The dad of the reader Patrick will soon be celebrating his 65th birthday. Immigrated to Montreal since 2000, the latter will therefore be able to receive his Old Age Security pension (PSV).
The patriarch has not accrued enough years of residency to qualify for full PSV. Patrick wonders how the father's pension will be improved if he waits until he is 70 before applying for it.
“You have already written that the government improves the PSV if we wait before taking it. If my father does that, does he add years of residence which would increase his pension even more? »
A question as I like them, I had to go to my contacts to find the answer. Let's go step by step. Let's start with the calculation of the pension in people who are not native to the place, as they say.
An immigrant must have resided in Canada for at least 10 years after their 18th birthday to be eligible for OAS. He must be established here for 40 years to qualify for the full federal pension ($648.67 per month in 2022). Otherwise, the pension will be partial. The calculation is simple. Each year of residence entitles you to 1/40th of the benefit.
Our reader's father arrived in 2000. If he claims his pension this year, he will get 22/40ths of a normal PSV, or $4,281 a year, or just over $356 a month. If he is thinking of deferring his pension, it is because he can afford to do without it for five years in order to have a more generous one at age 70.
Bonus for delaying PSV
Anyone can take advantage of this option, and despite the mistrust it arouses, it is often advantageous.
Ottawa is offering retirees the option of postponing their request for PSV in exchange for a lifetime bonus to the benefit. Each month of deferral after age 65 improves the pension by 0.6%. Someone who waits until age 70 will receive a 36% higher pension, or $882.19 per month instead of $648.67.
Remember that the same principle applies to the Québec Pension Plan.
Now that we've explained how PSV works, we can better appreciate reader Patrick's question.
By waiting until age 70, his father will theoretically have accumulated 27 years (no longer 22) of residence in Canada before cashing his first pension check.
By delaying as much as possible, he is entitled to a bonus of 36% of his performance.
Do the two mechanisms for improving his pension add up? By applying the first only, his monthly payment would be increased to $437.85. With the second, it would rise to $485.20.
With both, Patrick's dad would get something like $595 a month. But that would be too good.
"A person who qualifies for a partial pension can get a higher amount, either by gaining years of residency or by increasing the voluntary deferral of OAS, but not both," says David Truong, an adviser at the center. expertise from National Bank Private Wealth 1859.
According to the financial planner, adding years of residence is more profitable if you have accumulated less than fourteen. Otherwise, the bonus of 0.6% per month will pay more.
In any case, the retiree does not have to choose, Service Canada will apply the most advantageous solution for the beneficiary.
DELAYING YOUR OLD AGE SECURITY (OAS) PENSION HOW MUCH DOES IT GIVE PER MONTH?
♦ Amount valid from April to June 2022