The Old Age Security (OAS) pension in Canada

What is the “Old Age Security (OAS)” pension in Canada ?

Like CPP (Canada Pension Plan), the Old Age Security (OAS) pension is also an important part of retirement income system in Canada. Payments under this plan are available to any Canadian citizen or legal resident of Canada over the age of 65 and has lived in Canada for at least 10 years after the age of 18. Also interesting to know that the OAS pension is not designed to be an income replacement tool. Government of Canada expects you to contribute towards your own retirement by depositing your funds into registered accounts (like RRSP) and other non-registered accounts. The income earned from OAS plan can be an added benefit for living after you get retired. It is not intended to replace any plan however is only available to support you during your retirement period.
We live in a country that has history of supportive old aged individuals. Canada’s retirement system is broadly consists of various plans from which on of them is Old Age Security pension.

Receiving OAS Pension:

To take the full advantage of this, you must have lived in Canada for at least 40 years after the age of 18. Persons who have lived in Canada less than 40 years, but more than 10, can receive a partial funds under this plan.

These rates are reviewed 4 times a year to adjust for changes in the cost of living, based on the CPI (Consumer Price Index). It is also possible to receive your benefits as early as age 60 if you are low-income and qualify. However the amount you receive phases out according to your income. Once you reach a certain income level, you are no longer eligible for OAS payments.

If you are moved outside Canada, then you can also receive OAS. You can even arrange to receive your payments in your local currency, if you are eligible. Check with Service Canada for more information regarding what you need to do in order to arrange OAS pension payments if you plan to live outside the country.

Taxation for OAS payments:

There are few tax implications that needs to be aware of with Old Age Security. If you are above the income level that government decides every for repayment, then you need to repay 15% of any income over that limit commonly known as OAS clawback. It can be painful to deal with the clawback if you haven’t made plans to deal with it. Lower income earners may also be eligible for the Guaranteed Income Supplement (GIS), which is an additional monthly payment.

Therefore it is important for you to understand these implications and prepare yourself for these charges.You may consult with a tax specialist or a retirement specialist to help you figure out how best to deal with the tax implications.

OAS and CPP combined to give you annual payout of about $25,000 per couple, are an excellent foundation to your retirement planning.