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Differences between CPP and OAS

A lot of Canadians made a lot of noise last year when Federal Finance Minister Jim Flaherty announced that those younger than 54 would need to wait another two years before they received any government assistance as they got older. The Old Age Security (OAS) benefit was being pulled back from 65 to 67, and it had many wondering how they were going to make ends meet during their later years; and mistakenly, why they weren’t being given something they had paid into. This latter group of Canadians was confusing OAS with CPP, and it’s something many people still do. We thought we’d take some time to explain the differences.

Old Age Security

The OAS pension is a payment, made monthly, to Canadians of a certain age (65 for now, 67 starting on April 1, 2023.) Just about any Canadian is eligible for it, regardless of employment history or earnings, although there are some restrictions on high-income Canadians. For those retirees who have more than $70,954 in annual income, the government will take back 15 cents on every dollar above that mark.

Canadians who are legal residents, or who spent at least 10 of their adult years in Canada are eligible; as well as Canadians who have lived in Canada for at least 20 years of their adult life. Individuals should apply for OAS six months before they turn the eligible age. If the time in Canada has not been continuous, or an individual was not born in the country, the government will need written statements containing all dates of entrance and exit from the country, and any supporting documentation.

CPP

The Canada Pension Plan is a program put in place by the federal government. During their working years, individuals pay into CPP through their employer. At the age of retirement they can start receiving that money back in the form of CPP benefits. The maximum payment available in 2013 was $1,012.50 a month.  The government adjusts this amount every year, according to the cost of living as stated by the Consumer Price Index.

Anyone who has worked in Canada, and lives in Canada when they turn 65, is eligible for payments once they turn 65; although the amount given will depend on the income at the time payments were contributed, how long a person was in the workforce, and how long they paid into the CPP program. Individuals can apply for the benefit early, but if applied for before the age of 65 a penalty will be deducted for every month before they turn the age of 65.

OAS and CPP are both programs available for Canadians to provide a small cushion of income once they retire. However, the two do work very differently, with differences in eligibility, amounts paid, and when benefits begin.

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