal situation, you could receive an amount up to $1,614.89 per month (2024), with reduced amounts available depending on your income and personal circumstances.

8. What happens to my OAS pension when I die?

There is no survivor benefit or death benefit. Benefits are payable for the month in which the death occurs, but any benefits received after that will have to be repaid. OAS pension benefits must be cancelled upon death by contacting Service Canada by phone or by sending the required documentation to the nearest Service Canada Office by postal mail.

9. Can I split my OAS pension with my spouse or partner?

No, the OAS pension is not eligible for pension income splitting with a common law partner or spouse.

10. How do I apply for OAS?

In some situations, Service Canada will automatically enroll you for the OAS pension. When this happens, Service Canada will inform you if you have been automatically enrolled. If Service Canada does not have enough information to enroll you automatically, you will need to apply for your OAS pension.