Old Age Security or OAS is a supplementary income program for Canadian residents ages 65 and older with moderate or low individual income. Unlike CPP, its eligibility is based only on years of Canadian residence, not employment income. OAS payments are generally smaller than CPP with a maximum of about $7,350 per year, they are also fully taxable and subject to a special tax, known as a “clawback”, if the recipient’s individual income exceeds a certain level. Similar to CPP, OAS can be delayed past age 65, to a maximum of age 70, with each month’s delay increasing the payment amount by 0.6% or 36% if payments are delayed to age 70.
The clawback is the most complex part about receiving OAS, and also the main feature which allows for some measure of planning and optimization. An individual with income below $77,580 as of early 2021 receives the full OAS payment amount. For every additional dollar of income above that figure, 15 cents of OAS is clawed back in the following summer (OAS is administered on a 12 month schedule from July to June). As a result, if individual income is above $126,058, the entirety of OAS is clawed back for the year.
The main source of optimization surrounding OAS is to reduce income into, or below the threshold for a particular individual in a year. If a person’s income is near one of the thresholds, it could be valuable to, say, use capital losses to offset capital gains in order to allow for some or all of the OAS payments to be received without clawback. However, it’s important to remember that all income, including OAS, is taxable as income, and tax minimization is also very important. A focus on simply maximizing OAS payments can result in higher taxes payable and actually mean less after-tax income.
OAS also has additional programs for people with low incomes (the Guaranteed Income Supplement or GIS), a program for people not yet old enough to receive OAS but whose spouses already receive the GIS, and a program for widowed people ages 60 to 64. The Government of Canada has very good summaries of these programs on their website.