{"id":807623,"date":"2026-07-17T10:17:20","date_gmt":"2026-07-17T10:17:20","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/807623\/"},"modified":"2026-07-17T10:17:20","modified_gmt":"2026-07-17T10:17:20","slug":"little-known-oas-pension-rule-prevents-deferral-double-dipping","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/807623\/","title":{"rendered":"Little-known OAS pension rule prevents deferral double dipping"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

For every month someone defers their OAS pension, they receive an additional 0.6 per cent (7.2 per cent a year) of pension. Credit: Anthony Jenkins \/ The Globe and MailAnthony Jenkins\/The Globe and Mail<\/p>\n

Digging into the rules governing the Old Age Security (OAS) pension can lead you down some rabbit holes.<\/p>\n

That\u2019s what happened to me last month, when I wrote about a recent court ruling<\/a> involving a retiree who was denied a full OAS pension retroactively and who had to repay amounts because Service Canada found he hadn\u2019t met the residency threshold for a full pension. <\/p>\n

According to Service Canada\u2019s online OAS guidance<\/a>, a person who is eligible to receive OAS will receive a full pension if they have been a resident of Canada for 40 years since the age of 18, while an eligible person with fewer than 40 years of residency would receive a partial pension based on the number of years they were a resident of Canada divided by 40.<\/p>\n

Okay, straightforward enough, but I wondered: could a 65-year-old Canadian resident who lived in Canada for less than 40 years defer applying for OAS to benefit from additional years of residency and thus a better payout ratio? <\/p>\n

Furthermore, could that same person also benefit from the bonus deferral amount available to seniors who apply for OAS after age 65? <\/p>\n

Under OAS legislation, for every month someone defers their OAS pension, they receive an additional 0.6 per cent (7.2 per cent a year) of pension. (There\u2019s no advantage to deferring after age 70.)<\/p>\n

Service Canada\u2019s online guidance didn\u2019t address these questions directly, so I kept digging.<\/p>\n

Before letting you know what I found, here\u2019s a quick OAS refresher:<\/p>\n

A person who is 65 years or older is eligible to receive an OAS pension if they have lived in Canada for at least 10 years since the age of 18 and are a Canadian citizen or legal resident when Service Canada approves their application.<\/p>\n

If they\u2019re living outside Canada, they must have been a Canadian citizen or a legal resident the day before they left Canada and they must have resided in Canada for at least 20 years since the age of 18 to receive OAS.<\/p>\n

If they\u2019re eligible, a person who has been a resident of Canada for 40 years as an adult would receive a full OAS pension. <\/p>\n

However, an eligible person who has been a Canadian resident for, say, 38 years when they apply for OAS would receive a 38\/40 partial pension. Once Service Canada approves a partial pension, it cannot be increased because of additional years of residency in Canada. <\/p>\n

But what if that 65-year-old with 38 years of residence waited two more years to apply for the OAS? Would they receive both a full OAS pension and the bonus deferral amount?<\/p>\n

Well, as you might have guessed, the OAS legislation \u2010 specifically, section 7.1(3) of the Old Age Security Act \u2010 doesn\u2019t allow double dipping. <\/p>\n

\u201cA person can only benefit from one of the residence provision or the voluntary deferral provision after age 65,\u201d said Liana Brault, a spokesperson for Employment and Social Development Canada, in an e-mail responding to questions from The Globe.<\/p>\n

She added that \u201ca person who qualifies for a pension will automatically receive the option that provides the highest monthly amount available to them, unless they choose otherwise.\u201d<\/p>\n

That being the case, a Canadian resident eligible for a 38\/40 partial pension at age 65 who waited until age 67 to apply would receive an OAS increased by the deferral bonus amount \u201cas this increase is larger than an increase based solely on years of residence,\u201d Ms. Brault said. <\/p>\n

\u201cTheir pension amount would be 38\/40th of the full OAS amount increased by 14.4 per cent (i.e., 0.6 per cent increase per month x 24 months).”<\/p>\n

But then I wondered, wouldn\u2019t the deferral bonus, at 7.2 per cent per year, almost always be preferable to an extra year of residence, at 1\/40th (2.5 per cent) of a full pension? <\/p>\n

Not necessarily, explained Paul Thorne, director of advanced planning with Sun Life Financial, in a response sent by e-mail to questions from The Globe.<\/p>\n

That\u2019s because the 2.5 percentage point increase in the payout rate for an extra year of Canadian residency is based on the maximum OAS amount, while the 7.2 per cent deferral bonus is based on someone\u2019s actual OAS entitlement, which will be less than the maximum if they have less than 40 years of residence.<\/p>\n

\u201cYou need [someone\u2019s] entitlement first to determine their deferral bonus,\u201d Mr. Thorne said.<\/p>\n

According to Mr. Thorne\u2019s calculations, the effective break-even point is 14 years of residence, or 14\/40. Above that threshold, the deferral bonus would provide an applicant with the bigger benefit. Below it, additional years of residence would provide the higher monthly OAS amount.<\/p>\n

Are you reading us on the web or did someone forward the e-mail version to you? If so, you can sign up for Advisor Weekly here<\/a>.Must reads<\/p>\n

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