In Budget 2012, the Canadian federal government formally announced the changes it planned for the Old Age Security (OAS) pension. The major change will be raising the eligibility age for the OAS and related Guaranteed Income Supplement (GIS) from 65 to 67, beginning April 1, 2023.
The change in the age of eligibility will be phased in gradually from 2023 to 2029. The changes will not affect you if you are currently receiving OAS benefits. The change in eligibility for OAS and GIS benefits will also not affect anyone born on April 1, 1958.
The government will also be introducing the option for individuals to defer taking up their OAS pension for up to five years. By deferring his/her OAS pension, an individual would receive a higher annual pension starting in a later year.
In an effort to improve services, the government will be starting proactive enrolment for the OAS and GIS for eligible seniors. This will be phased in from 2013 to 2016 and should mean that eligible seniors will not need to apply for the OAS and GIS as they do now.
What is the OAS?
Canadian Old Age Security (OAS) is the single largest program of the Canadian federal government. According to Budget 2012, the OAS program provides approximately $38 billion per year in benefits to 4.9 million individuals. It is now funded from general revenue, although for many years there was such as thing as an OAS Tax.
The Canadian Old Age Security (OAS) program is a basic safety net for seniors. It provides a modest monthly payment to seniors 65 years of age and older who meet the Canadian residency requirements. Employment history and retirement status are not factors in the eligibility requirements.
Low-income seniors may also qualify for supplemental OAS benefits including the Guaranteed Income Supplement (GIS), the Allowance and Allowance for the Survivor.
The maximum annual basic OAS pension is currently $6,481. Benefits are indexed to the cost of living measured by the Consumer Price Index. OAS benefits are taxable by both federal and provincial governments.
The maximum annual GIS benefit is currently $8,788 for single seniors and $11,654 for couples. The GIS is not taxable, although you must report it when you file your Canadian income taxes.
The OAS is not automatic. You must apply for the OAS, as well as for the supplemental benefits.
Why is the OAS Changing?
There are several critical reasons for changes being made to the OAS program.
- Canada's Aging Population: Demographics are changing. Life expectancy is increasing, and the age group of baby boomers (those born between 1946 and 1964) is huge. The government predicts the number of Canadian seniors will nearly double from 2011 to 2030, from 5 million to 9.4 million. That puts a huge pressure on funding the OAS program, especially when the number of working-age Canadians (who will be paying taxes) per senior is expected to drop from four to two over a similar time frame.
- Cost: Budget 2012 estimates that the cost of the OAS program without changes would grow from $38 billion in 2011 to $108 billion in 2030. That means the 13 cents of every federal tax dollar being spent on OAS benefits today would become 21 cents for every tax dollar being needed for the program in 2030-31.
- Flexibility: Allowing seniors to choose to defer taking their OAS pension will provide them with more choice to make decisions appropriate to their own circumstances.
- Efficiency: The phased-in proactive enrolment of many seniors in the OAS and GIS programs will not only reduce an unnecessary burden on seniors, it is also a long-overdue administrative change that should save government program costs.
When Do the OAS Changes Happen?
Here are the time frames for the changes to the OAS:
- Increasing the Eligible Age for OAS and Supplemental Benefits: These changes begin in April 2023 and are being phased in over six years until January 2029. These charts of OAS changes show the ages by quarter.
- Voluntary Deferral of OAS Pension: The voluntary deferral of the OAS option for up to five years begins July 2013.
- Proactive Enrolment in OAS and GIS: This will be phased in from 2013 to 2016. Those who are eligible will be notified personally by mail. Those who are not eligible will be sent applications or can pick up applications from Service Canada. You should apply for the OAS at least six months before you turn 65. There will be more information on this option available from Service Canada as it is developed.
Questions About Old Age Security
If you have questions about the Old Age Security program, I suggest you
- Check the information on the Old Age Security pension on the Service Canada site
- Read the Frequently Asked Questions about the OAS on the Service Canada site. Their contact information is also on that page.