Your Old Age Security Pension and the Truth About Clawback

You know what you want your retirement to look like. You have realistic goals, are planning for the unexpected, and understand all the resources that are available to you. With a robust Registered Retirement Savings Plan (RRSP), your Canada Pension Plan (CPP), and your Old Age Security pension (OAS), you’re in great shape…but you didn’t account for the tax clawback. Here is what you need to know about OAS and tax clawback:

What is an OAS pension?

The majority of Canadians over 65 years old qualify for an OAS pension. It provides a monthly payment to citizens that currently reside in Canada and have done so for a minimum of 10 years – or 20 years for those residing outside of the country – after turning 18. It’s important to note that, beginning in April 2023, the age of eligibility will slowly increase to 67 over a six-year period.

How much can I expect to receive?

The amount you receive has nothing to do with your employment history. Instead, it’s based on the number of years you have lived in Canada since your 18th birthday. To qualify for the maximum monthly amount – $551.54 for 2014 – you must have lived in Canada for 40 years or more.

What is clawback?

Certain Canadians that receive an OAS pension face the Old Age Security pension recovery tax, which is casually referred to as “clawback.”

Will clawback affect my OAS pension?

Your vulnerability to clawback depends on your annual net income. For instance, the minimum threshold is currently $70,954, so if your income is higher you will have to repay a portion of your OAS pension (15 per cent of the disparity between your income and the threshold). So, if you made $115,716 in 2013, you will have to pay back all of your OAS.

What should I do if I face clawback?

The answer is simple: plan ahead. You can likely calculate your annual income, at least approximately, so set aside enough to compensate for any portion of your OAS that you will have to repay. And as always, consult a professional advisor in order to prepare for any eventuality.

For more information on Old Age Security Pensions, consult the C.R.A.’s website: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/113-eng.html