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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 October 2007:

To calculate the October 2007 OAS rates increase, the average CPI for May, June and July 2007 is divided by the average CPI for February, March and April 2007. The result is subtracted by 1 to obtain a percentage increase.

The average of 112.1 plus 111.9 plus 112.0 is divided by the average of 110.2 plus 111.1 plus 111.6. The result is subtracted by one to obtain the rate increase.

In numeric terms, 112.1 plus 111.9 plus 112.0 is averaged to 112.0. This amount is then divided by the average of 110.2 plus 111.1 plus 111.6 which equals 111.0. The result is subtracted by one to obtain the rate increase.

112.0 divided by 111.0 equals 1.009. By subtracting 1 and multiplying by 100, the rates increase equals 0.9 percent.

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 13-year period. It shows that the CPI has increased 27 percent over the 13-year period, using the 1992 base year. OAS rates have increased by the same amount over the same period.

CPI increase compared to the OAS increase
Consumer Price Index		OAS Basic Max Rate
June 1992	100.0	October 1992	$378.19
June 2005	127.2	October 2005	$479.83
% Increase	27%	% Increase	27%

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 World Wide Web Site .