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Old Age Security

Old Age Security (OAS) is a monthly pension paid by the federal government. Unlike the Canada Pension Plan it does not depend on earnings or contributions; it depends on age and years of residence in Canada. It is taxable income.

The rules

  • Eligibility: age 65 or older, with at least 10 years of residence in Canada after 18 (20 when applying from outside Canada).

  • Amount: the full pension needs 40 years of residence after 18. Fewer years give a partial pension of years ÷ 40, fixed once granted. For July to September 2026 the full amount is $751.97 a month at ages 65 to 74.

  • Deferral: the pension can start later than 65. It rises by 0.6% for each month deferred, for at most 60 months, so 36% at 70, and the increase is permanent.

  • At 75: the pension is 10% higher; see OAS at 75.

  • Recovery tax: 15% of net income above a threshold ($95,323 for the 2026 income year) is repaid out of the pension; see the OAS recovery tax.

  • It is indexed to prices each quarter. The deferral and age-75 increases are not counted when the Guaranteed Income Supplement is calculated.

    monthly OAS = full pension × (years ÷ 40) × (1 + 0.006 × months deferred) × 1.10 if 75 or older

What the engine does

  • Takes the full pension at 40 years of residence unless the years are entered, and a start at 65 unless another age is given. A start after 65 earns the deferral increase.
  • Applies the partial-pension fraction, the deferral increase and the 75 increase to the July to September 2026 amount, and grows it once each January at the plan's inflation rate rather than quarterly.
  • Subtracts the recovery tax from the cash received and counts OAS as taxable income.
  • Declines to estimate OAS for fewer than 10 years of residence, which would need a social security agreement.

What it deliberately does not

  • Residence outside Canada, and partial pensions under agreements with other countries, are not modelled.
  • The OAS Allowance for spouses aged 60 to 64 and the survivor's allowance are not modelled; see the Guaranteed Income Supplement.
  • Quarterly indexation is replaced by one projected increase a year; see inflation and today's dollars.

Connected to

  • Inflation and today's dollars · The default inflation rate is 2.5% a year. A future dollar amount can be shown as is, or divided by (1 + inflation) for each year to show what it would buy today.
  • Net worth, as the plan counts it · Net worth is everything the plan holds (cash, investment and registered accounts, homes at market value) minus mortgages, credit lines, debts and tax owing. It is not reduced for selling costs or for tax on money still in an RRSP.
  • OAS at 75 · Old Age Security is 10% higher from age 75. A stream that began before then steps up in the calendar year the recipient turns 75.
  • RRIFs and the wind-up at 71 · An RRSP must become a RRIF by the end of the year you turn 71, after which a prescribed minimum comes out and is taxed every year. Give a birth year and the plan models it; leave it blank and a plan running past 71 looks better than it is.
  • The Guaranteed Income Supplement · A tax-free top-up to Old Age Security for pensioners with little other income. It falls by 50 cents for every dollar of other income (75 cents through part of the range); RRSP and RRIF withdrawals count against it, TFSA withdrawals do not. The projection estimates it on the previous year's income.
  • The OAS recovery tax · Years where net income clears the threshold repay 15% of the excess out of Old Age Security. The projection withholds it from the OAS cash, exactly as the CRA does, and leaves taxable income unchanged.

Sources