Deferring Old-Age Security

If you turn 65 before July 1, 2013, can you still opt to delay receipt of Old-Age Security (OAS)?

You can defer starting your OAS pension by simply not applying for it at age 65. Under recent changes to the Old Age Security Act, your pension amount will be increased by 0.6% for each month of deferral after your 65^th birthday or July 1, 2013, whichever comes later, until your 70^th birthday. 

This means that an individual who turns 65 before July 1, 2013, may elect to delay receiving his or her pension for up to five years beyond his or her 65^th birthday — but the 0.6% per month increase will not begin until July 1. 

This option makes the most sense for seniors whose income will be in excess of $113,000 in 2013, the amount at which their OAS would be fully clawed back. So, there is no cost for delaying receipt. Depending on other factors, this option may make sense for others as well.

Example: Anna will turn 65 this coming March. She has $500,000 in her RRSP and receives $80,000 income annually from other sources.  If she applies for her OAS as of March, much of her 2013 OAS will be clawed back. She can delay receipt of her OAS until March 2018 (her 70^th birthday). Her OAS at that time will be increased by 34.2% (0.6% x 57 months, as the increase will not begin until July 1, 2013). During the deferral period, Anna can implement a program whereby she melts down her RRSP. Then, by the time she begins receiving her OAS and converts her RRSP into a RRIF, she will have minimized the OAS clawback.