Deferring OAS to 70 Pays 36% More. The Recovery Tax Decides How Much You Keep
Deferring OAS to 70 raises the pension by 36%, and that increase is only half of the decision. The other half is the recovery tax, which takes 15 cents of every extra dollar of pension and, past a certain income, takes all of it. The result is that there is no single answer. A retiree with $60,000 of income before OAS keeps the whole increase. One at $110,000 keeps 85 cents of each extra dollar of pension. One at $160,000 keeps 13.8% of the increase, because the pension they would have started at 65 has already been clawed away to nothing.
The Act adds 0.6% a month and stops dead at 70
Section 7.1(1) of the Old Age Security Act says the pension “is increased by 0.6% for each month in the period that begins in the month after the month in which the person becomes qualified for that pension and that ends in the month in which the person’s application is approved.” The clock runs to the month the application is approved, not to a birthday.
Section 7.1(4)(b) is why the ceiling is 70 rather than 72 or 75. No increase accrues for any month “after the month in which the person attains 70 years of age.” Sixty months at 0.6% is 36%, and month 61 is worth nothing.
Paragraph (c) of the same subsection stops the clock for a different reason. No increase accrues for any month “in which the person’s pension would not be paid by virtue of subsection 5(3), or would be suspended under subsection 9(1) or (3), if the person were a pensioner.” Section 9(1) suspends payment once a pensioner has been outside Canada for six consecutive months, and section 9(2) allows payment to continue without that suspension for a pensioner who establishes twenty years of residence in Canada after turning 18 as at the day they left. Someone short of those twenty years who spends a long stretch abroad during the waiting years is not building the 0.6% while they are away.
| Start age | Increase | Monthly pension |
|---|---|---|
| 65 | none | $751.97 |
| 66 | 7.2% | $806.11 |
| 67 | 14.4% | $860.25 |
| 68 | 21.6% | $914.40 |
| 69 | 28.8% | $968.54 |
| 70 | 36% | $1,022.68 |
Service Canada’s deferral table, from its page on when to start your Old Age Security pension, which labels these amounts July to September 2026. Service Canada’s page on Old Age Security payment amounts carries the same $751.97 as the maximum for ages 65 to 74 in the current October to December 2026 quarter, and $827.17 for 75 and over. Applying 0.6% a month to the $751.97 reproduces every row to the cent, and $751.97 multiplied by 1.10 gives that $827.17.
Waiting costs $45,118.20 up front and buys $270.71 a month
Someone who starts at 65 collects sixty cheques the deferrer never sees: 60 times $751.97, or $45,118.20. What the deferrer gets back is a larger cheque for life, and a larger one again at 75, because section 7.1(5) applies the 10% age-75 increase to “the amount of the full monthly pension, as it is increased under subsection (1)”. The two increases multiply rather than substituting for each other.
| Age band | Start at 65 | Start at 70 | Monthly difference |
|---|---|---|---|
| 65 to 69 | $751.97 | no pension | n/a |
| 70 to 74 | $751.97 | $1,022.68 | $270.71 |
| 75 and over | $827.17 | $1,124.95 | $297.78 |
Figures in October to December 2026 dollars. The $827.17 is Service Canada’s published 75-and-over maximum, and the $1,124.95 is our arithmetic, $1,022.68 multiplied by the same 1.10. Inflation does not tilt the comparison either way. Service Canada reviews payment amounts “each year in January, April, July and October to ensure they reflect cost of living increases, as measured by the Consumer Price Index (CPI)”, and section 7.1(1) applies the deferral increase to whatever the current full monthly pension is, so the deferred stream is 1.36 times the other in every quarter.
Break-even lands at 83 years and 1 month
Running the two streams forward at current rates, cumulative payments cross at age 83.08, which is 83 years and 1 month. By then the early starter has drawn $170,471.89 and the deferrer $170,480.95.
The simplest version of the sum gives a later date, and the gap is instructive. Sixty forgone months divided by a 36% larger cheque gives 166.67 months after 70, or age 83.89, and that version has no age-75 uplift in it. Our own model with the uplift stripped out of both streams agrees, at 83.92. Restoring it pulls break-even forward by 10.0 months, because the 10% scales both pensions from 75 onward while the $45,118.20 the early starter banked between 65 and 70 is never scaled by anything.
The rest deserves saying plainly: deferral is a bet on living past 83.
Investing the payments instead of spending them pushes the crossing years later
The 83 years and 1 month assumes every payment is spent as it arrives. If payments are invested instead, at the same real return whichever stream they come from, the crossing moves out.
| Real return on payments once received | Break-even age |
|---|---|
| 0% | 83.08 |
| 1% | 84.42 |
| 2% | 86.00 |
| 3% | 88.17 |
| 4% | 91.17 |
Our arithmetic. Both streams are in constant October to December 2026 dollars, so the rate in the left column is a real return after inflation, not a nominal one, and it is earned on payments from either stream once they arrive.
The life tables put odds on the bet
Statistics Canada’s complete life table for Canada, table 13-10-0114, reference period 2022, sets out how long a 65-year-old is expected to live.
| Life expectancy at 65, 2022 | Years | Age reached |
|---|---|---|
| Both sexes | 20.85 | 85.85 |
| Males | 19.43 | 84.43 |
| Females | 22.15 | 87.15 |
The same table counts survivors. Of an original 100,000, 88,760 are alive at 65, 57,310 at 83 and 31,846 at 90. So of those who reach 65, 64.6% reach 83 and 35.9% reach 90.
Set that against the break-even rows. The 0% crossing at 83.08 sits 2.77 years below life expectancy at 65 of 85.85 for both sexes, 1.35 years below the 84.43 for men, and below the 87.15 for women as well. The survivor counts answer the same question without hiding behind an average: roughly two in three of those who reach 65 live to see 83, at 64.6%. At a 2% real return the crossing moves out to 86.00, which is above the 85.85 for both sexes and the 84.43 for men, and still below the 87.15 for women. The margin against the both-sexes figure there is 0.15 years, about 1.8 months, which is finer than a decision of this size can be balanced on.
Section 8(3) of the OAS Act adds the harder edge. The pension “shall continue to be paid during the lifetime of the pensioner and shall cease with the payment for the month in which the pensioner dies.” Someone who defers and dies at 68 collects nothing, and nothing is paid to an estate for the years spent waiting.
The recovery tax takes 15 cents of every extra dollar of pension
OAS is ordinary taxable income taxed at the recipient’s marginal rate, and the recovery tax sits on top of that, so every figure in this piece described as kept is a figure before income tax.
The clawback itself lives in section 180.2 of the Income Tax Act, not in the OAS Act. The tax is A(1 – B), where A is the lesser of the OAS included in income and “15% of the amount, if any, by which the individual’s adjusted income for the year exceeds $50,000”. B is defined in the same subsection as “the rate of tax payable by the individual under Part XIII on amounts described in paragraph (a)” of the description of A, and Part XIII of the Act is headed “Tax on Income from Canada of Non-resident Persons”. For a Canadian resident B is nil and the tax is simply A, with nothing subtracted from it. The recovery tax is levied federally, under Part I.2 of the Income Tax Act.
The word to build the rest around is “lesser”. The recovery tax can never exceed the pension itself, which is why a pension is clawed to zero rather than into negative territory, and why a larger pension survives to a higher income.
The $50,000 is the base figure written into the statute, and it is indexed. Section 117.1(2)(t) of the Income Tax Act makes each of the amounts expressed in dollars in Part I.2 a specified amount for the annual adjustment, and 117.1(3) rounds the adjusted result to the nearest dollar. That is how $50,000 becomes the threshold a retiree actually meets.
Service Canada’s figures for the recovery period running July 2026 to June 2027, based on 2025 income, are a minimum threshold of $93,454 and a maximum of $152,062 at ages 65 to 74, $157,923 at 75 and over. On 2024 income they were $90,997, $148,451 and $154,196. Above the minimum, “You must repay 15% of that amount”, and “The repayment amount is then divided monthly and deducted from your OAS pension payments as a recovery tax.” That withholding is not the final settlement. Subsections 180.2(3) and (4) work the monthly deduction out of the individual’s adjusted income for the base taxation year, with nil withheld in any case the first two paragraphs of 180.2(4) do not cover, while 180.2(5)(b) requires every individual liable under Part I.2 to “pay the individual’s tax payable under this Part for the year on or before the individual’s balance-due day for the year”. So the recovery tax is normally withheld from the monthly payments, and because the withholding runs on an earlier year’s income, any difference is settled on the return. Section 60(w) of the Income Tax Act then allows a deduction for “the amount of the taxpayer’s tax payable under Part I.2 for the year”, so money repaid through the recovery tax is not taxed as income as well.
The threshold is indexed, and it is tested on income earned up to a year and a half ago
Because the July 2026 to June 2027 recovery period is assessed on 2025 income, the cheque arriving today is measured against income earned as long as a year and a half ago. Someone who works to 69 and files at 70 has their first year of pension tested against the income they were earning while still working. The withholding follows that earlier year, while the tax actually payable under Part I.2 follows the year the pension is paid, and the difference between them is settled on the return.
The CRA publishes the threshold as an indexed series: $86,912 for the 2023 income year, $90,997 for 2024, $93,454 for 2025 and $95,323 for 2026. The indexation factor for 2026 was 2.0%, and $93,454 multiplied by 1.02 is $95,323.08, which section 117.1(3) rounds to the published $95,323. Which of the two a reader needs depends on which cheque they are looking at. The $93,454 is the threshold behind the payment arriving now, and $95,323 governs the recovery period that begins in July 2027.
That threshold is tested against a retiree’s whole income, so a withdrawal from a registered plan counts toward it exactly as pension income does. Our piece on what a rising RRIF minimum does to the OAS clawback follows that side of the pressure.
Deferring raises the income at which the pension disappears
The recovery tax takes 15 cents of every dollar of adjusted income above the threshold, so a pension survives until those increments have consumed the whole of it. A pension 36% larger needs a gap 36% larger before they can finish it, and that holds whichever pension the arithmetic runs on. The distance from the threshold to the point where the pension is gone is 1.36 times longer for someone who deferred.
On the October to December 2026 pension of $9,023.64 a year, the rate every table in this piece uses, the pension started at 65 is gone at $153,611.60 of adjusted income and the deferred one at $175,268.34, a rise of $21,656.74. That is our arithmetic on the $93,454 threshold.
Service Canada publishes $152,062 as the maximum threshold for this recovery period, $1,549.60 below our figure for the same quantity, and the published figure is built on a smaller pension. The distance between its own two published thresholds, $93,454 and $152,062, is $58,608, and 15% of $58,608 is $8,791.20 a year, which is $732.60 a month rather than the $751.97 in force now. That reverse arithmetic is ours.
The two amounts are adjusted on different clocks. The pension is reviewed in January, April, July and October against the Consumer Price Index, in the Service Canada wording quoted earlier, while section 117.1(1) of the Income Tax Act adjusts each specified amount in relation to Part I.2 once a year, using “the Consumer Price Index for the 12 month period that ended on September 30 next before that year”.
The ratio is what actually matters, and it holds on either basis. Scaling Service Canada’s published pair, the vanishing point moves from $152,062.00 to $173,160.88, a rise of $21,098.88, and at 75 and over the published $157,923 scales the same way, to $181,131.84. Both of those scalings are ours.
Where the retiree’s own income sits decides almost everything
Whose income counts is settled by the words of the statute. The tax is tested on “the individual’s adjusted income”, one person at a time, so a couple has two thresholds and two pensions. The pension itself cannot be moved between them, while much other retirement income can, which is the arithmetic our piece on pension income splitting in Canada works through.
Take a retiree at 70 with $110,000 of income before OAS, holding steady year to year. Starting at 65, the pension is $9,023.64 gross and the recovery tax takes $3,835.45, leaving $5,188.19. Starting at 70, the pension is $12,272.16 gross and the recovery tax takes $4,322.72, leaving $7,949.44. Deferring adds $3,248.52 of gross pension and $2,761.25 after the recovery tax, which is exactly 85.0% of the increase. That is no coincidence: inside the clawback zone the recovery tax takes 15 cents of each additional dollar of pension, so 85 cents survive.
| Income before OAS | Recovery tax, start at 65 | Recovery tax, start at 70 | Share of the increase kept |
|---|---|---|---|
| $60,000 | $0.00 | $0.00 | 100.0% |
| $85,000 | $85.45 | $572.72 | 85.0% |
| $95,000 | $1,585.45 | $2,072.72 | 85.0% |
| $110,000 | $3,835.45 | $4,322.72 | 85.0% |
| $130,000 | $6,835.45 | $7,322.72 | 85.0% |
| $145,000 | $9,023.64 | $9,572.72 | 83.1% |
| $160,000 | $9,023.64 | $11,822.72 | 13.8% |
Age 70, our arithmetic on the recovery tax alone. The first column is income before OAS, which is not the same quantity as Service Canada’s net world income thresholds, because those include the pension itself.
The bottom two rows show the mechanism’s teeth. At $145,000 the early starter’s pension is already fully recovered, so the only thing left to claw is the extra pension deferral bought. At $160,000 the early starter has nothing left at all, and the deferrer keeps $449.44 of a $12,272.16 pension, which is 13.8% of the $3,248.52 increase. At $175,000 both keep $0.00 and the difference is $0.00.
Which row a retiree lands on is partly settled years earlier, because much of that income is self-directed. Section 146(2)(b.4) of the Income Tax Act lets the Minister register a retirement savings plan only if “the plan does not provide for maturity after the end of the year in which the annuitant attains 71 years of age”, so the conversion date is fixed in advance rather than chosen. What the minimum withdrawals then require of a retiree, and what that does to taxable income, is the ground our guide to RRSPs and how they convert covers, and it is worth reading before assuming income will stay where it is.
Above the threshold, the five forgone years cost far less than $45,118.20
The $45,118.20 is the gross pension. What a deferrer actually gives up is the pension net of the recovery tax, and above the threshold that is a much smaller number, because those cheques were being taken back anyway.
| Income before OAS | Kept at 65, a year | Five years forgone | Annual gain from deferring | Years of the gain to repay it | Whole again at age |
|---|---|---|---|---|---|
| $60,000 | $9,023.64 | $45,118.20 | $3,248.52 | 13.89 | 83.89 |
| $110,000 | $5,188.19 | $25,940.95 | $2,761.25 | 9.39 | 79.39 |
| $140,000 | $688.19 | $3,440.95 | $2,761.25 | 1.25 | 71.25 |
| $150,000 | $0.00 | $0.00 | $1,949.44 | nothing to repay | n/a |
Income before OAS held constant across the five years, our arithmetic on the recovery tax alone. No row carries the age-75 uplift in either stream. On the first two rows, where the repayment runs past 75, that makes the age in the last column later than the full arithmetic would give. The $140,000 row is repaid well before 75, so the uplift does not touch it. The $60,000 row is the 166.67-month figure from earlier, which is why it reads 83.89 rather than 83.08.
The consequence runs against the usual shape of this decision. The retiree for whom deferral is the easiest call is the one still earning well at 65. At $140,000 of income before OAS the wait is repaid by age 71. At $150,000 nothing is forgone at all, because the pension was fully recovered either way, and the deferred pensioner collects $1,949.44 a year that the early starter never sees, permanently.
The exact point at which a pension started at 65 is recovered in full is $144,587.96 of income before OAS, which is $153,611.60 of adjusted income. For a pension deferred to 70 the same point is $162,996.24 of income before OAS. Both are our arithmetic on the recovery tax and the $93,454 threshold.
Deferring switches off the GIS and the spouse’s Allowance
Under section 11(1) of the OAS Act, a guaranteed income supplement “may be paid to a pensioner”, and section 11(7)(b) bars a supplement for “any month for which no pension may be paid to the pensioner”. Someone deferring is not a pensioner, so there is no GIS during the waiting years.
The supplement is no larger afterwards either, and that sits in the Act’s definitions rather than in the supplement rules. Section 2.1(1) provides that “a reference to the amount of a full monthly pension means the amount of a full monthly pension, as it is calculated in accordance with section 7, that has not been increased under subsection 7.1(1) or (2)”, and section 2.1(2) does the same for the terms used in subsections 12(5) and 22(2), which sit in the provisions setting the amount of the supplement and the amount of the Allowance. The Act strips the deferral increase back out before the supplement is worked out. Service Canada puts the first half plainly: “You cannot get the Guaranteed Income Supplement” if you are not receiving OAS. For anyone who expects to qualify for the supplement, that usually settles the question the other way, because the waiting years pay nothing and the supplement is no larger for having waited.
Section 19(1) does the same to the spouse. The Allowance goes to “the spouse, common-law partner or former common-law partner of a pensioner” aged 60 to 64. Remove the pensioner and the spouse’s claim goes too: “Your spouse/common-law partner cannot apply for the Allowance” if you delay OAS.
Section 7.1(3) matters to anyone short of 40 years of Canadian residence. Such a person receives the greatest of three amounts: the full monthly pension increased under 7.1(1), if they qualify for a full pension; the partial pension increased under 7.1(2); and the partial pension as recalculated when the application is approved. Someone still living in Canada through the deferral years accrues residence and the 0.6% at once, and receives whichever limb is largest.
The same person is usually choosing two start dates, and the second behaves differently. CPP has its own deferral increase at its own rate and is never subject to a recovery tax, which is why our piece on when to take CPP arrives at a different shape of answer. The two interact through total income, but only one of them gets clawed back.
There is no application to defer, only a waiver to decline
Nobody applies to defer. Section 5(4) of the OAS Act lets the Minister waive the requirement for an application on the day a person turns 65, where the Minister is satisfied, on information already held, that the person qualifies. Section 5(5) requires the Minister to notify the person in writing of that intention beforehand, and section 5(7) lets the person, before the day they turn 65, “decline a waiver of the requirement for an application by notifying the Minister in writing of their decision to do so”. Deferring is a matter of declining the waiver or simply not applying, and the notice that starts it arrives before the birthday.
Section 8(2) covers the person who did neither and files late. Where the applicant had already turned 65 when the application was received, approval may be effective as of a day no earlier than the later of “a day one year before the day on which the application was received” and the day the applicant turned 65.
The application can be undone, for six months
Section 9.3(1) of the OAS Act lets a pensioner request cancellation of the pension “in the prescribed manner and within the prescribed time after payment of a pension has commenced”. If the request is granted and the pension and any related supplement and allowance are repaid in time, the application “is deemed never to have been made” and the pension is “deemed for the purposes of this Act not to have been payable during the period in question”.
The prescribed times are in section 26.1 of the Old Age Security Regulations: the request must be made to the Minister in writing no later than six months after the day payment begins, and the repayment made no later than six months after the day the request is granted. Before payment has begun at all, section 5.1(1) of the Act is simpler again, letting an applicant withdraw the application by written notice at any time before payment commences. A 65-year-old who filed on reflex, or who let the waiver run and never decided at all, has a six-month window to undo it and defer instead.
What the decision turns on, by income before OAS
Knowing which case applies takes one conversion. The $93,454 threshold is tested against adjusted income, which already contains the pension, so income before OAS has to stay below $84,430.36 for someone who started at 65, or $81,181.84 for someone who deferred. A retiree with $90,000 of income before OAS is inside the clawback, not outside it.
From there, five cases cover most of it, all keyed to income before OAS and all stated before income tax.
- Expecting the Guaranteed Income Supplement. The waiting years pay nothing and the supplement is no larger afterwards, so they are given up for nothing.
- Below about $84,430. The recovery tax never reaches the pension, so this is purely a longevity question. The streams cross at 83 years and 1 month if the payments are spent, and later at every positive real return.
- About $84,430 to about $144,600. Eighty-five cents of each extra dollar of pension survives the recovery tax, and the cheques given up in the waiting years were already reduced by it.
- About $144,600 to about $163,000. The pension started at 65 is recovered in full anyway, so the waiting years cost nothing, and the larger deferred pension still keeps part of itself. This is the strongest case for waiting on the page.
- Above about $163,000. Both pensions are recovered in full, and the start date makes no difference to what is kept.
The break-even age and the recovery tax are two questions wearing one headline, and answering only the first is how this decision gets made badly.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Pension amounts are Service Canada’s published maximums for the October to December 2026 quarter, and the recovery thresholds are those published for the July 2026 to June 2027 recovery period, which is assessed on 2025 income. Service Canada’s deferral table is labelled July to September 2026 on its own page and carries the same $751.97 base. The indexed threshold series is from the Canada Revenue Agency’s indexation adjustment table. Statutory text is from the Old Age Security Act, the Old Age Security Regulations and the Income Tax Act on the Justice Laws Website, fetched September 29, 2026. Life expectancy and survivor figures are from Statistics Canada table 13-10-0114, complete life table, reference period 2022. Income levels in the worked examples are illustrative and held constant, chosen to show where the recovery tax bites, and every amount described as kept is before income tax. Figures described as our arithmetic are scalings of published figures and are not published numbers.
