The Difference Between OAS and the CPP

And When to Apply for Them

January 12, 2017

Apart from private money squirrelled away in a Registered Retirement Savings Plan (RRSP) or other savings vehicles, the OAS and complementary CPP are key components in the retirement planning of many Canadians. But many people confuse the two programs, how much they pay out, and when they should apply for them.

What is OAS?

The Old Age Security pension is a monthly payment available to Canadians age 65 and older who meet certain requirements. Unlike CPP, it is not dependent on a person’s employment history and a person does not need to be retired from a job to qualify for it.

Who is eligible?

OAS is available to Canadian citizens and legal residents living in the country who have spent at least 10 years in Canada after they turned 18. It is also open to people outside of the country who were Canadian citizens or legal residents on the day they left the country, as long as they spent at least 20 years of their adult life in Canada.

When should I apply?

A person should apply for OAS six months before they turn 65.

What is CPP?

The Canada Pension Plan is a form of retirement income that is open to all Canadians who have worked and paid into the system through deductions from their pay cheques. The amount a person receives under the system depends on how much and for how long a person contributed, along with the age at which a person started receiving CPP payments.

Who is eligible?

Anyone who has made at least one payment into CPP is eligible for benefits once they reach the age of 65, but the size of the benefits depends on how much and for how long a person contributed into the plan and at what age they start receiving benefits.

When should I apply?

This is really up to the individual and whether they want to receive a smaller or larger CPP benefit. However, the government recommends applying six months before a person wants their pension to begin. A person can begin receiving CPP anytime after age 60, although they incur a financial penalty by doing so. In 2013, a person receiving CPP early will be subject to a 0.54% reduction for each month before the age of 65 that they received payments. That number is targeted to rise to 0.6% each month in 2016. On the other hand, if a person chooses to delay CPP payments they receive a similar increase for each month they wait between the age of 65 and 70. In 2013, that increase worked out to 0.70% per month.

In offering this overview of how the OAS and the CPP differ, it is important to note that both programs contain important nuances needing discussion with a knowledgeable professional.

For further information and clarification about OAS and CPP please contact Michael Fahy, The Michael Fahy Group, 604-691-7207