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A person who moves to Canada in middle age won’t be entitled to the maximum Old Age Security pension. Find out the impact of OAS deferral in this case.
I have asked this question to CRA and have got different answers depending on whom I am speaking to. I migrated to Canada in 2001 and was born in the year 1956. Therefore, I am over 65 but not drawing from OAS yet. If I claimed OAS when I was 65 (in 2021), I would have got half (20 divided by 40) of OAS. By delaying the OAS to, say, when I am 70 years (in 2026), am I increasing my years of residence in Canada to 25? And at the same time, do I get the additional 0.6% increase per month to a total of 36% increase in my OAS? Or is that considered double dipping?
—Amin
The best source of information for Old Age Security (OAS) is Service Canada, Amin. Service Canada is operated by Employment and Social Development Canada and administers many of Canada’s government services and benefits, including the OAS pension. Canada Revenue Agency (CRA) may be able to provide limited tax-related information about your OAS.
You generally need 40 years of residency in Canada after the age of 18 to qualify for the maximum OAS pension. The maximum monthly payment as of the fourth quarter of 2023 is $707.68 for someone who started their OAS at age 65. Someone aged 75 or older would be entitled to up to $778.45.
There may be situations where you qualify for the full pension without meeting the 40-year residency requirement. One example would be if you were over 25 and lived in Canada or had an immigration visa on or before July 1, 1977.
Another instance where you may qualify for a higher pension is if you lived in a country with a social security agreement with Canada. Time spent in other countries may count towards your OAS residency formula. If you worked outside Canada for the Canadian Armed Forces or an international charitable organization, this time might also count.
If you have under 40 years of residency, your pension is pro-rated. You need to have lived in Canada for at least 10 years after the age of 18 if you apply for OAS as a Canadian resident. If you live outside of Canada when you apply, you need 20 years of residency.
Interestingly, Amin, you can defer your OAS pension after age 65 to increase your residency requirements. This can work well for someone who is trying to get to 10 or 20 years, respectively, to qualify for the pension at all. In your case, the deferral will not have an impact on the residency calculation. I will explain why.
The reason is an OAS recipient deferring their pension after age 65 can only benefit from one of two enhancements: one, the years of residency; or two, the age-based increase. If you defer OAS to after age 65, your age 65 entitlement increases by 0.6% per month or 7.2% per year of deferral. You can start it as late as 70 for a maximum 36% increase.
If you get an extra year or 1/40th of residency, that amounts to a 2.5% boost in your OAS.
Unfortunately, Amin, you cannot get the 2.5% residency boost and the 7.2% age boost for deferring. You get the higher of the two, which is obviously the age-based adjustment of 7.2%.
OAS and Canada Pension Plan (CPP) deferral are often advantageous for healthy retirees. OAS has nuances to consider for low-income or high-income retirees, though.
Low-income OAS recipients may qualify for the Guaranteed Income Supplement (GIS). To be eligible, the income thresholds for 2023 are:
High-income retirees whose income exceeds $86,912 for 2023 will be subject to a pension recovery tax or clawback of $0.15 per $1 above that threshold when they file their tax return.
In summary, Amin, if you are in good health, you should consider deferring your OAS. If you have a low income, you should consider starting it right away if you could receive the GIS. If your income is high, you may need to contend with OAS clawback. If you are deferring to increase your residency years, it may only help you hit the 10- or 20-year minimum thresholds for residents and non-residents applying for OAS. It will not increase your pension. But the 0.6% monthly deferral increase after age 65 will apply.
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Good day to you ,
For the 10 years residency requirement, a person should have lived the 10 years in Canada without leaving the country and what happens if a client lived 5 years in Canada , then left a country for 3 years and came back and lived another 5 years, the total in this case would be 10 years, would he be eligible to OAS.
Thanks for clarifying this situation.
Younes Ben Sbeh
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.