What Are CPP and OAS (and Why Do They Matter?)

Congratulations! You're nearing retirement, and saying goodbye to the day-to-day jargon of the workforce. Or have you? Canadians entering retirement are often surprised by the number of 3-letter acronyms, but in the case of OAS and CPP, it's worth taking the time to understand what they really mean for your retirement.

If you're one of millions of Canadians who aren't fully familiar with how these programs work, read on! In this article, we'll cover the basics of CPP and OAS, how they work, and how they fit into your retirement planning. But it's important to know — CPP and OAS are just the building blocks, not a full retirement plan.

So What Are CPP and OAS?

In plain English, CPP and OAS are the two public retirement income programs provided by the Canadian government. This means that if you don't have a workplace pension (or even if you do!), you are still eligible to receive monthly payments from the government. While these benefits alone may not fund a full retirement, they form a reliable foundation to help make your retirement planning clearer and more predictable.

Canadian Pension Plan (CPP)

The Canadian Pension Plan (CPP) is a contributory, earnings-based social insurance program. If you've worked in Canada, you've likely been making contributions to CPP for most of your adult life. And now you can start receiving the benefits you've earned.

At a high level, CPP is a pension plan funded by working Canadians. From age 18 onward, employed Canadians contribute a percentage of their earnings, matched by their employer, to the federally administered pension plan. For residents of La Belle Province, the pension contributions are managed by the Quebec Pension Plan (QPP).

Despite what you may have heard, the CPP is in great shape. As of March 31, 2025, the CPP held $714.4B in net assets, up from $632.3B the previous year. And in its 2022 report, the Chief Actuary report confirmed that the CPP is expected to remain sustainable for the next 75 years.

CPP payments are also inflation-adjusted, based on changes in the Consumer Price Index (CPI). This means you can rest assured that your CPP payments will keep pace with inflation and the rising cost of living over your retirement.

CPP benefits are taxable as income. This means you'll need to include CPP, along with any other income (e.g., OAS, RRSP withdrawals, retirement work, etc.) when filing your personal taxes each year.

Current CPP Payment Amounts:

• As of January 2025, the maximum CPP pension was $1,433.00/month
• As of October 2024, the average CPP pension in Canada was $899.67/month

Old Age Security (OAS)

In contrast, Old Age Security (OAS) is a universal monthly pension, available to most Canadian citizens and permanent residents once they turn 65. OAS is a basic income. As long as you're a qualifying citizen or permanent resident aged 65 or older, you are eligible to receive OAS.

To receive the full OAS pension, you'll need to have lived in Canada for at least 40 years after turning 18. If you've lived in Canada for fewer years (common for immigrants or Canadians who spent time abroad) you can still receive OAS, but the payment will be proportionally reduced. For example, someone who has lived in Canada for 34 years after the age of 18 will be eligible for 85% of the OAS pension ($\frac{34}{40} = 0.85$).

The OAS pension is also subject to a pension recovery tax (sometimes called the "OAS clawback"). This means that if you are a high-earning retiree, you may be subject to a recovery tax to pay back part or all of your OAS benefits. In 2026, the repayment starts at an income of $95,323, capping out at $154,708 (age 65–74) or $160,647 (age 75 or over).

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When To Start?

A key decision for both CPP and OAS is when to start taking your payments. In Canada, the standard age to start receiving CPP/OAS payments is 65. However, you have the option to start receiving payments as early as 60 (and receive less), or choose to delay payments up to age 70 (and receive more). Here's how it breaks out:

So what does this mean for you? If you are an active retiree in good financial health, it may make sense to delay your CPP and OAS payments, since it would result in a 42% bonus on your CPP payments and 36% bonus on your OAS payments for the remainder of your retirement.

On the other hand, if your family has a medical history of lower life expectancy, or you need earlier access to your retirement payments, you certainly have the option to start receiving CPP as early as age 60. Just be aware that doing so will reduce your payments by 36%.

Want to calculate your optimal CPP and OAS start age? Try our CPP/OAS optimal age calculator to see when starting benefits makes the most sense for your situation.

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The Break-Even Math

The traditional "breakeven" calculation compares just two options: starting at 65 vs delaying to 70. Here's how that math works:

CPP: When Does 70 Beat 65?

By delaying from 65 to 70, you miss 5 years of payments but gain a 42% bonus on all future payments. Setting lifetime totals equal:

$$P(t - 65) = 1.42P(t - 70)$$

Solving for $t$:

$$t = \frac{1.42 \times 70 - 65}{0.42} \approx \mathbf{82 \text{ years}}$$

But Here's the Catch...

The breakeven only compares 65 vs 70. In reality, you can start at any age from 60-70 (CPP) or 65-70 (OAS). When you consider all options, intermediate ages often win:

The optimal age gradually shifts higher as life expectancy increases. Use our CPP/OAS calculator to find your personalized optimal start age.

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Bottom Line

CPP and OAS are foundational pieces of Canadian retirement income, but they're just the beginning. The decision of when to start taking benefits depends on your life expectancy, other income sources, and overall financial situation. While the traditional break-even analysis suggests age 82–84, the optimal start age is often somewhere in between 65 and 70.

The key takeaway: don't default to age 65 just because it's the standard. Take the time to understand your options, use tools like our CPP/OAS calculator to model different scenarios, and consider how these benefits fit into your complete retirement plan.

That covers the basics of CPP, OAS, and how timing can affect your retirement income. Understanding these government benefits is the first step toward building a confident retirement plan. For a deeper dive into timing strategies and lifetime calculations, explore our CPP/OAS optimal age calculator, retirement income calculator, and other related articles.

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