Government Will Increase Age of CPP and OAS Eligibility or Not? Things You Should Know

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Key Takeaway Box

  • The Canada Pension Plan (CPP) and Old Age Security (OAS) are two of the main pillars of Canada’s retirement income system.
  • CPP and OAS benefits are indexed each year to keep pace with inflation and protect retirees’ purchasing power.
  • In 2024, CPP and OAS benefits will increase by 4.7% and 0.8%, respectively, thanks to inflation indexing and the CPP enhancement.
  • The CPP enhancement will also introduce a second, higher earnings limit, creating a dual-threshold system that will increase the amount working Canadians receive upon retirement.
  • The eligibility age for CPP and OAS will remain at 65, but Canadians can choose to start receiving their benefits as early as 60 or as late as 70, depending on their personal circumstances and preferences.

Understanding CPP and OAS in Canada

The Canada Pension Plan (CPP) and Old Age Security (OAS) are two of the main pillars of Canada’s retirement income system. They provide monthly benefits to eligible Canadian seniors to help cover living expenses in retirement.

The CPP is a contributory pension plan funded equally by employees and employers. All working Canadians over the age of 18 contribute a percentage of their earnings to the CPP. These contributions are invested and grow over time. At retirement, CPP provides a monthly pension based on your contributions and earnings history. The average CPP retirement pension as of 2022 is $814.58 per month¹.

OAS is not based on contributions but is funded from general tax revenues. Canadian citizens and legal residents who meet the age and residency requirements can qualify for a full OAS pension. As of the fourth quarter of 2022, the maximum OAS pension amount is $697.07 per month for those 65-74 years old².

Both CPP and OAS are indexed each year to keep pace with inflation. This helps protect retirees’ purchasing power. The government adjusts benefits based on changes in the Consumer Price Index (CPI). Indexing ensures CPP and OAS keep up with the rising cost of goods and services.

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Government Will Increase Age of CPP and OAS Eligibility or Not?

One of the common questions that many Canadians have is whether the government will increase the age of eligibility for CPP and OAS benefits. The answer is no, the government has no plans to change the eligibility age for CPP and OAS.

The eligibility age for CPP and OAS is 65, but Canadians can choose to start receiving their benefits as early as 60 or as late as 70, depending on their personal circumstances and preferences. Starting CPP or OAS earlier or later than 65 will affect the amount of benefits you receive.

If you start CPP before 65, your monthly pension will be reduced by 0.6% for each month you start before 65, up to a maximum of 36% at age 60³. If you start CPP after 65, your monthly pension will be increased by 0.7% for each month you delay after 65, up to a maximum of 42% at age 70³.

If you start OAS before 65, you will not receive any benefits, as OAS is not available before 65. If you start OAS after 65, your monthly pension will be increased by 0.6% for each month you delay after 65, up to a maximum of 36% at age 70⁴.

The decision to start CPP or OAS earlier or later than 65 depends on various factors, such as your health, life expectancy, income needs, tax situation, and other sources of retirement income. You should consult a financial planner or advisor to help you make the best choice for your situation.

CPP and OAS Other Changes 2024

In addition to the annual indexing of CPP and OAS benefits, there are other changes coming in 2024 that will affect retirement planning and savings strategies. These changes are part of the CPP enhancement and the OAS increase for seniors 75 and over.

The CPP enhancement is a gradual and phased-in increase of CPP benefits and contributions that started in 2019 and will continue until 2025⁵. The CPP enhancement aims to strengthen the financial security of future retirees by increasing the amount working Canadians receive upon retirement.

The CPP enhancement will increase the replacement rate of CPP benefits from 25% to 33.3% of your average pre-retirement earnings, up to a certain limit⁵. This means that CPP will replace a higher percentage of your income when you retire.

The CPP enhancement will also introduce a second, higher earnings limit, creating a dual-threshold system⁵. The first threshold is the Year’s Maximum Pensionable Earnings (YMPE), which is the maximum amount of earnings that are subject to CPP contributions and benefits. The second threshold is the Year’s Additional Maximum Pensionable Earnings (YAMPE), which is 14% higher than the YMPE.

In 2024, the YMPE will increase to $68,500 and the YAMPE will increase to $73,200⁶. This means that Canadians who earn more than the YMPE will contribute and benefit from the CPP enhancement on a portion of their additional earnings, up to the YAMPE.

The OAS increase for seniors 75 and over is a one-time payment of $500 in August 2023 and a permanent 10% increase of OAS benefits starting in July 2024⁷. The OAS increase for seniors 75 and over aims to provide more financial support to older seniors who face higher risks of income insecurity and higher health care costs.

The OAS increase for seniors 75 and over will apply to all OAS pensioners who will be 75 or over as of June 2022⁷. The OAS increase for seniors 75 and over will not affect the eligibility or amount of the Guaranteed Income Supplement (GIS), which is an additional benefit for low-income seniors.

Concluding Words

The CPP and OAS are important sources of retirement income for many Canadians. They provide monthly benefits that are indexed to inflation and reflect your earnings history and personal choices. In 2024, CPP and OAS benefits will increase by 4.7% and 0.8%, respectively, thanks to inflation indexing and the CPP enhancement. The CPP enhancement will also introduce a second, higher earnings limit, creating a dual-threshold system that will increase the amount working Canadians receive upon retirement. The OAS increase for seniors 75 and over will provide a one-time payment of $500 in August 2023 and a permanent 10% increase of OAS benefits starting in July 2024. These changes are essential for Canadians to understand, as they may influence retirement planning and savings strategies. It’s crucial to monitor official updates as these projected figures will be confirmed by the relevant authorities.


Source: (1) CPP and OAS Payment Increase 2024. What To Expect. https://canpension.ca/articles/cpp-oas-2024. (2) Maximum Benefit Amounts and Related Figures – Canada Pension Plan (2024 …. https://www.canada.ca/en/employment-social-development/programs/pensions/pension/statistics/2024-quarterly-january-march.html.

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