Mid-Summer Reviews: When to Collect OAS and CPP

Did you know that 61% of Canadians are afraid of running out of money during retirement? According to a new CPP Investments survey, that fear is widespread. Yet surprisingly few people understand even the basics of public pension planning. For example, Canadians are not obliged to begin OAS or CPP at age 65. By delaying, they can significantly boost after-tax income and improve retirement security.

The summer wind-down is a perfect time to revisit retirement readiness. Here are some key considerations:

The Backdrop

Retirement planning ideally begins with an individual’s first paycheque. Every employed Canadian contributes to CPP once they turn 18. But will CPP alone be enough?

The government’s July 2 update shows the average CPP monthly payment is $844.53 ($10,134.36 annually)—far short of covering food, clothing, and shelter. That’s why pre-retirement planning matters: individuals need to understand early on that CPP is only a foundation and must be supplemented. The earlier saving and investing begin, the greater the benefit of compounding.

What About OAS?

The Old Age Security pension is Canada’s second public retirement benefit:

• Age 65–74: maximum $734.95/month
• Age 75+: maximum $808.45/month

Most assume OAS begins at 65, but it can be deferred to 70 for up to a 36% increase in payments.

Why Wait?

Deferring can make a meaningful difference:

• : Benefits can start as early as 60, but delaying to 70 boosts payments by 42% (0.7% per month).
• : Starting at 70 increases benefits by 36% (0.6% per month).
• At 75, OAS automatically rises another 10%.

For example, a $760 monthly OAS at 65 grows to more than $1,000 if delayed to 70.

The Downside: OAS Clawback

High-income clients must consider the OAS Recovery Tax. In 2025, OAS is reduced when net income exceeds $93,454. For each dollar above that, 15 cents are clawed back until benefits are fully eliminated at $151,668 ($157,490 for those 75+). Strategic RRSP contributions may help lower taxable income and preserve OAS.

Planning Matters

Postponing pensions can create tax advantages. For example:

• Drawing more from RRSPs between 65–70 while delaying OAS may reduce lifetime tax liability, especially with income splitting.
• Surplus funds can be contributed to a TFSA, creating a tax-free income bucket.

Deferral works best for those with good health and longevity prospects. For others, these discussions become part of broader estate planning—helping clients ensure financial security in later life.

Bottom Line: Clients still working after 65 must continue CPP contributions unless they file Form CPT30 with CRA and their employer. Note: once CPP payments begin, they are taxable. Professionals should assist clients with this paperwork.

For more details: Deciding when to start your public pensions