Voluntary deferral of OAS

Updated with October 2015 rates and corrected for errors May 22, 2016

As part of the 2012 federal budget, the government announced three changes to Old Age Security (OAS)program.

  1. The age of eligibility for OAS will gradually increase from age 65 to age 67 (Note – this change was subsequently revoked by the Liberal government, prior to implementation).
  2. You will be able to defer taking your OAS pension by up to five years in order to receive a higher monthly pension.
  3. The government will start a proactive enrolment process that will eliminate the need for many people to apply for OAS and the GIS (Guaranteed Income Supplement).

Related article:  Three changes to OAS

The increase in the eligibility age doesn’t start to take effect until April 2023, with full implementation by January 2029. (Note – as mentioned above, the increasing age eligibility was subsequently revoked prior to implementation).

The proactive enrolment for OAS is supposed to be implemented in a phased-in approach from 2013 to 2016, but I haven’t seen much detail on it yet. In any case, I see the impact of this initiative as minimal.

The voluntary deferral of OAS is effective as of July 2013 and the impact can be quite significant, so this change is the focus of my article today!

What is meant by voluntary deferral of OAS?

Voluntary deferral means delaying your receipt of OAS pension in order to receive a larger pension at a later date. The term “voluntary” is perhaps a bit of a misnomer, however, since the larger benefit will be payable whether the delay was intentional or just an oversight.

Who is affected by the voluntary deferral of OAS initiative?

Anyone under age 70 and not in receipt of OAS as of July 2013 is potentially affected by this initiative. You will be able to defer your OAS whether you’re eligible for the full OAS or just a partial OAS, although you cannot “double-dip” by waiting. (I’ll explain this in more detail later.) Voluntary deferral does not affect the income-tested benefits of GIS, the Allowance or the Allowance for the Survivor.

What is the impact of voluntary deferral of OAS?

For each month of “valid” deferral, your OAS pension will be increased by 0.6%. The maximum deferral is 5 years, which would increase your OAS pension by 36%. I used the qualifier of valid deferral, because there is no increase in your pension in the following situations:

  • For any period of time before July 2013
  • For any month after you turn 70 years of age
  • For any month before you meet the residence requirements for a full OAS
  • For any month before you reach any specific step in the 1/40ths eligibility for a partial OAS (This is what I referred to as double-dipping above, and which I’ll explain more fully in the third example below.)

Here is a chart that shows the dollar impact of deferral on a full OAS pension (using October 2015 rates), as well as the breakeven age (the age at which you would begin to be ahead if you deferred the start of your OAS pension beyond age 65.)

Age 65 Age 66 Age 67 Age 68 Age 69 Age 70
Monthly amount $569.95 $610.99 $652.02 $693.06 $734.10 $775.13
Breakeven age n/a 80 81 82 83 84


The above chart demonstrates that the basic premise of voluntary deferral of OAS is fairly easy to understand and evaluate. However, due to the restriction of no deferral before July 2013, and no “double-dipping” on meeting the residence requirements for full or partial OAS, the actual implementation is slightly more complex.

Here are some examples that may help to demonstrate those complexities.


In this example, let’s say that Joe turns 71 in July 2015 and he finally decides to apply for his OAS. (He may have had his own reasons for not applying earlier, or he may just not have been aware of OAS until then.) Joe will be limited by both the July 2013 restriction and the age 70 restriction above, so his valid deferral is just 12 months or 7.2% overall. Luckily for Joe, however, OAS provides for a maximum of one year of retroactivity for a late application, so at least he is compensated in that way for his delay beyond age 70.


In this example, let’s say that Mary lived in Canada from birth to age 30 and then she left Canada for work reasons. She retired and returned to Canada at age 60 in June 2010. She inquires about OAS when she turns 65 and is told that in one year when she turns age 66, she will be eligible for a full OAS under the “three-for-one” rule. (She would also have other choices for an immediate partial OAS pension, but let’s ignore that for now.) When she turns age 66 in June 2016, she is eligible for a full OAS, but she doesn’t receive any increase for voluntary deferral, because she didn’t meet the residence rules for a full OAS until that date.


In this example, let’s use Mary again, but let’s have her return to Canada at age 65 in June 2015. At that time she is eligible for a partial OAS pension of 12/40ths immediately, or she can wait six more years until age 71 to qualify for a full OAS. She initially decides to wait for a full OAS, but she decides a year and a half later (for health or financial reasons) that she wants to start receiving her OAS immediately. At that point, she would have 13.5 years of residence in Canada after age 18, and she would have two choices as follows:

  • A full year of retroactivity at 12/40ths partial OAS, plus a six-month deferral increase of 3.6%
  • Six months of retroactivity at 13/40ths partial OAS with no deferral increase

As mentioned above, this third example demonstrates that if you delay applying for your OAS, you can increase your partial pension by adding extra 40ths, or you can increase your pension by the voluntary deferral percentage, but you can’t “double-dip” and use the same period of time to count for both purposes.

Here are links to some Government of Canada web pages that provide more information about the voluntary deferral of OAS, as well as the other upcoming changes to OAS.

Written by Doug Runchey

Doug Runchey worked for the Income Security Programs branch of Human Resources and Skills Development Canada for more than 32 years, and was a specialist in the Canada Pension Plan and Old Age Security legislation, regulations and policy areas. He now runs his own company, DR Pensions Consulting, which provides pension advice, including detailed calculations for CPP retirement planning and “credit splitting” purposes. Doug can be reached by email @ [email protected] or check out his website at http://www.drpensions.ca/.

31 Responses to Voluntary deferral of OAS

  1. Good article.

    Have you or Jim looked at the pros & cons of delaying CPP & OAP specifically for inflation protection?
    Jim has had earlier articles advocating “take it early” & others have argued to delay.
    In our case the gov’t $$$ will be the only indexed retirement payments. The rest will be RRSP, TFSA, & non registered investments, probably with some portion in annuities.
    Those of us entering retirement remember inflation in the 70’s all too well.
    By delaying to 70 we would have enough from gov’t. only (probably with a purchased annuity as well) to do OK. Especially given that spending drops in peoples 70’s.
    What do you think? Might a topic for a future article?



    • Grant
      I’ve heard that suggestion before, but I’m going to stick to what I know best (CPP and OAS legislation and calculations) and I’ll leave it to Jim to comment on retirement planning scenarios. Thanks for reading!

    • If you think you will live a very long life, you might argue that delaying CPP makes sense. That being said, the MATH would tell you otherwise.

      In terms of inflation, I have no idea what the future will hold but in my humble opinion, I can’t see inflation of the 70’s coming back. In the 70’s boomers were all working, making money and spending it which attributed to the inflationary period.

      Boomers are now retiring. Often this means spending less, not more because incomes will be lower in retirement than pre-retirement.

      In the end, do what you feel is best for you and your situation. Good luck!

      • Agree — it’s a stretch to think of 1970’s style inflation coming back, but I think one should at least plan for inflation within the Inflation-Control Target range followed by the Bank of Canada (currently 1% to 3%, with 2% midpoint being the specific target.)

        On the other hand, I’d be interested in seeing how relevant the CPI actually is to retirees? The basket of products used to calculate the CPI is representative of Canadian consumers on average, which means it isn’t very representative of a specific subgroup like retirees that have different spending patterns. i.e. the CPI may be under- or over-stating the effect of inflation from a retiree’s perspective.

  2. Hi Doug / Jim

    Thank you for mentioning that the federal government in the 2012 budget announced that they will start a proactive enrolment process that will eliminate the need for many people to apply for OAS and GIS.

    In my field, I see delays receiving OAS or GIS payments because the paperwork is not received or is incomplete because of missing information. Some of these cases involve people who do not have a fixed address, are ill or incapable of completing the application necessary to qualify for income benefits.

    I don’t believe the government should allow the voluntary deferral of OAS. By the time someone is 65 years of age and having contributed to the economy for much of their normal working years (18-65) this benefit should simply be paid out.
    Your article highlights the financial benefits of the deferral of OAS and the breakeven points. The breakeven age ranges from 80 to 84. It would be great if you could comment on the percentage of males and females expected to live long enough to benefit from the deferral of OAS.

  3. I am in the 100% claw back club right now. I am also one who was advised that my OAS payment would start automatically this year at 65. I ignored that little notice, just put it in the file. My accountant told me very specifically to not collect OAS this year. I called OAS to make sure, that is when I was reminded of my situation – the automatic part. I sent a letter say do not pay, which was followed up by an “are you sure?” letter which I just sent in.

    So if I took the benefit this year, I would pay a high tax rate on this years benefit, and I believe I would lose the benefit for for following year when my income could be substantially lower and I might like to have the benefit. – I think.

    I don’t have a problem with applying later, as they will make it retroactive 11 months if required.

  4. Hi Doug

    Thanks for the great series of articles on pensions. Most informative. I ran some numbers on Excel to check the breakeven age using my own numbers for CPP and OAS. What I found interesting was what happened when I included a modest return on investment of 2.5% (based on an expected return of 4.5% less 2% for inflation). I think that to really compare the breakevens fairly, that the time value of money be included. The results added six additional years to the breakeven age for OAS for example. Higher rates would only further the effect.


    • Garth

      You certainly raise a valid point, but getting everybody to agree on what might be reasonable numbers to use for inflation and/or for rate of investment is difficult. And many people who are making this decision will be using the OAS for living expenses rather than for investment purposes, so ignoring those factors is probably appropriate.

  5. Expected Annual income is a huge factor for me when deciding when I should begin to receive the OAS benefit. I plan to retire at the end of June 2015 when I will be 66. I intend to apply for the OAS benefit to only begin in January 2016. If I applied to receive OAS back when I turned 65 in 2014 or even choose to receive OAS in July 2015 when I retire, my annual incomes for 2014 and 2015 would be above the income threshold and most, if not all, of this OAS benefit would be ‘clawed back’. So I am deferring the start of OAS to January 2016 when my annual income should NOT trigger any clawback. The increased OAS benefit by delaying my OAS start for 19 months has a much shorter breakeven point (Age 68.3) in this scenario because I need to recover only the portion of the missed OAS benefit that I would have actually KEPT and not the entire OAS benefit paid initially since most of this benefit would have been permanently clawed back.

    Another benefit of delaying OAS until the year when annual income falls to within the income threshold is that there will be no clawback carry over condition from the previous year. It is my understanding that anyone with a higher income receiving OAS and triggering the benefit clawback will have that clawback deduction automatically taken each month from their OAS benefit until an annual tax return is filed showing a lower annual income within the OAS income threshold. If I had triggered an OAS clawback condition it would be another 14 to 16 months of ‘clawback’ deductions taken from my OAS monthly payment until the clawback condition is removed. I would eventually get this unnecessary clawback deduction back but only after filing next year’s tax return.
    For these reasons I have delayed my OAS start date until January of the year in which I will not trigger a clawback.

  6. I am eligible for OAS this coming Feb when I turn 65. Does anyone know if the claw-back is also deferred for Gov pensions if one elects to defer OAS?

    Also what impact if any is there on Pension splitting

    • Don

      The clawback only applies to OAS, so if you defer OAS there is nothing to claw back.

      I don’t understand what your question about credit-splitting means.

  7. Is it true that if you delay OAS you will never be eligible for GIS? or will you only be eligible once you start collecting OAS ? pending of course you income level makes you eligible for GIS in the first place?

    • Viviana

      No, it’s not true. You can’t receive GIS during the delay in applying for OAS, but you can receive GIS as soon as you begin receiving OAS (depending on your income level as you suggest).

  8. Doug,
    In example #2, Mary returned to Canada at age 60 in 2010, that means that she was born in 1950. She left Canada at age 34, so in 1984.
    My understanding from the esdc website is that she does not need to wait until she is 66 to qualify for a full pension:

    “Full pension

    You may qualify for a full Old Age Security pension if…
    You were born on or before July 1, 1952, and
    on July 1, 1977, you resided in Canada, or…”
    Your article is dated October 2015, the esdc website was modified on 2016-04-05.
    Am I misinterpreting this text?
    On another note, I would argue that in the case of deferral for people who do not meet the residency requirements to qualify for a full pension at 65, opting for the extra 0.6% per month increase (or 7.2% per annum) is much better that adding 1/40th (or 2.5% per annum). Would you not agree?

    • Sam

      Good spotting! I’ve made a correction to example #2. See if it makes sense now?

      As to your second point, I agree IF the person has 14 or more years of residence in Canada when they turn age 65. If for instance, they only had 10 years in Canada when they turn age 65, waiting one year and claiming 11/40ths is a 10% increase for them compared to if they took 10/40ths plus a 7.2% increase for voluntary deferral.

      There’s also the situation for a partial OAS when waiting only one month can give you an extra 40th, which would always be a better choice than taking the 0.6% increase under voluntary deferral.

  9. Doug,

    Now example 2 makes sense since you decreased the number of years of residence between Mary’s 18th birthday and the year she left Canada to 12 years. Those 12 years could make up (under the three-for-one rule) for 4 years only out of her missing 5 years to complete the 10 consecutive years in Canada before applying for OAS. So she needs to spend one more year.
    However, 2 points:
    – Example 3 should be modified since it still states that Mary, upon returning at age 65, is eligible for a partial OAS of 16/40th.
    – Mary would be entitled to a full pension after spending a year only because she was born on or before July 1, 1952 and she resided in Canada on or before July 1, 1977. If that was not the case she would only be entitled to a partial OAS.

    On another hand, you have a very good point: it is actually more beneficial to add 1/40th from the 10th and up to the 14th year and may be even beyond if only few months can add a 1/40th. Many scenarios may unfold as the rules for the 1/40th addition (after the 10th year) and the 0.6% per month increase (after 65) because of deferral are different (yearly vs monthly and partial linear vs direct linear). Thank you.

    • Sam

      Thanks for pointing out that example #3 also needed to be changed after I corrected example #2. Hopefully they are both accurate now?

  10. All 3 examples relate to someone born before 1952-07-01. Can you create some examples for those of us a little younger, eg immigrants with say 10 / 20 / 30 years of residence after age 18?
    Thank you.

  11. The impact of OAS deferral on a couple claiming GIS isn’t clear. A couple with only one member collecting OAS can collect GIS at an income much higher (42K) than a couple with both members collecting OAS (23K). Is it possible to defer OAS of one member in order to keep collecting GIS? I know that OAS income doesn’t enter into the GIS means-testing but it does enter into eligibility in this weird way.

    • Hi David – Yes, it would be possible for one spouse to defer OAS; which could enable the other spouse to receive GIS, as you point out.

  12. Both of us turned 64 in 2017 and received letters from Service Canada saying we may be eligible for OAS and they included an application form.

    We both want to defer OAS until age 70.

    I’ve read in various places that Service Canada may automatically start some peoples OAS…. At least they started a project to do that.

    I can’t find any definitive information on what I should do. Is simply not applying going to accomplish the deferral or do I need to formally tell them.

    They send lots of paper surely its not too much to ask that they include a definitive statement on this issue, since they themselves say (on the website) they might automatically send it but then send us applications! The letter we received talks about deferral.

    Doug or anyone else can you clarify? Thanks

    • I think I figured it out but still think they could be clearer.

      I now have found there are two different letters sent out.

      Our letters did not say we were selected for automatic enrollment….. so we will do nothing.

      • Hi Dave – I’m not 100% sure whether the automatic approval project is still being used or not, but I know that the automatic approval letter was pretty clear that you had to contact them if you wanted to defer and you didn’t need to apply or contact them if you wanted to receive OAS. You’re clearly in the group that has to apply if you want to receive it and will automatically be deferred if you don’t apply.

  13. I was born in Poland in March 1949 and came to Canada in September 1990. I postponed receiving OAS up to January 2018. Service Canada calculate my OAS as 27/40 it means $396. I turn 65 in March 2014.
    According to my understanding I should receive 23/40 of full amount + 45month x 0.6 for differal what is equal 27%.
    Total amount should be $428 it means $337 x 1.27.
    Is Service Canada right in this calculation?
    Thanks in advance for answer.

    • Hi Antoni – You are 100% correct in your thinking. Service Canada is supposed to automatically give you the greater of those two choices, unless you choose the other option for some reason. Perhaps they were having troubles with their calculator that day? If you call them, I think they’ll correct it without any problem. Let me know if they don’t.

  14. Hi Doug, do you happen to have a chart using the current 2018 rates? Also, if you defer your OAS and die before you sign up to collect it, is your spouse still able to apply for survivor benefits?

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