CPP and OAS in 2026: Your Retirement Income Explained

CPP and OAS in 2026: Your Retirement Income Explained

If you’re approaching retirement or already retired, understanding CPP and OAS is essential. These two programs form the foundation of most Canadians’ retirement income. Here’s how they work in 2026.

Canada Pension Plan (CPP)

What it is

CPP is an earnings-based pension. You contribute during your working years, and the amount you receive in retirement depends on how much and how long you contributed.

Key 2026 numbers

• Maximum monthly CPP retirement pension at age 65 is approximately $1,400+ (varies by year and contribution history)
• Average monthly payment is typically much lower (around $800 to $900) because most people don’t contribute the maximum for the full required period

When to start

• Age 60: Earliest you can start. Reduced by 0.6% per month before 65 (up to 36% reduction).
• Age 65: Standard start date. No adjustment.
• Age 70: Latest start. Increased by 0.7% per month after 65 (up to 42% increase).

If you expect to live past your mid-70s and can afford to wait, delaying CPP increases your lifetime benefit. If you need the income now or have health concerns, starting earlier makes sense.

Old Age Security (OAS)

What it is

OAS is a monthly payment available to most Canadians aged 65+ who have lived in Canada for at least 10 years after turning 18. Unlike CPP, it’s not based on your work history. It’s funded from general tax revenue.

Key 2026 numbers

• Maximum monthly OAS for ages 65 to 74 is approximately $730+ (indexed quarterly)
• For ages 75+, there’s a 10% automatic increase
• Full OAS requires 40 years of Canadian residency after age 18. Partial OAS is available with 10+ years.

OAS Clawback

If your individual net income exceeds approximately $94,000 (indexed annually — confirm the current year’s threshold on CRA’s website), OAS starts getting clawed back at 15 cents per dollar. At around $148,000+, OAS is fully eliminated.

This is a strong reason to plan income carefully in retirement. Drawing too much from RRSPs/RRIFs in one year can trigger OAS clawback.

Guaranteed Income Supplement (GIS)

If your income is low in retirement, GIS provides additional monthly payments on top of OAS. It’s income-tested and recalculated annually based on your tax return. Many low-income seniors miss this because they don’t file their taxes.

Tax Treatment

• CPP: Fully taxable as income
• OAS: Fully taxable as income (plus subject to clawback above the threshold)
• GIS: Tax-free (but included in net income for clawback calculations)

CPP Sharing for Couples

If both spouses are 60+ and receiving CPP, you can split up to 50% of the CPP earned during your years together. This can reduce the higher earner’s tax rate and preserve OAS. Apply through Service Canada.

5 Planning Tips

1. Check your CPP statement. Log into My Service Canada Account to see your estimated pension.
2. Consider delaying CPP to 70 if you can. The 42% increase is substantial.
3. Manage RRIF withdrawals to avoid OAS clawback. Draw down RRSPs before 65 if it makes sense.
4. File your tax return every year. GIS and OAS depend on it.
5. Use pension splitting. Allocate up to 50% of eligible pension income to the lower-income spouse.

Planning your retirement income? Book a free consultation with FinGems and we’ll help you maximize CPP, OAS, and minimize tax.