Personal Finance

Technical question re: Old Age Security deferral vs. years-in-Canada pro-rating

  • Last Updated:
  • Aug 2nd, 2017 3:28 pm
[OP]
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May 7, 2015
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GTA

Technical question re: Old Age Security deferral vs. years-in-Canada pro-rating

At age 65, the claimant will have lived in Canada 25 years (and not the 40 years required to get a full pension). As such, if they started OAS at age 65, they would get 25/40=60% of the full OAS pension (i.e. those who retire at age 65 and have lived in Canada for at least 40 years).
If they defer and start taking OAS at age 70, by which point they would have lived in Canada 30 years, will they get both (a) 30/40=75% of the full pension PLUS (b) the deferral bonus of 0.6% per month of deferral?


The relevant Old Age Security act sections appear to be :
3 (3) Subject to subsection 7.1(3), the amount of a partial monthly pension, for any month, shall bear the same relation to the full monthly pension for that month as the aggregate period that the applicant has resided in Canada after attaining 18 years of age and before the day on which the application is approved, determined in accordance with subsection (4), bears to 40 years.

Voluntary deferral — partial monthly pension
7.1 (2) If a person applies for their pension after they become qualified to receive a partial monthly pension, the amount of that pension, as it is calculated in accordance with subsection 3(3) at the time that they become qualified for that pension, is increased by 0.6% for each month in the period that begins in the month after that time and that ends in the month in which the person’s application is approved.

Greatest amount of pension
7.1 (3) A person who is qualified to receive a monthly pension shall, unless they decide otherwise, receive the greatest of the following amounts:
(a) the amount of the full monthly pension as it is increased under subsection (1), if the person is qualified to receive a full monthly pension,
(b) the amount of the partial monthly pension as it is increased under subsection (2), and
(c) the amount of the partial monthly pension as it is calculated under subsection 3(3) at the time that the person’s application is approved.
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