Taxpayers over the age of 65 now have the option of deferring receipt of their Old Age Security pensions (OAS) until they reach the age of 70.
What are the benefits?
Delaying receipt of your OAS pension will not only increase your future monthly OAS benefit upon collection by 0.6% for each month of deferral, it may provide an effective tax planning opportunity to avoid clawback of your OAS benefits. “Clawback” results in an extra 15% tax for OAS recipients on your income over an annual preset threshold ($70,954 for 2013) up to a maximum of your annual OAS benefit amount.
What are the drawbacks?
Deferral of your OAS will also result in a deferral of other benefits such a The Guaranteed Income Supplement and Allowances for Survivors. Unlike your OAS monthly amount, there is no incremental increase in these benefits
How is it done?
You can apply for OAS up to 11 months before your 65th birthday, or up to 11 months prior to the date in which you choose to defer collection of your pension to, up to your 70th birthday.
Pensioners who have been receiving OAS for less than six months can submit a written request to Service Canada to cancel receipt of their pension if they wish to take advantage of the deferral.
Is this for you?
You must consider your own unique circumstances, finances, health, and plans for retirement when making financial decisions. Please contact your accounting professional at Millard’s for more information, and to see if OAS deferral could benefit you.
Click here to contact a Millards Chartered Accountants branch near you for more information.