Old Age Security is the closest thing Canada has to a universal retirement pension. Live here long enough and it arrives at 65. What surprises people is the fine print at the top end: pass an income threshold and Ottawa claws the pension back, a little at a time, until at high incomes it is gone completely.
How the clawback actually works
Each July, the government looks at the net income on your previous year’s tax return. For every dollar above the threshold, you repay 15 cents of OAS. Cross the threshold by $10,000 and you give back $1,500 over the following year — usually withheld quietly from your monthly payments rather than billed.
Two quirks matter. First, the repayment is based on last year’s income, so a one time spike — selling a cottage, a large RRIF withdrawal, a severance landing in retirement — can shrink this year’s pension even if your income has since dropped. Second, the thresholds are indexed, so the numbers move a little every year.
The levers people actually use
None of this is exotic. Spreading a capital gain across years, splitting pension income with a lower income spouse, drawing RRSP money in low income years before OAS begins, and using TFSAs (withdrawals are not income, so they never feed the clawback) are the standard tools. Delaying OAS itself to age 70 raises the pension by 0.6% a month — useful, but it also concentrates more income into later years, which cuts both ways.
The mistake to avoid is discovering the clawback on a notice. If your retirement income will live anywhere near the threshold, the time to plan is the year before the income lands.