What happens to my Canadian pension if I move abroad?

According to the Government of Canada, an estimated 4% of Canadian seniors live abroad, which begs the question: what happens to my Canadian pension if I move abroad? The answer depends heavily on the specific pension type, your residency status, and how long you've lived in Canada.

Quick Summary

Your Canadian pension benefits are not all treated the same when you move abroad; the Canada Pension Plan (CPP) is portable, but the Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) have strict residency requirements and will cease if you are away for too long.

Key Points

• CPP is Portable: Your Canada Pension Plan (CPP) benefits are based on your contributions and are portable, meaning you can continue to receive them while living anywhere in the world.

• OAS is Residency-Based: Eligibility for Old Age Security (OAS) payments outside Canada depends on your residency history; you must have lived in Canada for at least 20 years after age 18 to receive it for more than six months abroad.

• GIS Stops if You Leave: The Guaranteed Income Supplement (GIS) is strictly tied to Canadian residency and will cease if you are out of the country for more than six months.

• Utilize Social Security Agreements: Canada has agreements with many countries that can help you meet residency requirements for OAS or coordinate benefits.

• Watch for Withholding Tax: As a non-resident, your pension income will be subject to a non-resident withholding tax (up to 25%), which can be affected by international tax treaties.

• Inform Service Canada: Always update your address and banking details with Service Canada to ensure uninterrupted payments when you move abroad.

• Consult a Tax Professional: Cross-border tax regulations are complex, so professional advice is crucial for managing tax liabilities and optimizing your benefits.

Understanding the Canada Pension Plan (CPP) and Old Age Security (OAS)

Retirement income for many Canadians includes the Canada Pension Plan (CPP) and Old Age Security (OAS). These government programs differ significantly in how they are treated if you move outside of Canada.

CPP is a contributory plan funded by your and your employer's contributions. This makes it a portable benefit; you are entitled to it regardless of where you live, as long as you've made at least one valid contribution. OAS is funded by general taxes and is residency-based, meaning eligibility depends on how long you've lived in Canada.

The Fate of Your Canada Pension Plan (CPP) Payments

Your CPP benefits will continue no matter where you live, provided you are eligible. The amount is based on your contributions.

Receiving CPP payments while living abroad

Inform Service Canada of your move to ensure uninterrupted payments.

• Direct Deposit: CPP can be deposited directly into bank accounts in many countries and converted to local currency.
• Paper Cheques: If direct deposit isn't available, payments are sent via cheque in Canadian currency.
• Tax Implications: Non-residents may face a 25% withholding tax on CPP, which can be reduced or eliminated by tax treaties.

The Rules for Your Old Age Security (OAS) Pension

OAS rules for non-residents are stricter, depending heavily on your residency history in Canada.

Eligibility requirements for OAS abroad

To receive OAS outside Canada for over six months, you must have lived in Canada for at least 20 years after age 18, or combine residency in Canada and a country with a social security agreement to reach 20 years.

What happens if you don't meet the requirements?

If you don't meet the 20-year requirement, OAS payments stop after six months outside Canada. Payments can resume if you return to live in Canada and contact Service Canada.

Guaranteed Income Supplement (GIS) and Other Benefits

The Guaranteed Income Supplement (GIS) is a non-taxable benefit for low-income seniors and is strictly residency-based. GIS payments stop if you are outside Canada for more than six months. Social security agreements do not affect this rule.

Social Security Agreements with Other Countries

Canada has agreements with many countries to coordinate pension programs for those who have lived or worked in both.

• Bridging Eligibility Gaps: These agreements can help meet the 20-year OAS residency requirement by combining periods of residence in Canada and a treaty country.
• Avoiding Double Taxation: Tax treaties may reduce or eliminate non-resident withholding tax on your Canadian pension.

Key countries with agreements

Countries like the United States, United Kingdom, and Australia have social security agreements with Canada. For specific details, visit the official government site: https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-international.html.

Comparison Table: CPP vs. OAS for Canadians Moving Abroad

Feature	Canada Pension Plan (CPP)	Old Age Security (OAS)
Portability	Fully portable worldwide.	Depends on Canadian residency history.
Eligibility	Requires a minimum of one contribution.	Requires a minimum of 10 years (partial) or 40 years (full) of Canadian residency after age 18.
Payments Abroad	Payments continue as long as you are eligible, regardless of location.	Payments stop if you are outside Canada for more than six months, unless you have resided in Canada for 20+ years since age 18.
Guaranteed Income Supplement	N/A	Ineligible if outside Canada for more than six months.
Foreign Currency Deposit	Available for direct deposit in many countries.	Available for direct deposit in many countries.
Non-Resident Tax	Withholding tax (default 25%) applies, may be reduced by tax treaty.	Withholding tax (default 25%) applies, may be reduced by tax treaty.

Tax Implications of Receiving Canadian Pensions Overseas

Non-residents receiving Canadian pension income are typically subject to a non-resident withholding tax. This tax, generally 25%, can vary based on Canada's tax treaty with your country of residence. The Canada Revenue Agency (CRA) handles these matters. Filing Form NR5 can sometimes help lower the withholding tax. Consulting a cross-border tax professional is advisable for understanding your specific tax situation.

Conclusion: Planning Your Retirement Abroad

Moving abroad for retirement requires careful financial planning regarding your Canadian pensions. CPP is portable, while OAS and GIS are tied to Canadian residency. Understanding these differences, informing Service Canada of your move, providing updated details, and seeking tax advice are crucial steps for securing your financial future and enjoying retirement overseas.

Frequently Asked Questions

Can I receive my CPP payments if I move abroad permanently?

Yes, you can receive your Canada Pension Plan (CPP) payments regardless of where you live. Since it is a contributory plan based on your lifetime earnings, your benefits are yours to keep, even if you become a permanent non-resident of Canada.

Will my OAS payments continue if I'm not a Canadian resident?

Whether your OAS payments continue depends on your residency history. You must have lived in Canada for at least 20 years after age 18 to receive your OAS pension outside the country for more than six months. Otherwise, payments will stop.

What about the Guaranteed Income Supplement (GIS)?

GIS is not payable outside Canada for more than six consecutive months. It is a residency-based benefit for low-income seniors and is not portable like the CPP.

How do social security agreements help with my Canadian pension if I move abroad?

Canada's social security agreements with other countries allow for the coordination of pension programs. They can help you meet the 20-year residency requirement for OAS by counting periods of residence or contributions in a partner country toward your eligibility.

Are my pension payments taxed if I receive them overseas?

Yes, as a non-resident, your Canadian pension income is typically subject to a non-resident withholding tax, which is 25% by default. However, this rate can be reduced or exempted by an international tax treaty between Canada and your new country of residence.

How do I receive my Canadian pension in my new country's currency?

You can arrange for direct deposit into a bank account in many countries. Service Canada offers this service, and your payments will be converted to the local currency automatically. You must inform Service Canada of your move and banking details.

What is the key difference between CPP and OAS when moving abroad?

The key difference is portability. CPP is a contributory plan that travels with you, guaranteeing benefits based on your contributions. OAS is a residency-based benefit that has strict requirements for continued payment outside of Canada.