How Is OAS Calculated? Your Pension Explained
Understand how Canada's Old Age Security pension is determined, from eligibility to income adjustments and application steps.
The Old Age Security (OAS) program is a key component of Canada’s retirement income structure. It provides a monthly pension to most individuals aged 65 or older who meet specific residency and legal status criteria. Unlike other retirement plans, OAS is funded through general tax revenues, making it a non-contributory benefit. It aims to provide a reliable base income for seniors.
OAS Eligibility Requirements
To qualify for the Old Age Security pension, individuals must be 65 or older. Legal status in Canada is a prerequisite; applicants must be a Canadian citizen or legal resident at the time of application approval if living in Canada, or on the day before leaving the country if living abroad.
Residency in Canada after turning 18 is a central condition for OAS eligibility. Individuals living in Canada must have resided there for at least 10 years since age 18. For those living outside Canada, a residency period of at least 20 years after age 18 is required.
Full OAS pension eligibility requires living in Canada for at least 40 years after reaching 18 years of age. However, a partial pension is available for those who meet the minimum residency but not the 40-year mark. Exceptions exist for Canadians working abroad for Canadian employers, such as the Canadian Armed Forces, where time spent outside the country may count towards the residency requirement. Social security agreements with other countries may also allow for combining residency periods.
Determining Your Basic OAS Pension
The maximum Old Age Security pension amount is subject to quarterly adjustments. These adjustments are based on changes in the Consumer Price Index (CPI), ensuring that the pension keeps pace with the cost of living. While monthly payment rates can increase if the cost of living rises, they will not decrease if the CPI goes down. For the July to September 2025 quarter, the maximum monthly OAS payment is $734.95 for individuals aged 65 to 74 and $808.45 for those aged 75 and over.
The number of years an individual has resided in Canada after age 18 directly impacts their basic OAS pension, especially for partial pensions. A partial monthly pension is earned at a rate of 1/40th of the full monthly pension for each year of residency in Canada after age 18.
A partial pension is determined using the formula: (Years of residency after age 18 / 40) x Maximum OAS pension. For example, 25 years of residency (25/40ths or 62.5%) of the maximum OAS amount for ages 65-74 ($734.95) would be approximately $459.34. A person with 15 years of Canadian residency would receive 15/40ths (37.5%), amounting to about $275.61 per month.
Understanding the OAS Recapture
The Old Age Security program includes the “OAS recapture,” or pension recovery tax. This provision reduces the OAS pension for higher-income individuals; it is a direct reduction of the benefit, not a separate tax. It aims to ensure the OAS benefit primarily supports low and middle-income seniors.
The recapture is triggered when an individual’s net income exceeds a specified threshold. For the 2025 income year, the Old Age Security repayment threshold is $93,454. For every dollar of net income above this threshold, the OAS pension is reduced by 15 cents. This calculation is based on the individual’s net income, including investments, pensions, and Registered Retirement Income Fund (RRIF) withdrawals.
The reduction continues until the entire OAS benefit is repaid for high-income earners. For July 2025 to June 2026, the maximum income recovery threshold for individuals aged 65-74 is approximately $151,668, and for those aged 75 and over, it is about $157,490. The recovery tax calculation is automatic and appears on an individual’s Notice of Assessment, affecting OAS payments for the subsequent July-to-June period.
The OAS Application Process
Service Canada automatically enrolls eligible individuals for the Old Age Security pension. If sufficient information is available from tax filings and other government records, individuals may receive a letter notifying them of their automatic enrollment around the time they turn 64.
If an individual does not receive such a notification or if the information is incorrect, they must apply manually. Applications can be submitted online through a My Service Canada Account (MSCA), by mail, or in person at a Service Canada office.
Key information and documents required for the application include:
Social Insurance Number (SIN)
Proof of age (e.g., birth certificate)
Proof of legal status (e.g., Canadian passport or permanent resident card)
Residency information, detailing addresses and dates of living in Canada since the age of 18
After submission, Service Canada reviews the application and sends a decision letter, outlining the outcome and payment details. Payments can be received via direct deposit.