Two Canadian income programs for seniors have similar sounding names: the OAS and the GIS. The Old Age Supplement, OAS, is a payment made to older Canadians based on how long they have lived in this country. The Guaranteed Income Supplement tries to ensure that all older Canadians have at least a small income to live on. This article is about the Old Age Security pension and will help you decide whether you will get it.
Why Do We Need Old Age Security When We Have the Canada Pension Plan?
Canadians who work must contribute to the Canada Pension Plan, CPP. It, in turn, provides them with a modest income after retirement.
Some Canadians, however, will never work for pay, or may only work for a few years. Or they may work their entire lives but for such low earnings that their CPP contributions are negligible. They will not contribute much (or anything) to the CPP and they will not get much or anything back from the plan.
Examples can include persons who stay at home raising children and/or grandchildren and persons who lack the skills or abilities to find regular paid employment. It can also include persons with extremely low paying jobs, such as people on commission, and certain types of artists and self-employed persons.
CPP is also a fairly recent invention. According to the History of Pensions, the Canada Pension Plan was introduced in 1965. That means many people in Canada who are retired today did not belong to the CPP for many years, if at all. Instead, they may have earned pensions privately from their employers. Or they may have no pension at all.
OAS is a Modest Pension Earned by Living Here
The Old Age Security pension was created before the Canada Pension Plan. OAS was intended to provide a small guaranteed income to people who had lived in Canada all their lives but who now were too old to work.
What Does the OAS Pay?
The current maximum OAS pension payment is made monthly to a person aged 65 or older who has lived in Canada for at least 40 years since they turned 18. In September, 2013, the maximum OAS payment per month was $549.89 before tax.
Can I Increase My OAS Payments?
Under recent changes, it is possible to get more OAS by delaying when you start receiving it. According to the Service Canada website:
“Starting July 2013, you can choose to delay receiving your Old Age Security pension for up to 60 months after your 65 birthday in exchange for a higher monthly amount. Your monthly pension will be increased by 0.6% for every month you delay receiving it, up to a maximum of 36% at age 70.”
Am I Eligible to Get the OAS Pension?
To get the maximum OAS,
- a person must have lived in Canada at least 40 years since turning 18; or
- the person must have been 25 years or older on July 1, 1977 and meet the rules described by Service Canada at http://www.servicecanada.gc.ca/eng/isp/pub/oas/oas_pension/index.shtml#pension-calculated
To receive an OAS payment, the person must be 65 years of age or older.
Under recent rule changes, however, that age requirement will gradually increase to 67. If you were born after March 31, 1958 you will be affected by this increased age requirement.
To get any OAS, you must have lived in Canada at least 10 years after turning 18. (Or 20 years if you are applying from outside of Canada.)
If you have not lived 40 continuous years in Canada, you will have to prove when you lived here and when you were lived elsewhere.
To get the OAS, you must also be a Canadian citizen or a legal resident at the time you are approved. If you weren’t born here, you will have to prove your legal status in Canada.
It may also be possible to qualify if you are living in a country with which Canada has negotiated a social security agreement or if you contributed to the social security agreement of a member country. For these types of details, please contact Service Canada directly.
Can I Keep the OAS Even If I Have Other Income?
Unlike the CPP, the OAS payments are made from the taxes collected each year from Canadian citizens and companies. This has led to many demands to cut OAS payments to seniors who have high personal incomes or assets.
While the federal governments have generally been unwilling to cut the OAS payments to seniors for fear of an election backlash or because of a belief that the existing system is fair, some cuts have been made.
If your net income is more than the maximum (including the OAS pension) then you will have to repay some or your entire OAS pension when you file your income taxes. In 2013, the re-payment began if you made $70 954 (including OAS) and you would have had to repay all of the OAS if you had income of $114 640. These income thresholds change regularly. You will have to check the Service Canada website to find the most current information.
You can see that if your OAS payment is being “clawed back” you are actually receiving a pretty good income compared to the average Canadian working for minimum wage. (I realize you also are probably paying a lot of taxes, have probably paid a lot of taxes in the past, and have managed your money well.)
Is the OAS Taxed?
Yes. Unlike the GIS, the OAS is taxable income and you have to report it on your annual tax return.
Can I Get the GIS If I Leave Canada?
Yes, under certain conditions. Otherwise, you can get payments for 6 months after you leave Canada, but after that payments cease.
- You can read about the rules governing the amount of OAS you are entitled to receive at: “How is Your Pension Calculated?”
- What is the Guaranteed Income Supplement, GIS, and Will I Get It?
- What Will I Live On When I Retire if I Have No Savings and Don’t Own a Home?
Have you or a friend or relative discovered any quirks in the OAS system? Please share your experiences with a comment.