Updated June 21, 2017
On March 29th, the Conservative party released their 2012 budget and the big news is the announced changes to Old Age Security (OAS). This change was one of the government’s worst secrets as Stephen Harper announced that changes needed to be made to OAS at the World Economic Forum earlier this year.
Note: The following change in eligibility from age 65 to 67 was cancelled by the Liberal party in 2016, so that the change never actually came into effect. The other two changes were implemented and remain in effect at this time. This article is retained though, for historical purposes.
What is not changing
There was some suggestions that the government should lower the OAS clawback threshold which would affect higher income retirees but there will be no changes to the OAS clawback.
CPP also underwent significant changes of it’s own so the current budget does not make any new changes to CPP
Changes to the age of eligibility
The biggest news is the gradual change in the age of eligibility from age 65 to 67. This change will be implemented in 2023.
This means that this change will not affect those Canadians who are 54 or older as of March 31, 2012. Canadians are effectively being given 11-year notice and then 6 years to gradually implement the change.
- If you were born before March 31, 1958, you will not be affected
- If you were born between April 1, 1958, and Jan. 31, 1962 will have an age of eligibility between age 65 and 67. See the chart below for more details:
OAS/GIS Age of Eligibility by Date of Birth
|Month of Birth||1958||1959||1960||1961||1962|
|Jan.||65||65 + 5 mo||65 + 11 mo||66 + 5 mo||66 + 11 mo|
|Feb. – Mar.||65||65 + 6 mo||66||66 + 6 mo||67|
|Apr. – May||65 + 1 mo||65 + 7 mo||66 + 1 mo||66 + 7 mo||67|
|June – July||65 + 2 mo||65 + 8 mo||66 + 2 mo||66 + 8 mo||67|
|Aug. – Sept.||65 + 3 mo||65 + 9 mo||66 + 3 mo||66 + 9 mo||67|
|Oct. – Nov.||65 + 4 mo||65 + 10 mo||66 + 4 mo||66 + 10 mo||67|
|Dec.||65 + 5 mo||65 + 11 mo||66 + 5 mo||66 + 11 mo||67|
Option to defer OAS
Under the new OAS rules, Canadians will also have the option to defer OAS payments for up to 5 years starting July 1, 2013. The increase is what the government calls actuarially neutral which means on average Canadians will receive the same lifetime OAS benefit whether they choose to take it at 65 or as late as 72 after the new eligibility rules are implemented.
This may be particularly important for those who intend to continue working past 65 who would otherwise be subject to recovery (or clawback) of OAS on total income and who wish to reduce their taxable income.
Proactive enrollment for OAS
The Government will also attempt to improve services for seniors by putting in place a proactive enrolment regime that will eliminate the need for many seniors to apply for OAS and GIS. This measure will reduce the burden on seniors of completing application processes and will reduce the Government’s administrative costs. Proactive enrolment will be implemented in a phased-in approach from 2013 to 2015.
What do you think of these new changes? I’ll share my five cents tomorrow