The differences between CPP and OAS

Old Age Security (OAS) and Canada Pension Plan (CPP) are hot topics because of all the attention on pension reform

From the questions I get, I realize many people are confused about the different government benefits so this article attempts to help people understand the differences between CPP and OAS.

CPP is not really a government benefit

One of the big differences between CPP and OAS is that the government does not fund CPP.  CPP is really a defined benefit pension plan, which is not part of government assets.  Canadians and their employers make contributions into CPP through their paycheques.

OAS on the other hand is a government benefit.  If you look at your paystubs, there is no OAS deduction.  Instead the income tax that Canadians pay go into a generally pot which goes to fund various programs, one of which is Old Age Security.

Will CPP and OAS run out of money?

Despite a common fear that CPP will run out, the CPP Investment board suggests that CPP is on solid ground because contributions into CPP have been steadily increasing and the plan continues to grow it’s reserves.  In fact new CPP changes came into effect in 2012 to provide greater flexibility for older workers to combine pension and work income if they wish; modestly expand pension coverage; and improve fairness in the Plan’s flexible retirement provisions.  All these changes are affordable under current funding levels.

Old Age Security is very different because there is no fund and there is no surplus.  OAS payments are paid by current taxpayers.  With all the baby boomers turning 65 over the next 20 years, the government is very concerned about the rising cost to fund OAS.  According to government reports, OAS is costing the government $36.5 billion dollars.  They predict that the cost to fund Old Age Security will triple to $108 billion by 2030.  Between CPP and OAS, OAS is more likely to be at risk of change.


One of the questions I commonly get is whether CPP or OAS has a clawback provision. There is no clawback of CPP.  Clawback only applies to Old Age Security.  The OAS clawback means that high-income earners (over the age of 65) are required to repay some or the entire OAS pension.  If your net individual income is above a set threshold, your OAS pension will be reduced. Here are the starting thresholds:

  • $70,954 for 2013
  • $69,562 for 2012
  • $67,668 for 2011
  • $66,733 for 2010
  • $66,335 for 2009

As you can see, OAS is adjusted each year for inflation.

Age of eligibility

Canada Pension Plan is a benefit that defines ‘normal retirement’ as age 65.  You can take early CPP as early as age 60 but at a reduced rate.  You can also choose to collect CPP after 65 as late as age 70 at an enhanced amount.  There is some flexibility in when to draw CPP and there are mathematical breakeven points to consider.  Here’s a couple of article on on taking CPP early:

Old Age Security is a benefit available at age 65.  You cannot collect OAS any early and new rules now allow for the voluntary deferral of OAS to as late as age 70.

One of the speculations from the Harper government is the change of eligibility of OAS from 65 to 67.  There has been some confusion and many people have mistaken this change to apply to CPP.

This is not the first time in OAS history that the government has tried to make changes to OAS. In 1985, Brian Mulroney tried to stop fully indexing OAS benefits to inflation.  In 1996, the Chretien government tried to replace the OAS program with a confusing and inferior Seniors Benefit.  In both cases, there was enough lobbying and backlash that the government backed off and left OAS alone.

Benefit amounts

The amount of Canada Pension Plan you will get in retirement is based on contributions into the plan.  The more you contribute, the more CPP you will be eligible for at retirement.  Here are the maximum benefits at age 65:

  • 2013 – $1012.50 per month
  • 2012 – $986.67 per month
  • 2011 – $960.00 per month
  • 2010 – $934.17 per month
  • 2009 – $908.75 per month
  • 2008 – $884.50 per month
  • 2007 – $863.75 per month
  • 2000 – $762.92 per month

Old Age Security benefits have nothing to do with how much you worked, how much income you made or how much tax you paid.  OAS is based solely on residency.  If you were resident of Canada for 40 years between the age of 18 and 65, you will get the maximum OAS amount.  Here are the maximum OAS figures:

  • 2013 – $546.07 per month
  • 2012 – $540.12 per month
  • 2011 – $524.23 per month
  • 2010 – $521.62 per month
  • 2009 – $516.96 per month


When someone dies, the Canada Pension Plan can continue to a spouse through a CPP Survivor Pension.  The surviving spouse must apply (it is not automatic) and the maximum combined CPP pension (personal CPP plus CPP survivor) cannot exceed the annual maximum benefit.

There are no provisions for OAS to continue to any after death.  OAS ends when the pensioner dies.

Splitting income

Couples can split their CPP retirement benefits. The only reason you would do this is if the spouse with the higher CPP is in a higher tax bracket than the lower CPP earner. Both spouses must be over the age of 60 and both have applied to collect CPP. CPP is a two directional split which means both spouses must split their CPP. For example, if the higher income spouse earns $700 per month and the other spouse earns $300 per month, CPP allows each spouse to take $500 per month ($700 plus $300 divided by 2).

There is no provision with OAS to split income.

My Two Cents

As you can see, Canada Pension Plan and Old Age Security are very different benefits.  Either way, its important to understand the benefits to see the role they will play in your retirement income plan.  Did I miss any differences?  Feel free to add in your two cents below.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

40 Responses to The differences between CPP and OAS

  1. Great post. I don’t think you missed anything, but I would also add that although the current CPP maximum payment is $986.67 the average is much less at only $512.64. Might be a bit misleading for someone to glance at those numbers and jump to the conclusion they’ll be getting $986/month from CPP when, on average, they’ll only get about half that. Of course, the actual amount anyone gets is determined on what they’ve paid in over the years, as you’ve indicated. OAS average and max are much closer, I guess meaning most people getting OAS did live here for at least 40 years between 18 and 65. We’re a loyal bunch… !! Cheers,


  2. Good job in distinguishing the two.

    ith the recent media blitz of the possibility of delaying OAS to age 67 – so many people are upset, with fears that they’ll never be able to retire! What they don’t realize is that OAS and CPP are not the same thing. They can still collect CPP at 65, and between CPP, company pensions and RRSPs… these folks should still be able to retire.

  3. Comment, the term clawback is a bit misleading -what really happens is a inflated rate of tax is applied on the OAS. Although personally it would be to my financial detriment we should be substantially reducing the starting “clawback” threshold for the CPP to something less than 45,000. At 69,500 we’re just giving money to people to go on cruises. We should also consider giving less than 2x the full monthly amount to couples. As 2 living under one roof certainly live cheaper than a single person. With baby boomers fast becoming pensioners our country just cannot afford OAS with life expectancy of 80 years and beyond. And lets not forget that the OAS age used to be age 70 back in the late 1960’s

  4. I don’t understand why someone making $60k should still collect Old Age Security. I’d rather they increased the monthly payments but only gave it to those making under $30,000.

    • well if you think about it, those who make more money were likely asked to pay more into the system in the first place. so, if you beleive that there should be no relation between amount paid in and amount taken out then you’re right.that’s the problem however, it’s the typical socialist view. From each according to their ability to each asccording to their need. Pretty soon there will be no incentive to work hard and no one, not even people like you will be able to benefit.

  5. I agree with previous posters about reducing the clawback cutoff for the OAS, although maybe not all the way down to $30K. Remember, retired people at the very bottom of the scale already get money from a third source, the GIS, which keeps almost all seniors out of dire poverty.

  6. This was an excellent article back in 2011/12 but is now very much out of date. As of July 1, 2013, we will be able to postpone OAS similar to the provisions for CPP. In other words, OAS will increase by 0.6% for every month you delay (up to age 70)

  7. I think many people confuse the GIS with OAS probably because of the S’s!

    GIS, the guaranteed income supplement, is to try to keep Canadian seniors alive. It ensures a minimum income of about $15000 per year, for seniors who have lived in Canada for 40 years after they turned 18. The GIS is reduced for (almost) every $ of income a senior receives. For example, if you have a pension that pays $10000 a year and CPP that pays 5000 a year, you would not get any GIS.

    I think over the next decade or so, they will start easing back on the OAS (and hopefully easing up the GIS.) I think the target of OAS was people who never contributed to CPP despite working all their life. As those people literally die off it may be easier to start winding down the program. The problem that each government discovers is after paying everyone else’s OAS for years, people deeply and strongly resent any attempt to reduce payments or cut off payments. Changes would have to be introduced very slowly to avoid a political backlash against the party that brings them in.

    As someone mentioned above, most high income earners have been high tax payers all their working lives. So even if they don’t need OAS they don’t see why they shouldn’t get the same amount as someone who never paid any taxes because they were on welfare or were unable to find decent employment for their entire working lives. It’s a political hot potato to cut OAS.

  8. Hi, I am 62 and a permanent resident of Canada and receiving my CPP benefit. I had been living, schooling and working in Canada since my adult life for 30 years.
    I am planning to retire in my native country in the middle of this year and have no intention of coming back to Canada.

    My question is can still apply and receive the OAS when I turn 65? As at that time I would have lost my Permanent Resident status in Canada and will be a foreigner.

    If it will be possible ,how can I apply as I will be outside Canada at that time?
    Your information will be greatly appreciated.
    Thank You

    Jimmy Yong

  9. What is the minimum Old Age Security benefit ? How does one qualify for the maximum Old age security benefit ?

    Thanks, Jodi

    • Jodi

      The Old Age Security (OAS) pension is based on how many years you have resided in Canada after age 18 and before your OAS starts.

      The “full basic” OAS is payable if you have 40 years of such residence in Canada, and that amount is currently $551.54 monthly. The only way to receive more OAS than that amount is if you delay applying beyond the eligible age, in which case it is increased by 0.6% for every month of delay.

      The minimum OAS is normally based on 10 years of residence in Canada, and the amount would be 10/40ths of $551.54 = $137.89. If you qualified for OAS under an international agreement with another country, you could potentially qualify with as little as 1 years of residence in Canada and receive 1/40th of $551.54 = $13.79.

      • Doug. Someone is telling me that an immigrant who has just arrived in Canada at age 65, can apply for OAS immediately and then wait the 10 years to satisfy the minimum Canadian resident rule. After the 10 year wait. They would get retroactive pay for the 10 years of OA as well as 10 years of GIS.

        This sounds like bull feathers..

        This is his email:
        “If you are an immigrant and you come here at age 65, YES, you will wait ten years (but not before you can apply and receive benefits) but you will receive benefits from the minute you land in Canada – so technically there is no waiting period, just a delay in payment. We have two laws cancelling them selves out here – one immigration says that you are not eligible to receive OAS benefits until you have accumulated 10 years of residency and another with OAS that states, everyone over age 65 is entitled to receive OAS if living in Canada. New immigrants are not disentitled at all, simply delayed.

        You wait ten years for your first cheque and I was expecting that she would receive her first monthly installment after those ten years. I attended this woman’s 75th birthday party and she gave me the letter, with the cheque attached for over $17000.00. She asked me what she should do because she was not sure if she was entitled to it or not and so did not wish to cash it, in case she had to pay it all back. I took her file # and enquired with OAS and they assured me that because she had been here 10 years and was age 65 upon entering the country, that she was entitled to receive OAS since age 65. I was blown away, but it was not over at that point. She also received GIS because her OAS was so small and her only declared income source and the rent subsidy on her senior’s apt. was also over $800 monthly. Her total package exceeded my mother’s who had a private pension from working in a public hospital + CPP + OAS. The difference was that my mom was not eligible for GIS and they clawed back her OAS based on her private pension.”

  10. There most certainly is a direct clawback aspect of CPP. It is taxable income and therefore affects your tax level. This may cause higher tax rates on ALL income which is a direct clawback of CPP.

  11. Hi
    In the website article above you have mentioned CPP splits and I fall into this category through divorce.
    It is stated both ex’s must apply at the same time? Is this correct? OR can either of us apply and then would this mean the other spouse (my ex) would have to follow suit, to collect or would he be notified I wanted to start therefore with him having to agree with me doing so as he would have to start, as we are in a CPP split?
    OR when I apply does he just get notified to also start because I applied to start?
    There are three scenarios above so which applies to a CPP split?
    I turned 60 June 2014
    I will be 61 of course uocoming June 2015.
    MY EX SPOUSE was born July 11, 1952.
    I would appreciate your kind response.
    Also is it still benefical to start now as 1/2 way through my year before I actually turn 61 in June 2015?

  12. Brenda

    The “CPP splitting” that Jim described in the article above applies to ongoing marriages and not to divorced couples. In your situation, you would apply for “CPP credit splitting”, and then there’s no need for you both to apply for your pension at the same time.

    Here is a link to an article that I just wrote that explains the difference between CPP pension sharing and CPP credit splitting:

  13. hi , i just turn 60 in march and i was excepted to get my retire with cpp payment os 102 per month , what other benefit i can get from ontario government , i am not working no more ,

  14. Hi, will CPP and OAS be paid out as long as I live?
    – If I retire at age 65 and getting the maximum CPP and OAS, will there be any difference if I live until 75 years old or until 100 years old?
    – Is there any monies paid out to my beneficiaries (husband or children) when I die?

    • Angela

      Yes, both CPP and OAS are payable for life, regardless how long you live.

      OAS ends when you die, but CPP includes a lump sum death benefit and monthly survivor’s benefits. The formula for survivor’s benefits is somewhat complex. Read this article if you want to know more:

  15. Can someone answer the following for? At present I am 62 and on CPP disability.My question is as follows: when I turn 65 and receive the OAS which pays as high as $565.00 approximately per month, will I have to relenquish my CPP disability? If that is the case I will then receive almost $600.00 less per month which hardly seems fair.

    • Rod – Your CPP disability pension will convert to a CPP retirement pension at age 65. If your CPP disability is currently about $1,165, it will convert to a retirement pension of approx. $932, which is in addition to the OAS amount of $565ish.

  16. I am currently on LTD. My insurance company is pushing me to apply for CPP disability benefits. Will this affect my OAS in the future?

    • Melissa

      No, applying for CPP disability benefits won’t affect your OAS at all. If approved for CPP disability however, your CPP retirement pension will be a greater amount at age 65 than if you aren’t approved for CPP disability but you’re not working until then.

  17. I am 55 and just retired with maximum contribution to my provincial government pension. The amount I get has a ‘bridge benefit amount’ and a “temporary annuity”. Both are gone at 65 and replaced with CPP. I was on LTD prior to retiring. My insurance company forced me to apply for CPP Disability. My LTD was tax free. I have been retroactively approved for CPP Disability and now my insurance company is saying they get reimbursed for the full period I was on LTD whereas their correspondence (telling me I was required to apply) said that I would owe then retroactive payments from the date of my application. So, in other words I now have to pay retroactive tax for 3 years (my period on LTD). I have two questions – do I, in fact, have to reimburse my insurance company for the full period? I’m not sure why I would get that benefit under the collective agreement and then have to pay it back later. My second question is: can you get a CPP Disability pension at the same time you get a “bridge benefit” between 55 and 65. I’m not sure if this bridge benefit is, in fact, part of a CPP benefit.

    • Kim

      Most disability insurers will reduce their payments by the amount of any CPP disability benefits that you receive, so that is not unusual. The maximum retroactivity on your CPP disability would be 11 months prior to when you applied, so I wouldn’t think you would have to reimburse them for anything prior to that. Then again, if you have something from them in writing that limits reimbursement to when you applied for CPP disability, I recommend that you ask for an explanation.

      Most bridge benefits that I’ve seen end either at age 65 or when you start receiving a CPP disability pension, so make sure that they know that you’ve been approved for CPP disability or you may have to repay your bridge benefit sometime in the future.

  18. Thank you for the info. My confusion is this: Turning 60 we applied for CPP. We did not contribute for years as we were self-employed, so we are receiving about $500 each for my husband and I. So at 65, we will receive OAS and CPP to be a total of around $1,000 but GIS will kick in to subsidize us to $15,000 annual each? So, it does not really matter that we did not pay into CPP for all those years because GIS will kick in anyway? Also, it does not matter that we took CPP early because of the GIS subsidy? Right?

    • Susan

      You’re certainly correct that GIS is a factor to consider, but GIS only makes up for about half of any decrease in your CPP. So you would always be ahead after age 65 if your CPP was higher either to more contributions or waiting until after age 60 to have applied for your CPP.

  19. Susan
    “Turning 60 we applied for CPP.”
    – Taking CPP at 60 reduces the benefit by 32.4% from a maximum of $1,065.00 to a “maximum” of $700.77

    “We did not contribute for years as we were self-employed.”
    – Self employed or not, it is mandatory to contribute to CPP; you are probably thinking of EI.

    “We are receiving about $500 each for my husband and I.”
    – That is around average unless you each earned around 10% more than the average Canadian for the last 40 years of working.

    “So at 65, we will receive OAS and CPP to be a total of around $1,000 but GIS will kick in to subsidize us to $15,000 annual each?”
    – If you became 65 today your CPP will still be $500 a month, OA will add another $569.95 but only the CPP is considered income, so a couple getting $12,000 a year CPP will get $225.07 GIS per month each. Monthly total for the couple; $1,000.00 CPP, plus $1,139.90 OAS, plus $450.14 GIS, = $2,590.04 monthly or $31,080.48 yearly

    Table 2 – Guaranteed Income Supplement (GIS) amounts for an income range of $12,000.00 to $12,863.99

    GIS for spouse/common-law partner of someone who receives an OAS Pension

  20. I have recently taken an early retirement. I get my pension amount, a bridge benefit and a temporary annuity. The later two disappear at 65. I am currently 55 years of age. My plan was to start a new career since I considered it possible to work another 10 or 15 years. Unfortunately a serious health issue has developed. I’ve been approved for CPP Disability. How does this CPP Disability affect my pension before age 65. I realize CPP Disability disappears at 65 as well.

    • Kim

      As you are aware, your CPP disability pension will convert to a retirement pension when you reach age 65. The period of time that you receive a CPP disability pension is excluded from your contributory period, which means that your retirement pension is protected from decreasing even though you are no longer working and contributing to CPP.

      In effect, your CPP retirement pension at age 65 will be based on your average lifetime earnings from age 18 to age 55, and indexed from then to age 65 based on any increases in the CPI.

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