Monday, July 26, 2010

Canadian Old Age Security pension

In addition to CPP or QPP Canadians can apply for the old age security pension when they reach 65. There are some rules regarding the pension that you should look into.
You can find the information at:
http://www.servicecanada.gc.ca/eng/isp/pub/oas/oas.shtml

The rules are:

Scenario 1 - People living in Canada
You must be 65 years of age or older.
You must live in Canada and be a Canadian citizen or a legal resident at the time we approve your pension application.
You must have lived in Canada for at least 10 years after turning 18.

Scenario 2 - People living outside Canada
You must be 65 years of age or older.
You must have been a Canadian citizen or a legal resident of Canada the day before you left Canada.
You must have lived in Canada for at least 20 years after turning 18.

If you are not covered by either of these two scenarios, you may still qualify for a pension since Canada has social security agreements with many countries. If you have lived in one of these countries or contributed to its social security system, you may qualify for a pension from that country, from Canada or from both countries.

Canada and the US have a treaty which allows for totalization of years worked in both countries. You may be able to use that to obtain the OAS. contact them directly at 1-800-277-9914 (English), or for service in French: 1-800-277-9915.

There is also a clause in the OAS pension called clawback which affects people who have more than $66k income (including the OAS payment) are subject to the clawback. However the clawback may not apply to people who live in the US. The rules are stated:

How do I know if the recovery tax applies to me?
You must pay the recovery tax if:

your annual net world income is more than $66,335 (for 2009, in Canadian dollars); and you live in a country where the non-resident tax on Canadian pensions is 25 percent.

Since the US has a tax treaty with Canada the non-residence tax is 15%.

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