Will the Government Increase the Age of CPP and OAS Eligibility? Here’s What You Need to Know

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Key Takeaways:

The government has not announced any plans to increase the age of CPP and OAS benefits, which remain at 65 for most Canadians.
CPP and OAS benefits are adjusted annually to keep pace with inflation and reflect changes in the cost of living.
In 2024, CPP and OAS benefits will increase significantly, thanks to the CPP enhancement and the OAS boost for seniors over 75.
Canadians can choose to defer or advance their CPP and OAS benefits to suit their retirement needs and preferences.

If you are planning for your retirement, you may be wondering if the government will increase the age of eligibility for the Canada Pension Plan (CPP) and the Old Age Security (OAS) benefits. These two programs are the main pillars of Canada’s retirement income system, providing monthly payments to eligible seniors to help them cover their living expenses.

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In this article, we will explain what the current age of eligibility is for CPP and OAS, and whether there are any plans to change it in the future. We will also discuss the changes that are coming to CPP and OAS benefits in 2024, and how they will affect your retirement income. Finally, we will offer some tips on how to optimize your CPP and OAS benefits to suit your retirement goals.

Table of Contents

Understanding CPP and OAS in Canada

The CPP is a contributory pension plan that is funded by the contributions of employees and employers. All working Canadians over the age of 18 must contribute a percentage of their earnings to the CPP, up to a maximum amount each year. These contributions are invested and grow over time, creating a pool of funds that pays out benefits to retirees and other beneficiaries.

The OAS is a non-contributory pension program that is funded by general tax revenues. Canadian citizens and legal residents who meet the age and residency requirements can qualify for a full OAS pension, regardless of their work history or income. The OAS also provides additional benefits to low-income seniors, such as the Guaranteed Income Supplement (GIS), the Allowance, and the Allowance for the Survivor.

Both CPP and OAS benefits are indexed to inflation, meaning that they are adjusted each year to reflect changes in the cost of living. This helps protect the purchasing power of retirees and ensure that their benefits keep up with the rising prices of goods and services.

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

The current age of eligibility for CPP and OAS benefits is 65 for most Canadians. However, there are some exceptions and options that allow you to start or delay your benefits at a different age.

For CPP, you can choose to start receiving your benefits as early as age 60, with a permanent reduction of 0.6% for each month that you start before age 65. This means that if you start your CPP at age 60, your benefits will be 36% lower than if you waited until age 65. Alternatively, you can choose to defer your CPP benefits until as late as age 70, with a permanent increase of 0.7% for each month that you delay after age 65. This means that if you defer your CPP until age 70, your benefits will be 42% higher than if you started at age 65.

For OAS, you can also choose to defer your benefits until as late as age 70, with a permanent increase of 0.6% for each month that you delay after age 65. This means that if you defer your OAS until age 70, your benefits will be 36% higher than if you started at age 65. However, unlike CPP, you cannot start your OAS benefits earlier than age 65.

The government has not announced any plans to increase the age of eligibility for CPP and OAS benefits, which remain at 65 for most Canadians. However, in the past, there have been proposals and debates about raising the age of eligibility to 67, as part of the efforts to ensure the sustainability and adequacy of the programs. In 2012, the previous Conservative government announced that it would gradually increase the age of eligibility for OAS from 65 to 67, starting in 2023 and ending in 2029. However, in 2016, the current Liberal government reversed this decision and restored the age of eligibility to 65.

CPP and OAS Other Changes 2024

While the age of eligibility for CPP and OAS benefits remains unchanged, there are other changes that are coming to these programs in 2024, which will affect the amount and calculation of your benefits.

For CPP, the main change is the ongoing enhancement of the program, which started in 2019 and will be fully implemented by 2025. The CPP enhancement aims to increase the retirement income of future retirees by increasing the amount of benefits they receive and the amount of earnings they contribute to the plan. The CPP enhancement has two main components:

An increase in the CPP replacement rate from 25% to 33.3% of your average pre-retirement earnings, up to a certain limit. This means that the CPP will replace a larger portion of your income when you retire, providing you with higher benefits.
An increase in the CPP maximum pensionable earnings (YMPE) from $66,600 in 2023 to $68,500 in 2024, and eventually to about $82,700 in 2025. This means that the CPP will cover a higher range of earnings, allowing you to contribute and receive benefits on more of your income.

The CPP enhancement will result in higher CPP benefits for most Canadians, especially for younger workers who will contribute to the enhanced CPP for a longer period of time. However, it will also result in higher CPP contributions for both employees and employers, as the contribution rate will increase from 10.5% in 2023 to 11.9% in 2024, and eventually to 11.9% in 2025. The contribution rate is split equally between employees and employers, meaning that each will pay 5.95% of their earnings to the CPP in 2024, up to the YMPE.

For OAS, the main change is the introduction of a 10% permanent increase in benefits for seniors aged 75 and over, which took effect in July 2022. This measure aims to provide additional support to older seniors who face higher risks of income insecurity, poverty, and health challenges. The 10% increase applies to the basic OAS pension, as well as the GIS, the Allowance, and the Allowance for the Survivor. This means that seniors aged 75 and over will receive up to $784.67 per month in OAS benefits in 2024, compared to $713.34 for those aged 65 to 74.

Another change for OAS is the adjustment of the clawback threshold, which determines how much of your OAS benefits will be reduced or recovered if your income exceeds a certain limit. The clawback threshold is also indexed to inflation, meaning that it increases each year to reflect changes in the cost of living. For 2024, the clawback threshold will increase from $81,761 in 2023 to $86,912, meaning that you will start to lose some of your OAS benefits if your net income in 2022 is higher than this amount. The clawback rate is 15%, meaning that you will lose 15 cents of your OAS benefits for every dollar of income above the threshold. If your income is high enough, you may lose all of your OAS benefits.

Concluding Words

In summary, the government has not announced any plans to increase the age of eligibility for CPP and OAS benefits, which remain at 65 for most Canadians. However, there are other changes that are coming to these programs in 2024, which will affect the amount and calculation of your benefits. CPP and OAS benefits will increase significantly, thanks to the CPP enhancement and the OAS boost for seniors over 75. However, CPP contributions will also increase, and OAS benefits will be subject to a higher clawback threshold.

If you are planning for your retirement, you should be aware of these changes and how they will impact your retirement income. You should also consider your options to optimize your CPP and OAS benefits, such as deferring or advancing your benefits, depending on your retirement needs and preferences. For more information and guidance on CPP and OAS, you can visit the official websites of these programs, or contact a financial planner or advisor.

We hope you found this article informative and helpful. If you have any questions or comments, please feel free to leave them below. Thank you for reading and happy retirement planning!

Source: (1) CPP and OAS Payment Increase 2024. What To Expect. https://canpension.ca/articles/cpp-oas-2024. (2) Here’s How Much CPP and OAS Are Increasing in 2024 – Savvy New Canadians. https://www.savvynewcanadians.com/how-much-will-cpp-and-oas-increase/. (3) CPP and OAS Increase in 2023: What to Expect – canpension.ca. https://canpension.ca/articles/expected-increase-in-cpp-and-oas-benefits-for-2023-what-you-need-to-know.