Changes to the Old Age Security benefit give qualified recipients more choice, but step one is determining eligibility. Old Age Security (OAS) is a monthly benefit paid to eligible taxpayers 65 or older. Unlike the Canada Pension Plan, it is not linked to employment history and you do not have to be retired to receive it. But it cannot be collected before age 65.
You qualify for the OAS by living in Canada as either a citizen or legal resident for 10 years. Non-residents who are Canadian citizens or legal residents when they left Canada must have lived here for at least 20 years to qualify. However, if you lived in a country that has a social security agreement with Canada or you contributed to its social security system, the requirements for OAS may change.
If you do not meet full eligibility requirements, you may still receive a partial OAS benefit depending on how long you lived in Canada or the length of your absences.
In the last federal budget, changes to OAS raised the qualification age limit from 65 to 67. This will be phased in starting April 2023, and fully implemented by February 2029. If you are born on or after February 1, 1962, you will be affected. If you were born before April 1958, you are not affected. For the people, in between, the increase will be phased in.
Starting July 1, 2013, the government also allowed OAS eligible taxpayers to postpone their benefits for up to five years. Once they start receiving OAS, the annual benefit will be greater because of the deferral.
Deferring does not guarantee greater total benefits; those who live an average life span receive the same total whether they choose the earliest date or defer. However, those who live longer and defer benefits will receive more in total.
The other change to OAS makes applying easier. A proactive enrolment program means enrolment will be automatic, with people notified via mail. This program will be phased in from 2013 to 2016.
Until the enrolment program is fully implemented, Service Canada recommends seniors apply for OAS six months before they turn 65. Benefits are only paid retroactively for up to 11 months, so delaying application risks losing some payments.
If you plan to continue working past 65, you may want to explore your OAS options before receiving the benefit. For examples, if you are going to earn more than $70,954 in 2012, you may have to repay some of the OAS. Deferring your OAS a few years may mean you can avoid this clawback.
These new options increase the complexity of the OAS program somewhat, but the new flexibility will be welcomed by those who want more control over their Old Age Security payments.