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What is Old Age Security?
Old Age Security or OAS is a social insurance program that provides a basic level of pension income, on application, to anyone age 67 or over who meets residence requirements. OAS is financed from the general tax revenues of the Federal Government. All benefits under OAS are adjusted quarterly each year in line with rises in the cost of living as measured by the Consumer Price Index.
Persons who are Canadian residents must include the basic Old Age Security pension in their taxable income. Meanwhile, persons who reside outside Canada are subject to tax withholding on their basic Old Age Security pension. The usual rate of withholding tax is 25%. However, persons who live in countries with which Canada has concluded a tax treaty that specifies a rate of withholding lower than 25% are only subject to that lower rate.
A minimum of 10 years of Canadian residency after reaching age 18 is required to receive an Old Age Security pension in Canada. To receive OAS outside the country, a person must have lived in Canada for a minimum of 20 years.
The amount of a person’s pension is determined by how long he or she has lived in Canada. A person who has lived in Canada, after reaching age 18, for periods that total at least 40 years will qualify for a full OAS pension. Conversely, person who cannot meet the requirements for the full OAS pension may qualify for a partial pension. Thus, a partial pension is earned at the rate of 1/40th of the full monthly pension for each complete year of residence in Canada after reaching age 18.
The amount of Old Age Security pension paid to persons with high incomes is reduced through a recovery provision of the Income Tax Act.