Old Age Security Rates and the Consumer Price Index

Old Age Security (OAS) rate increases are calculated four times a year, using the Consumer Price Index (CPI). They come into effect each January, April, July and October. These increases are legislated under the Old Age Security Act so that benefits keep up with the cost of living.

Consumer Price Index

Statistics Canada developed the CPI to measure changes in the cost of living. The CPI tracks cost changes in common household expenses. This "basket" of goods consists of food, shelter, clothing, transportation, health care and other average household expenditures.

Statistics Canada is currently using 1992 as the base year. In 1992, the CPI was equal to 100. This means that the basket of goods in 1992 cost Canadians $100.00. The CPI in January 2003 was measured at 121.4, meaning that the same basket of goods that cost $100.00 in 1992 now costs $121.40.

OAS Rates

OAS rates are adjusted four times a year using a 3-month "moving average method." The moving average method is used to reduce the effect of sharp changes in the CPI. The rate increase is the percentage change from one 3-month period to the previous 3-month period in which the rates increased.

For example, these equations show how the CPI was used to calculate the OAS rate for January 2006:

If the cost of living has decreased over the 3-month period, the calculation of the rate increase will produce a negative amount. However, benefit rates do not decrease, so they stay at the same level when there is a decrease in the cost of living.

CPI increase compared to the OAS increase

The following table illustrates the changes in the cost of living compared to the changes in the OAS rates over a 12-year period. It shows that the CPI has increased 25 percent over the 12-year period, using the 1992 base year. OAS rates have increased by the same amount over the same period.

For further information regarding the CPI, please consult Statistic Canada's Your Guide to the Consumer Price Index - For this purpose, you will need Adobe Acrobat reader .