Old Age Security (OAS)
OAS pension amount is determined by how long you have lived in Canada after the age of 18. You will receive a partial pension benefit if you haven't resided in Canada for the full 40 years.
You receive OAS payment after you turn 65 (2021 maximum monthly payment is $615.37).
OAS is taxable income.
OAS is reviewed quarterly to reflect increases in the cost of living as measured by the Consumer Price Index (CPI).
OAS clawback: OAS is subject to a recovery tax if individual income higher than threshold set for the year ($77,580 for 2019).
OAS Eligibility is related to your residential history not employment history:
If you are living in Canada, you must have resided in Canada for at least 10 years since the age of 18
If you are living outside Canada, you must have resided in Canada for at least 20 years since the age of 18
If you do not qualify to receive your Old Age Security pension while outside of Canada, your payments will stop if you are out of the country for more than 6 months after the month you left.
Sandy is 69 years old and has lived in Canada since she was 51 years old. She travels to her home country, China for a holiday and decides to stay there for 10 months. Will she be eligible for any OAS benefit when she is in China?
Answer: Sandy is eligible for partial OAS payments because she has lived in Canada for at least 10 years after age of 18. However, her benefits will stop if she is away from Canada for more than 6 months (excluding the month she left Canada) since she has resided in Canada for less than 20 years. Her OAS payments will resume in the month she returns to Canada.
For 2019, the OAS clawback threshold is $77,580. If John had $72,500 net income in 2019, not including OAS benefit of $6,500. Is he subject to clawback of his OAS benefit?
Answer: OAS payments are included in net income when calculating the OAS clawback. John’s 2019 net income is $72,500+$6,500=$79,000. His OAS clawback amount will be 15% of the difference between $79,000 and $77,580, which is (79000-77580) x 15% = 213. He has to repay OAS benefit amount of $213.
The Canada Pension Plan (CPP/QPP)
CPP/QPP retirement pension is a monthly, taxable benefit.
Payment is related to working (contributory earning)
For all employment except casual workers
If worker is between ages 18 and 64, contributions are mandatory.
If worker is between the ages of 65 and 69 and is receiving a CPP pension, he/she can choose to stop making CPP contributions when continue working.
No contributions after worker turns 70.
The standard age to start the pension is 65. Early start (as early as 60) or late start (as late as 70) is optional.
If start before age 65, payments will decrease by 0.6% each month (or by 7.2% per year), up to a maximum reduction of 36% if you start at age 60
If start after age 65, payments will increase by 0.7% each month (or by 8.4% per year), up to a maximum increase of 42% if you start at age 70 (or after).
CPP pension can be shared between spouse and/or common law partners.
Both spouses must be at least 60 years old.
They must apply and get approved for pension sharing.
The portion of the pension that can be shared is based on the number of months living together during the joint contributory period.
CPP pension credits can be split after a divorce or separation upon request.
The split ratio is based on the time they living together comparing to the contribution period.
Split amount = (Years of Living together/Contributory period) x benefit amount.
Frank Chan worked and paid the maximum in CPP contribution for 20 years. He was married to Linda Chu for 10 years of those 20 years. Then they divorced. Linda Chu is a homemaker and never worked. Regarding to Frank’s CPP credits, is Linda qualified for any split CPP credits?
Answer: The CPP credits that Frank accumulated during the 10 years he was married to Linda Chu will be divided equally between himself and Linda.
Joe and Judy, who are both over age 60, have been married for 28 years. Joe has contributed to CPP during his entire contributory period, 35 years. His monthly CPP benefit is $900. Judy has contributed to CPP for also 35 years, her entire contributory period. Her monthly CPP benefit is $400. Upon approval of their application for assignment, How much will Joe and Judy each receive as a total monthly CPP payment?
28/35 x 900 = 720. Joe shares 720, he is left with 180.
28/35 x 400 = 320. Judy shares 320, she is left with 80.
Total shared = (720+320)/2=520 (Each gets this amount)
Joe receives: 520+180=700; Judy receives: 520+80 = 600