What is Old Age Security and how does it work?
Old Age Security (OAS) is a public pension for most Canadians who are 65 or older. Along with the Canada Pension Plan (CPP) and private retirement savings such as Registered Retirement Savings Plans (RRSPs) and workplace pensions, they form the three pillars of Canada’s retirement income system. Unlike the CPP, where people pay into a shared fund that provides monthly payments, the OAS is fully funded by government money.
To be eligible for the OAS pension, individuals must be at least 65 years old, a Canadian citizen or permanent resident, and have lived in the country for 10 years or more since the age of 18. Service Canada usually enrolls eligible individuals automatically if they have sufficient information. In some cases, individuals must enroll themselves by mail or online.
The three pillars of Canada’s retirement income system
How much are individuals eligible to receive from Old Age Security?
There are three main components of Old Age Security: the OAS pension, the Guaranteed Income Supplement (GIS), and the Allowance. The pension pays out a fixed amount monthly and increases are calculated each January, April, July, and October, based on changes in the Consumer Price Index. Currently, the maximum an individual, single or married, can receive is $$727.67 per month. There is a top-up for those over 75 years old that increases the maximum to $800.44.
The Guaranteed Income Supplement is an additional benefit for low-income seniors receiving Old Age Security. Unlike the pension, the Guaranteed Income Supplement is not taxable. The maximum monthly GIS payment for single seniors and seniors whose partners do not receive OAS is $1,086.88 per month. Those with a partner receiving OAS are entitled to upwards of $654.23 per month.
The Allowance is meant for low-income seniors aged 60-64 whose partners get OAS and GIS. It's based on the total income of both partners. To qualify, their combined income must be under $40,800. The maximum benefit is $1,381.90 per month.
Do those with high retirement income receive OAS?
There is a clawback mechanism that impacts individuals who earn more than a specific threshold. Currently, those who earn more than $86,912 in worldwide income may be subject to repaying part or their entire OAS pension. The repayment is 15% of the difference between an individual’s worldwide income and the threshold. You can find more information about the Old Age Security Pension here.
How much does Old Age Security cost the Government of Canada?
In 2023, 7,209,154 people got Old Age Security benefits, costing the Government of Canada $77 billion, an 11% increase from $69 billion the previous year. It’s the second consecutive year the cost of OAS benefits experienced double-digit increases. That year, Old Age Security accounted for 15.7% of the federal government’s total expenditures.
As Canada's population grows older, more money will need to be spent on Old Age Security. From 1980 to 2023, Old Age Security obligations expanded tenfold due to more seniors receiving the benefit and changes in the Consumer Price Index. This trend is expected to continue. A report entitled Actuarial Report (18th) on the Old Age Security Program as at 31 December 2021 published by The Office of the Superintendent of Financial Institutions Canada, forecasts that by 2060, 13 million people will be receiving OAS and costs to fund the benefit will reach $276 billion, almost four times the amount incurred in 2023 and about 40 times the amount spent in 1980.
