As of July 1, 2013, where receipt of Old Age Security (OAS) is delayed, the monthly pension is increased by a factor of 0.6% for each month deferred, to a maximum increase of 36% (60 months, commencing receipt at age 70).
In a March 25, 2020 Federal Court case, the Court reviewed Service Canada’s decision to deny relief to an individual who applied to cancel his OAS pension slightly more than one year after it had commenced. The taxpayer wanted to benefit from recent changes which allowed deferral of receipt in exchange for higher future payments. His entire OAS pension for the previous year was lost due to high earnings.
Normally an individual has the ability to cancel a pension only within six months of the first payment. However, the Court looked to a special provision which allows the government to take remedial action for denied benefits resulting from erroneous advice or administrative error in the administration of the OAS Act.
The Court found that the government was not required to demonstrate that communications advising the taxpayer of changes to the rules had been appropriately delivered. However, they were required to demonstrate that these communications had been sent, and the evidence they provided did not demonstrate their mailings went to the specific taxpayer. Therefore, the decision to deny relief was not reasonable. Further, although the taxpayer did not lose immediate benefits as a result of the early application, there were future benefits lost due to the denied deferral.
ACTION ITEM: Before applying for OAS, make sure to determine whether your income (and expected income) will erode the benefits. If so, consider deferring application to benefit from increased future OAS payments.