As retirement approaches, you may start thinking more about your government benefits and understanding the differences between them.
Canada Pension Plan (CPP) and Old Age Security are the main government benefits that retirees can receive. And outside of workplace pensions, they are the only pensions that people typically receive.
It’s important to know how CPP and OAS are different so that you can make the best choices for your retirement.
CPP vs. OAS Comparison Table:
| Canada Pension Plan (CPP) | Old Age Security (OAS) | |
| Payment Amount: | Average CPP Payment is $760/month, Maximum CPP Payment is $1,306/month | Average OAS payment is $698/month |
| Qualifying for the Benefit. | You must have made at least one contribution to CPP in your working years and be at least 60 years of age | No contributions are required to be eligible for OAS. But you must be at least 65 years old, a Canadian citizen or Permanent resident, and lived in Canada for at least 10 years after age 18 |
| When can you begin receiving CPP / OAS | You can begin receiving CPP as early as age 60 and it can be delayed until age 70 | You can begin receiving OAS as early as age 65 and it can be delayed until age 70 |
| Taxation | CPP is taxed as income on your tax return | CPP is taxed as income on your tax return |
| Income Splitting | Yes, you can split CPP income you receive from CPP with a spouse to reduce your taxable income. | No, you cannot split OAS income you receive from OAS with a spouse to reduce your taxable income. |
| Clawbacks | No, your CPP income can not be clawed back. You always receive your full benefit. | Yes, your OAS payments can be clawed back. Your OAS payments will begin being reduced if your reported income is $86,912 or higher. And you will not receive any OAS pension if your reported income is above $142,428 |
| Payment Dates | The CPP and OAS payment dates are the same. | The CPP and OAS payment dates are the same. |
| Inflation Adjustment | Yes, CPP is indexed to inflation and your payments will increase alongside CPI | Yes, OAS is indexed to inflation and your payments will increase alongside CPI. |
What is CPP?
CPP stands for “Canada Pension Plan”.
CPP is designed to supplement retired Canadian’s other forms of income in retirement such as workplace pensions and drawing down on investment funds.
In this regard, CPP and OAS are quite similar. However, there are many technical differences between CPP & OAS.
What is OAS?
OAS stands for “Old Age Security”
OAS is a monthly retirement benefit provided to Canadians.
OAS is designed to supplement retired Canadian’s other forms of income in retirement such as workplace pensions and drawing down on investment funds.
In this regard, CPP and OAS are quite similar. However, there are many technical differences between CPP & OAS.
Which benefit is better? CPP or OAS?
It is difficult to say whether CPP or OAS is better without understanding a specific person’s circumstance. Whether CPP or OAS is better will be different for each person.
Technically you can receive more income from CPP if you’ve contributed the maximum amount for your entire working career. But there are also people who will receive less income from CPP than OAS.
OAS is an easier benefit to qualify for a larger income amount, but it has specific requirements as well.
How much do CPP and OAS pay?
CPP Payments
At age 65 CPP’s average payment in 2023 was $760/month. But the maximum amount you could receive is $1,306/month.
The amount you receive at age 65 depends on the amount of contributions you made to CPP during your working years. These CPP contributions are the same “deductions” that you see on your paycheque.
However, if you did not contribute to CPP you may not be eligible to receive any CPP income. And if you only contributed to CPP for a few years the amount of income you receive may be much lower than average.
OAS Payments
At age 65 OAS’s average payment was $698/month.
There are additional benefits you can receive in addition to this, such as the Guaranteed Income Supplement (GIS).
OAS does not require any contributions to the plan. If you have been a Canadian Citizen your entire life and apply for OAS at age 65 you should receive income equal to the average figure.
How do you qualify for CPP and OAS?
Qualifying for CPP
To qualify for CPP you have to made at least one contribution to CPP and you must be at least 60 years old.
Qualifying for OAS
To qualify for OAS you must meet 3 requirements:
- Be 65 years old or older
- Be a Canadian citizen or a legal resident at the time your OAS pension application is approved
- You have lived in Canada for at least 10 years since the age of 18
When can you begin receiving CPP or OAS?
CPP Start Date
You can begin receiving CPP as early as age 60. Though it will be a reduced pension.
The standard age to begin taking CPP is age 65. If you take CPP at age 65 it will not be reduced.
The delayed age to begin taking CPP is age 70. If you take CPP at age 70 your CPP benefit will be increased.
You do not have to wait specifically for age 60, 65 or 70 to begin taking CPP. You can begin taking it at anytime between age 60 to 70.
OAS Start Date
You can begin receiving OAS at age 65. This is the standard age to begin receiving the pension.
You can delay taking your OAS to age 70. If you do this you’ll receive an increased OAS amount
Taxation
Is CPP Taxable?
Yes, CPP is taxed as income on your tax return.
This is why it can be beneficial to delay receiving CPP if you are still working at age 60 or 65. Because you’ll pay less tax on the CPP you receive – while increasing the future benefit of CPP.
Is OAS Taxable?
Yes, OAS is taxed as income on your tax return.
This is why it can be beneficial to delay receiving OAS if you are still working at age 65. Because you’ll pay less tax on the OAS you receive – while increasing the future benefit of OAS.
Income Splitting
Can you split income from CPP?
Yes, CPP income can be split with a spouse.
The benefit of splitting income is to spread the income across two people with different tax brackets. A spouse with higher income splitting their CPP benefit with a lower income spouse will allow the couple to pay less tax.
Can you split income from OAS?
No, income from OAS cannot be split with a spouse.
Clawbacks
Can CPP be clawed back?
No CPP income can not be clawed back. You will always receive your full benefit.
Can OAS be clawed back?
Yes, your OAS payments can be clawed back. Your OAS payments will begin being reduced if your reported income is $86,912 or higher. And you will not receive any OAS pension if your reported income is above $142,428
This is a good reason to potentially delay receiving OAS. If you are still working your income will be higher, and if your income plus your OAS and CPP benefits meets the hurdles for OAS clawback you could have your OAS benefit reduced.
Payment Dates:
When are CPP Payment Dates?
CPP and OAS Payment Dates are the same
- January 27, 2023
- February 24, 2023
- March 29, 2023
- April 26, 2023
- May 29, 2023
- June 28, 2023
- July 27, 2023
- August 29, 2023
- September 27, 2023
- October 27, 2023
- November 28, 2023
- December 20, 2023
When are OAS Payment Dates?
CPP and OAS Payment dates are the same
- January 27, 2023
- February 24, 2023
- March 29, 2023
- April 26, 2023
- May 29, 2023
- June 28, 2023
- July 27, 2023
- August 29, 2023
- September 27, 2023
- October 27, 2023
- November 28, 2023
- December 20, 2023
Inflation Adjustments
Is CPP Adjusted for Inflation?
Yes CPP is adjusted for inflation. Each year the government looks at the Consumer Price Index (CPI) and will adjust the CPP payments depending on inflation over the last year.
Is OAS Adjusted for Inflation?
Yes OAS is adjusted for inflation. Each year the government looks at the Consumer Price Index (CPI) and will adjust the OAS payments depending on inflation over the last year.
Delay Receiving CPP vs. OAS
CPP
Receiving CPP at age 60
You can take CPP at any point after age 60.
But if you take it before age 65 your monthly CPP payments will be reduced by 0.6% per month multiplied by the number of months before you turn 65. On an annual basis, this means CPP is reduced by 7.2% for each year you take it before 65.
Receiving CPP at age 65
If you take CPP at age 65 you will receive the standard benefit. It will not be increased and it will not be decreased
Receiving CPP at age 70
When you turn 65 you will not automatically begin receiving CPP. You will need to apply for it.
If you delay taking CPP after age 65 your monthly CPP payments will be increased by 0.7% per month multiplied by the number of months after you turn 65. On an annual basis, this means CPP is increased by 8.4% for each year you take it after 65.
OAS
Receiving OAS at age 65
If you take OAS at age 65 you will receive the standard benefit amount.
Receiving OAS at age 70
When you turn 65 you will not automatically begin receiving OAS. You will need to apply for it.
If you delay taking OAS after age 65 your monthly OAS payments will be increased by 0.6% per month multiplied by the number of months after you turn 65. On an annual basis, this means OAS is increased by 7.2% for each year you take it after 65.