Last updated: Jun. 28, 2013
As of July 1, the Canadian federal government will allow for the voluntary deferral of the Old Age Security (OAS) pension for up to five years.
The pension will be adjusted based on an actuarially neutral basis which means that, on average, you will receive the same lifetime OAS pension whether you choose to take it at the earliest age of eligibility or defer it to a later year. Your annual pension will be higher if you choose to defer.
Guaranteed Income Supplement (GIS) benefits are not eligible for actuarial adjustment.
You can choose to delay receiving the Old Age Security pension for up to 60 months after your 65th birthday in exchange for a higher monthly amount. The monthly pension amount will be increased by 0.6% for every month you delay receiving it, up to a maximum of 36% at age 70.
Estimate what your pension deferral will be with the Canadian Retirement Income Calculator.
In general, based on today’s dollars a taxpayer who collects full OAS at age 65 (in 2013) is estimated to receive $546 per month ($6,552 per year). Should that taxpayer defer to age 70, in 5 years (expressed in today’s dollars) they would collect $743 per month ($8,916 per year).
If you choose to defer your OAS pension, you won’t be eligible for the GIS for the period that you’re delaying the OAS pension. In addition, your spouse or common-law partner won’t be eligible to receive the Allowance during that period.
You should consider your personal situation as you decide when to start receiving the OAS pension, as it may affect other benefits that you could receive. Elements to consider include:
- Current and future sources of income
- Employment status now and in the future
- Health
- Plans for retirement
Your main factor will be whether you need the money at age 65 or not. If you don’t need it right away, then it could be a decision involving life expectancy and complicated net present value calculations.
You can find out more about estate and retirement planning or contact us if you’d like help making the decision whether or not to delay your OAS pension.