Reader father Patrick will soon be celebrating his 65th birthday. The latter has immigrated to Montreal since 2000 and can then draw his old age security pension (PSV).
Patriarch has not accumulated enough years of residency to qualify for full PSV. Patrick wonders how his father’s pension can be improved if he waits until he is 70 to apply.
“You have already written that the government will improve PSV if we wait before adopting it. If my father does that, will there be years of residence that would increase his pension even more? »
A question as I like it, I had to go to my contacts to find the answer. Let’s go step by step. Let’s start by calculating the pension for people who are not, as the saying goes, non-residents.
40 years
An immigrant must have resided in Canada for at least 10 years after their 18th birthday to be eligible for OAS. He must have resided here for 40 years to qualify for the full federal pension ($648.67 per month in 2022). Otherwise the pension will be paid in part. The calculation is easy. Each year of stay entitles you to 1/40 of the benefit.
Our reader’s father arrived in 2000. When he claims his pension this year, he’ll get 22/40 of a normal PSV, or $4,281 a year, or just over $356 a month. If he’s thinking of deferring his retirement, it’s because he has the means to give it up for five years to have a more generous pension when he’s 70.
Bonus for delaying PSV
Anyone can use this opportunity, and despite the associated distrust, it is often beneficial.
Ottawa is offering retirees the option to defer their application for PSV in exchange for a lifetime bonus on the benefit. Each month of deferral after the age of 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.
Note that the same principle applies to the Quebec pension plan.
Double rise?
Now that we’ve explained how PSV works, we can better appreciate reader Patrick’s question.
By waiting until age 70, his father has theoretically accumulated 27 (up from 22) years of residency in Canada before cashing his first retirement check.
By delaying as much as possible he is entitled to a bonus of 36% of his performance.
Do the two mechanisms for supplementing his pension fit together? If only the first one is applied for, his monthly payment increases to $437.85. With the second, it would rise to $485.20.
With both, Patrick’s father would be getting about $595 a month. But that would be too good.
“A person who qualifies for a partial pension may receive a higher amount either through earning years of residency or through increasing OAS voluntary deferral, but not both,” says David Truong, an adviser to the center at National Bank Private Wealth 1859.
According to the financial planner, accumulating years of residence is more profitable if one has accumulated fewer than fourteen. Otherwise, the bonus of 0.6% per month pays off more.
In either case, the retiree does not have to choose, Service Canada will apply the solution most beneficial to the beneficiary.
DELAYING YOUR AHV PENSION HOW MUCH DOES YOU HAVE PER MONTH?
| Age | rising |
| 65 years | $648.67 |
| 66 years old | $695.37 |
| 67 years old | $742.08 |
| 68 years old | $788.78 |
| 69 years old | $835.49 |
| 70 years | $882.19 |
♦ Amount valid from April to June 2022
