Understanding Old Age Security
8 February, 2012 / by marketing
It was just a couple of weeks ago that Stephen Harper proposed raising the age of receiving Old Age Security benefits at the World Economic Forum; and sent Canadians into a near-riot at the very mention of such a thing. Before any official proposal was even put forward, or before Harper could fully explain what he was thinking, people started wondering how they were going to pay their Toronto mortgage, their utility bills, and cover the costs of daily living, all without their pension. But, hold up. Before you start yelling, you have to understand what he’s talking about. It’s not the CPP, as many think, it’s the OAS – Old Age Security. So what is the OAS, and why does Harper want to change it?
The OAS is a form of pension that’s available to certain individuals, although requirements are not tough to meet. Anyone over the age of 65, who has lived in Canada for at least 40 years since their 18th birthday, is eligible to receive a full monthly OAS payment of $516.96. Those who are over the age of 65 and have only lived in Canada for ten years are still eligible, but they will only receive a partial payment. OAS does have some tax regulations and limits that go along with it. For instance, those who earn $66,335 or more during the year will have to pay 15% on any amount that they are over at tax time. This is known as the OAS clawback.
So why does Stephen Harper want to make changes, and what changes was he proposing? The biggest change Harper was talking about making was raising the age limit to 67, instead of 65. While this is bad news for those that are looking at retirement soon, we certainly wouldn’t be the first countries to do it with China, Japan, Australia, and many other countries having an official old age of 67, and even higher in some areas. When Harper announced that he was thinking of making the changes, he cited low funding for the pension as one of the reasons, a large influx of Boomers about to be withdrawing from it as another; and a chance to keep people in the workforce longer as another reason. While he spoke about the OAS being in potential trouble, Harper was also very clear that CPP is not, and funding for that program is doing well.
Harper’s changes to the OAS have been tabled for the moment. But those who are going to be looking at retirement soon might want to think about other ways they could save, or other resources that they could tap into during their retirement such as their home equity. While no changes are going to be made to OAS at the moment, there’s no doubt that this talk will resurface in a couple of years, if not before.