Government pensions and benefits for seniors: OAS and GIS

We get a lot of questions about government pensions and benefits older Canadians can receive when they reach 65, which is the traditional age of retirement.  Many people don’t know the details about these pensions and these details are critical to know for retirement planning. The reality is most older adults rely on these pensions/income after retirement. This blog sets out details about the Old Age Security (OAS) pension benefit, the Guaranteed Income Supplement (GIS), and how OAS differs from the Canada Pension Plan/Quebec Pension Plan (CPP/QPP).

OAS and eligibility

The Old Age Security pension is provided by the federal government, funded from tax revenues. It is a benefit paid monthly to most Canadians 65 years of age or older. Unlike the CPP/QPP, it is not based on contributions as an employee. In other words, you do not need to have been employed to receive the OAS when you are 65. This pension benefit is based on the following criteria:

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

What will be the monthly pension amount?

As of January 2021, the maximum amount is $615.37. The benefits are adjusted quarterly and are indexed to the Canadian Consumer Price Index (CPI).  In the 2021 federal budget, it was announced that  OAS pensions will increase by 10 per cent for seniors 75 and over as of July 2022. It also proposes a one-time payment of $500 in August 2021 to OAS pensioners who will be 75 or over as of June 30, 2022.

When can I start to receive the OAS pension?

You can start your OAS pension when you are 65 or wait and defer until you are 70. Each month you defer increases the OAS benefit by 0.06%. If you defer it to age 70, for example, your pension benefit amount will increase by 36%. Like the CPP/QPP, this pension benefit will continue for the rest of your life. Like the CPP/QPP, the decision about what age to start this pension should be based on your health and life expectancy and other factors like your level of income at different ages (65 and 70 in particular).

Make sure you are enrolled for this pension

Unlike CPP/QPP, the federal government, through Service Canada, automatically enrolls individuals for this pension. You should receive a letter after turning 64. If you don’t, you should contact Service Canada.

If you want to defer your pension…

You need to contact Service Canada if you want to defer your pension.

If you already receive OAS benefits and you want to defer them, you can do so IF you have been receiving them for less than 6 months (and you will have to repay all benefits received up to the date of the cancellation).

If you decide to defer your OAS and then later change your mind, you can ask for retroactive payments for a maximum of 11 months (so if you change your mind, do it within the first year!)

Other Things to Know

• OAS benefits are taxable income
• Unlike CPP/QPP, you cannot split benefits with a spouse or common-law partner
• The pension benefit is subject to what is called a ‘pension recovery tax’. This means that the pension is reduced once your income exceeds $79,845 (2021) and you will not receive OAS benefits if your income exceeds $129,075 (I know, I know, this applies to very few Canadians!)
• If you live outside Canada when you reach 65 years of age, there are different eligibility criteria
• There are no survivor benefits for OAS (whereas there are for CPP/QPP). There is an allowance for surviving spouses or common-law partners who are between the ages of 60-64 and have an income under $25,152 (2021).
• Partial OAS pensions apply if you meet the minimum requirement of living in Canada for a minimum of 10 years, but less than 40 years (full OAS pensions is for people who have lived in Canada for a minimum of 40 years after the age of 18)

Guaranteed Income Supplement (GIS)

In addition to OAS benefits, there is a top-up or supplement called the Guaranteed Income Supplement (GIS) for people who are 65 years of age or over whose income or combined income with a spouse or common-law partner is very low. Eligibility criteria for GIS:

• You are 65 years of age or older
• You already receive OAS
• Your yearly income is very low, as determined by the federal government. To give you a sense of this, you may be eligible if your income as a single, widowed or divorced person is below $18,744; the combined income of you and a spouse/common-law partner who receives the full OAS pension is below $24,768.

File that income tax return

It is important to note that you must file an income tax return to (potentially) receive the GIS. Sometimes older adults don’t file a return if they don’t owe taxes. Filing your income tax return is how this benefit gets renewed and adjusted. Also, filing your income tax is how you are on the government’s radar, so to speak, to receive occasional benefits like lump sum payments during the COVID -19 pandemic or claim a GST rebate and other refundable tax credits.

Financial planning for your retirement

Consult with a financial planner, and use retirement calculators and tools to help you figure out whether you are saving enough for retirement or if you should be socking away more money each month.

You can also consult the federal government’s website for the most up-to-date information about OAS and GIS benefits, and further details such as entitlements related to immigration status.

What tools do you use to financially plan for the future. We would love to hear from you.