Old Age Security

Old Age Security (OAS) is the single, largest program of the Government of Canada.  The program provides benefits to most Canadians 65 years of age and over based upon a residency test.  The program consists of the basic pension, Guaranteed Income Supplement (GIS) and monthly allowances for eligible low-income people 60 to 64 years of age.
As part of Budget 2012, the federal government made a number of changes to reflect the changing landscape of longevity, work and cost to provide the basic pension.  They do not affect those currently receiving benefits.
Healthier lifestyle choices over the last 40 years have increased longevity from 69 to 79 for Canadian males and from 76 to 83 for women.  The result is a longer and more expensive pension for government to administer and a smaller ratio of working vs. retired Canadians.
Unlike the CPP, which is financed by dedicated, employee and employer contributions, OAS is paid out of general revenue on a pay-as-you-go basis.
The health and desire to work longer and perhaps even the financial realities of retirement have meant that many Canadians continue to work well past 65.  A new and voluntary deferral of OAS beginning at age 65 up to a maximum age of 70 is now an option.  This increases the future pension benefit by 0.6% per month or to a maximum of 36%.  While seemingly small unto itself, the additional working years may allow some to both increase and defer drawing from RRSPs, increasing monthly income from both CPP and OAS and reduce the number of years needed.
Last year’s budget continues to chip away at the long-established belief that retirement at age 65 is set in stone.  More geared at OAS, the eleven year advance notice and 6 year phase-in period will move the age of entitlement from age 65 to age 67.  People born between April 1, 1958 and January 31, 1962 will become eligible to receive their OAS benefits (and GIS) between the ages of 65 and 67, depending upon their birth date.
While seemingly less generous, the sustainability of social programs is paramount and increasing longevity will no doubt require further scrutiny of OAS and other social programs. Canada is not alone in this regard as 22 of 34 countries of the Organization for Economic Cooperation and Development (OECD) have announced similar measures.  A partial list of those countries include; the United States, United Kingdom, France, Germany, Greece and Japan.