CPP vs. OAS: Understanding Canada’s Retirement Benefits

Two major government programs for retiring in Canada exist: the Canada Pension Plan (CPP) and Old Age Security (OAS). They both provide monthly income to older Canadians, but they serve different purposes and operate under different rules.

Knowing how each one works can help you make better decisions about when to start benefits, how to plan your retirement income, and what to expect as you transition out of the workforce. Let’s explore both.

What Is the Canada Pension Plan (CPP)?

CPP is a contributory pension plan designed to replace part of your income when you retire.¹ You become eligible by working and paying into the plan through payroll deductions. If you’ve been employed in Canada and earned more than a minimum threshold, you’ve likely contributed to CPP.

Your monthly payment depends on how much and how long you contributed during your working years.² The more years you contribute and the higher your earnings, the higher your retirement benefit.

You can start collecting CPP as early as age 60, but your monthly amount will be lower. If you wait until 65, you’ll receive the “standard” amount. Waiting until age 70 gives you an even larger monthly benefit.

CPP payments are considered taxable income. They’re deposited monthly and are adjusted annually for inflation.

What Is Old Age Security (OAS)?

OAS is a separate government program that provides a basic pension to most Canadians aged 65 and older.³ It’s not tied to your work history. Instead, it’s based on how long you’ve lived in Canada after the age of 18. If you’ve been a resident for at least 40 years, you’re typically eligible for the full amount.⁴

Because OAS is funded through general tax revenues (not payroll deductions), you don’t have to contribute directly to receive it. Unlike CPP, OAS is available even if you’ve never worked in Canada. But it’s also subject to a clawback if your income in retirement exceeds a certain threshold.⁵

Key Differences Between CPP and OAS

While both CPP and OAS provide retirement income, they’re built around different principles.

• CPP is based on your work and earnings. If you didn’t work or didn’t contribute enough, you may receive very little or none at all.
• OAS is a residency-based benefit. If you’ve lived in Canada for decades but didn’t work much or at all, you can still receive OAS. However, because it’s income-tested, higher-income retirees may see their payments reduced or eliminated altogether.
• CPP can start as early as age 60. OAS begins at 65, though you can delay it up to age 70 to receive a higher monthly amount.
• CPP benefits are not subject to a clawback, no matter how much other income you have. OAS is.
• As of 2025, the maximum monthly CPP payment for someone starting at age 65 is about $1,433.⁶ You can use the OAS estimate calculator to estimate your OAS payment.⁷

CPP and OAS are two pillars of retirement in Canada. CPP rewards your working years, while OAS provides a baseline for everyone who’s lived in the country long enough. They complement each other but aren’t automatic or equal for everyone.

The more you understand how they work, the better prepared you’ll be to make smart, confident choices about your retirement income.

1. https://www.canada.ca/en/services/benefits/publicpensions/cpp.html
2. https://www.canada.ca/en/services/benefits/publicpensions/cpp/payment-amounts.html
3. https://www.canada.ca/en/services/benefits/publicpensions/old-age-security.html
4. https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/eligibility.html
5. https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/recovery-tax.html
6. https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html
7. https://estimateursv-oasestimator.service.canada.ca/en

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.