What to expect when receiving OAS at 65

Right after tax season I received in the mail one of those little brown envelopes from the federal government. No, they weren’t after me for more tax money but the opposite: it was from Service Canada and they were proposing to send ME money as of my next birthday. The letter informed me that having met three criteria, I was eligible to receive the Old Age Security (OAS) pension as of my 65th birthday in April 2018.

Better yet, I didn’t even have to apply: if I didn’t respond, they would send a cheque to the address they had on file. The letter says if their three facts about you are correct “and you wish to receive your OAS pension at age 65, you do not need to return this letter nor contact us. We will send you more information and your payments will begin in the month following your 65^th birthday.”

Sweet! Money for nothing and no paperwork or decision-making required! But of course things are seldom that easy. If I wished to defer the pension (for an enhanced return, which grows the longer you wait, by 0.6% per month extended, to a maximum 36% at age 70), I needed to notify them by making corrections to the letter and returning it ASAP, well before my 65^th birthday. And if I wanted to have the pension deposited electronically to my bank account, I’d also have to get in touch with them.

• When not to apply for OAS

As it happened, that is what I wished and while I was at it, I planned to ask them to deduct some tax at source, as I do with one of my employer pensions. I hate having to pay at tax-filing time.

I have to say my initial attempt to do this on the Internet was a frustrating one. It turned out to be far easier to call them on the telephone on the English-language helpline listed in the letter: 1-800-777-9914. Due to “high call volume” I was put on hold for 15 minutes, during which time the automated voice advised listeners to apply for OAS at least six months before their 65^th birthday and no more than a year in advance. It also said the maximum monthly OAS benefit is currently $578.53.

But once I got through to a live person it was a surprisingly painless process of providing certain identifying and banking information. I chose to have 25% tax withdrawn at source so with no further action on my part, I can expect my first OAS deposit of $433.90 (net of tax) to arrive magically in my bank on or about May 29, 2018. By then it may be slightly more, as it may be indexed to the cost of living.

Of course, before all this happens you have to jump through a few hoops. The three criteria are to be age 65, to be a Canadian citizen or permanent resident of Canada, and to have lived in Canada for at least 40 years since the age of 18. Check, check and check!

Now, readers may recall last summer I articulated my reasons for planning to take OAS as soon as I turn 65, even though I plan to defer the Canada Pension Plan (CPP) to as late as age 70. Why? In a nutshell, back in the 1990s, Ottawa tried to roll back OAS benefits for affluent seniors when it proposed the Seniors Benefit under the Paul Martin Liberals. I wouldn’t put it past the current Liberal administration to attempt the same ploy. Plus, as things currently stand, if you wait till 70 and your RRIF kicks in, you could well find those enhanced benefits clawed back. This is a classic case of taking a bird in the hand.

There was actually more good news in the Service Canada letter, although probably not for the likes of me or readers of this website: seniors with few other sources of income (such as corporate pensions, RRIFs and the like) may also qualify for the Guaranteed Income Supplement (GIS) to OAS. “If you have little or no other income,” the letter says, “In addition, your spouse or common-law partner may also qualify for the Allowance.”

• Should I work past 70 while collecting CPP and OAS?

Unfortunately, receiving the GIS is not quite as automatic as the OAS. “You must apply for these benefits,” the letter explains, inviting the reader to contact them or to apply online at www.servicecanada.gc.ca.

Service Canada also explains that you have to be receiving OAS in order to receive the GIS. Choosing to delay OAS means also delaying receipt of the GIS. However, “If you delay your pension, your spouse or common-law partner can apply for the Allowance when you apply for your OAS pension.”

Now from where I sit, anyone who qualifies for GIS probably needs the money at 65, so this does seem to be a bit of hypothetical situation.

The mailing contains a second page revealing your personal access code that will expire in two years. This is entered online at your my Service Canada Account (MSCA). On the flip side is a Privacy Statement, which tells the recipient that the information gathered on your behalf comes from the Canada Revenue Agency, the Canada Pension Plan (or Quebec), your Social Insurance Number and the data they have on your birth date and address. This personal information is collected under the authority of the Old Age Security Act.

It also advises that this information “may be shared” within the Ministry of Employment and Social Development Canada, or any federal institution, provincial authority or public body with which the ESDC has an agreement. And it reminds you that your “participation in the OAS automatic enrolment process is voluntary.”

Jonathan Chevreau is founder of the Financial Independence Hub and co-author of Victory Lap Retirement. He can be reached at [email protected] 

MORE ABOUT OAS:

• Why I’m taking OAS right at 65
• How business owners should time CPP and OAS
• Key to ‘rich’ qualifying for GIS is large TFSA
• Do bonds still belong in an RRSP?
• Think tank calls for tightened OAS eligibility
• How not to fund retirement

About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.

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