OAS Entitlement and Deferral Rules for Immigrants to Canada

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I contacted Service Canada and the Canada Revenue Agency for clarification and received different answers depending on the person I spoke with. I immigrated to Canada in 2001 and was born in 1956, so I am over 65 but have not started receiving OAS. If I had applied for OAS at 65 in 2021, I would have been eligible for half of the full pension (20 of the required 40 years). If I delay claiming OAS until age 70 in 2026, will those deferred years count toward 25 years of residency in Canada? And will I also receive the monthly 0.6% deferral increase—up to 36% at age 70—on top of the increased residency, or would that be considered double counting?

—Amin

Where to get authoritative information about the OAS pension

Service Canada is the definitive source of information about the Old Age Security (OAS) pension. Service Canada, operated by Employment and Social Development Canada, administers OAS and other federal benefits. The Canada Revenue Agency (CRA) can answer tax-related questions about OAS payments, but Service Canada manages eligibility, residency calculations and benefit amounts.

Generally, to qualify for the full OAS pension you need 40 years of residence in Canada after age 18. As a reference point, the maximum monthly OAS payment in the fourth quarter of 2023 for someone who began receiving OAS at age 65 was $707.68; for someone aged 75 or older the maximum amount was higher. Exact payments change over time with indexation, so check Service Canada for the most current figures.

Exceptions to the OAS residency requirement

There are some exceptions to the 40-year residency rule. For example, if you were over 25 and living in Canada or held an immigration visa on or before July 1, 1977, you might qualify for a larger pension despite not having 40 post-18 years of residence.

Another possibility is that time lived in another country may be credited if that country has a social security agreement with Canada. Periods spent working abroad for the Canadian Armed Forces or for certain international charitable organizations can also be counted for OAS residency purposes. These exceptions can help increase the proportion of the full pension for which you qualify.

Deferring OAS and how it affects residency calculations

If you have fewer than 40 years of Canadian residence after age 18, your OAS pension is pro-rated. To receive any OAS as a resident, you normally need at least 10 years of residence after age 18 if you apply from within Canada. If you apply while living outside Canada, you need at least 20 years of residence after age 18.

Deferring your OAS past age 65 can be a useful strategy for some people, particularly to increase the monthly payment through an age-based enhancement. However, deferring does not increase your residency years in the sense of changing the portion of the pension you have earned through actual years of residence. Put differently, postponing the start date cannot retroactively add residency years that you did not live in Canada after age 18.

When you defer OAS beyond age 65, you benefit from one of two possible increases: an adjustment based on any additional years of residency you accrue, or the age-based deferral increase. The age-based increase is 0.6% per month (7.2% per year) up to a maximum of 36% if you defer to age 70. By contrast, each additional year of residency counts as 1/40 of the full pension—about a 2.5% increase per full year of residence.

Because the program uses the higher of the two adjustments rather than stacking them, you cannot receive both the residency-based increase and the deferral age-based increase on the same portion of entitlement. In practical terms, if deferring to age 70 yields a larger increase than the extra residency proportion you would otherwise gain, you receive the age-based increase. That means you cannot “double dip” by getting both the 2.5% residency boost from one additional year and the 7.2% per year age-based increase for the same months.

Should you defer OAS and CPP?

Deferring OAS and CPP is often advantageous for healthy retirees because it increases monthly income later in life. But there are important nuances depending on your income level and eligibility for other benefits.

Low-income OAS recipients may qualify for the Guaranteed Income Supplement (GIS), which is income-tested. For 2023, GIS thresholds included specific annual income limits for single people and different combined thresholds for couples depending on whether a spouse receives OAS or the Allowance. If you are likely to be eligible for GIS, claiming OAS earlier may improve access to that complement and overall support.

Conversely, higher-income retirees may face an OAS recovery tax (commonly known as the clawback). For 2023 the clawback threshold started at $86,912 in net income; above that, OAS benefits are reduced by $0.15 for each dollar of income over the threshold. If your income is near or above the clawback level, the benefit of deferral should be considered in the context of potential reductions due to your total income.

Practical advice based on your situation

In summary, deferring OAS can make sense if you are in good health and expect to live long enough to benefit from the higher monthly payment. If you have low income and could qualify for the GIS, starting OAS earlier may be preferable. If your income is high enough to trigger the clawback, weigh the potential monthly increase from deferral against reductions caused by the recovery tax.

Deferring OAS does not convert into extra residency years for the purpose of pro-rating your pension; it only entitles you to the age-based increase of 0.6% per month (up to 36% at age 70) if that adjustment is greater than any incremental residency-based increase you might otherwise receive. For definitive answers tailored to your specific residency timeline and income situation, contact Service Canada to confirm how your months and years of residence are counted and how deferral would apply in your case.