What Is Old Age Security in Canada?

Over 6 million Canadian seniors currently receive Old Age Security (OAS) benefits, which are part of a government-sponsored retirement benefit program.

Old Age Security provides monthly benefits to Canadians aged 65 and older who meet residency requirements. OAS is funded through general tax revenues and does not require recipients to have paid into it directly through employment.

Understanding how OAS works and the factors that determine your payment amounts can help you optimize your retirement income.

What is Old Age Security?

The Old Age Security pension (OAS) is a monthly benefit administered by Employment and Social Development Canada (ESDC) and is available to most Canadians aged 65 and over. It is funded out of general tax revenues rather than directly through employment contributions.

OAS is intended to provide a baseline of retirement income for Canadian seniors, supplementing other sources like the Canada Pension Plan (CPP), private pensions and savings.

As of January 2025, the maximum OAS pension amount is $727.67 per month for those aged 65-74. Individuals aged 75 and over receive an additional 10%, which amounts to $800.44 per month (Source). The amount is adjusted quarterly based on the Consumer Price Index to account for increases in the cost of living.

OAS benefits are taxable income. Higher-income seniors must repay part or all of their OAS pension through the pension recovery tax if their annual individual income exceeds $93,454 in 2025.

Who Qualifies for Old Age Security in Canada?

To be eligible for any Old Age Security pension, you must meet the following four requirements:

Age Requirements

The primary eligibility criterion for OAS is reaching the age of 65. Your pension can commence as early as the month following your 65th birthday, providing immediate access to benefits upon reaching the qualifying age. There are no upper age limits for receiving OAS, and benefits continue for life once they begin.

Residency Requirements for Canadian Residents

For individuals living in Canada at the time of application, three key conditions must be satisfied:

• Be a Canadian citizen or legal resident at the time of approval
• Have resided in Canada for a minimum of 10 years after age 18
• Meet the age requirement of 65 or older

Residency Requirements for Non-Residents

Canadians living outside the country face more stringent requirements reflecting the program’s focus on supporting Canadian residents:

• Must have been a Canadian citizen or legal resident on the day before leaving Canada
• Must have resided in Canada for a minimum of 20 years after age 18
• Must meet all other eligibility criteria

Special Circumstances and Exceptions

Several special provisions accommodate Canadians who worked abroad while maintaining Canadian connections.

You may qualify if you lived outside Canada while employed by a Canadian organization, such as the Armed Forces or a financial institution, provided you either returned to Canada within six months of employment ending or turned 65 while still employed and maintained your Canadian tax residence.

When Should You Start Receiving OAS Payments in Canada?

You are eligible to start receiving OAS pension payments the month after you turn 65 years old. However, you can voluntarily choose to defer payments for up to 60 months (5 years) after your 65th birthday.

Deferring OAS will result in higher monthly payments when you do start your pension:

• OAS increases by 0.6% for every month it is deferred past age 65
• Maximum deferral to age 70 increases it by 36% (Source)

For example, if the full OAS amount is $500 at age 65, deferring it to age 70 would mean receiving $680 per month instead.

However, delaying OAS might not be the best strategy if:

• You have a low income during your 60s and need the payments sooner
• You are already over age 70 and missed the deferral window
• Your spouse is relying on the OAS Allowance payments between ages of 60-64

That said, you should consult with a financial planner to determine if deferring OAS is optimal based on your overall retirement income plan.

Once you decide when to start receiving OAS, it’s also helpful to know when the payments are issued each month. The OAS payment dates in 2025 follow a regular monthly cycle.

What Happens to OAS When You Pass Away?

Here are three key things that happen with your OAS benefits when you die:

• No Survivor Benefits After Age 65: There are no continuing OAS survivor benefits for your spouse or common-law partner if they are already over age 65 when you pass away. Their OAS eligibility is based on their own circumstances.
• Cancel OAS Immediately: Your OAS pension must be terminated effective the month following your death. Make sure your loved ones notify Service Canada right away.
• Allowance for Surviving Spouse 60-64: If your spouse or common-law partner is between the ages of 60 and 64 when you die, they may qualify for the Allowance for the Survivor benefit based on low-income eligibility. This provides partial OAS benefits for up to 60 months while they are under the age of 65.

Proper estate planning can help maximize OAS benefits and minimize complications for a surviving spouse.

How Is OAS Income Taxed In Canada?

OAS benefits are considered taxable income. There are four key things to understand about OAS taxation:

Report OAS as Regular Income

You must report your OAS benefits each year on your personal tax return as regular income. You will receive a T4A slip from Service Canada specifying your total OAS payments for the year.

OAS Subject to Pension Recovery Tax

OAS benefits are included in determining if you must repay some of your benefits through the pension recovery tax, also known as the “OAS clawback.”

In 2025, OAS will start to be clawed back if your net income exceeds $93,454. Your payments are reduced by 15% of your income above this threshold. Once your income reaches $151,668 in 2025, your OAS is completely eliminated.

Source: Old Age Security pension recovery tax – canada.ca

No Pension Income Splitting or Credits

You cannot split your OAS income with your spouse on your tax return. OAS income does not qualify for the pension income tax credit or the spouse’s tax credit.

Non-Resident Withholding Tax May Apply

If you are a non-resident of Canada receiving OAS, you may be subject to an additional non-resident tax on your benefits, depending on the tax treaty with your country of residence.

How Does OAS Fit Into Your Retirement Income Plan?

Understanding OAS is key to developing a tax-efficient retirement income plan. Here are seven important factors to consider:

• Start with an accurate estimate of your OAS payment amount based on your age and Canadian residency.
• Determine the optimal time to start OAS based on other income sources, your tax situation, and your spouse’s benefits.
• Understand how OAS interacts with other sources like CPP, workplace pensions, and RRIF withdrawals. Work with a financial planner to coordinate income to minimize OAS clawbacks.
• Consider whether OAS deferral from 65 to 70 makes sense based on your income needs in your late 60s and increased payments later.
• Develop a tax minimization strategy and know how OAS affects your marginal tax bracket.
• If emigrating abroad, be aware of potential non-resident taxation rules on OAS.
• Review your overall retirement plan annually and when life changes occur. Make adjustments to optimize your after-tax income.

Thoughtful planning can help you maximize your Old Age Security benefits. Consult an experienced financial advisor to incorporate OAS into a tax-efficient retirement plan tailored to your financial situation.

The bottom line

Knowing the ins and outs of OAS is an important piece of your retirement puzzle. While rules and payments adjust over time, the principles remain relevant. With thoughtful planning and expert guidance, you can make the most of your Old Age Security benefits. Your golden years will be that much brighter when OAS is working optimally for you.

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