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What happens to your pension benefits if you decide to relocate or retire outside of Canada? The reality is that an increasing number of Canadians are choosing warmer climes and destinations with a lower cost of living for their retirement.

Some retirees only move out of Canada in the winter (snowbirds), while some depart Canada to live abroad for good. One of the readers of this blog contacted me recently and requested that I write about personal finance topics of interest to Canadian expats. So, this post is one of a series of many to come.

Read on to find out what happens to your CPP, OAS, and other government benefits if you decide to leave Canada.

Related: A Pre-Retirement Checklist for Canadians

Collecting OAS While Living Abroad

The Old Age Security (OAS) pension is one of the three main pillars of retirement income for Canadians. OAS payments are available to eligible seniors starting from age 65. To continue receiving the OAS pension while living outside of Canada, you must be at least 65 years old and have lived in Canada for at least 20 years after your 18th birthday.

Even if you do not meet the 20-year residency requirement, you may still qualify for OAS if you have lived and worked in a country that has a social security agreement with Canada. Or, if you do not leave Canada for longer than 6 months in a year.

The maximum amount of OAS you will receive depends on how long you lived in Canada as an adult. A 40-year residency is required to qualify for full OAS pension. For example, a 20-year residency means 20/40th (or one-half) of a full pension.

Recent immigrants to Canada who do not meet the 20-year residency rule and who come from countries without a social security agreement risk losing their OAS payments if they leave Canada for more than 6 months. Pension payments are stopped and resume again when you return.

Taxes on OAS Payments

The taxes you pay on your pension payments depends on your overall income and how you are categorized for income tax purposes, whether as non-resident, resident, or factual resident of Canada.

In general, OAS payments to a non-resident are subject to a default 25% withholding tax. This tax may be reduced or become nil if your new country of residence has a tax treaty with Canada.

For instance, if you have moved to Florida or Arizona to enjoy warm weather all-year round, based on the tax treaty that Canada has with the United States, no withholding tax is deducted at source from your OAS and CPP/QPP benefits. You can check out a listing of non-resident tax by country here.

You may be able to lower your withholding taxes even if you live in a country that has no tax treaty with Canada by completing a NR5 application.

What About the OAS Clawback?

Also known as a “recovery tax,” the OAS clawback amounts to a 15% tax on excess OAS payments when your annual net world income exceeds the specified threshold for the year ($77,580 for 2019). 

For example, if your net income is $87,580 for 2018, you are required to pay a recovery tax on $10,000 ($87,580 – $77,580) at 15% or 15 cents on the dollar, for a total clawback of $10,000 x 15% = $1,500 or $125 per month.

There is also a maximum income threshold at which your OAS payments become zero. For 2019, the cut-off amount is $123,386.

If you are residing in a country that has a tax treaty with Canada (41 countries as of this writing), you do not pay the OAS recovery tax even if your income exceeds the threshold and are not required to file a return (i.e. the Old Age Security Return of Income – OASRI).

If you do not reside in these tax treaty countries, you must file an OASRI every year by April 30th at the latest.

How About GIS and OAS Survivor Benefits When Abroad?

The Guaranteed Income Supplement is a monthly payment made to low-income seniors in Canada. Unlike the OAS, GIS payments are non-taxable. Also, you must be a “resident” of Canada to receive GIS. This, by extension, means that you cannot be absent from Canada for more than 6 months in a year.

If you stay outside of Canada for longer than 6 months, GIS payments are stopped and will continue when you return to Canada (if you are still eligible).

Similar conditions apply to other OAS benefits including:

  • Allowance: This is a monthly benefit paid to a low-income senior between the ages of 60-64 years whose spouse receives the GIS.
  • Allowance for the Survivor: This is a monthly benefit paid to low-income seniors (aged 60-64 years) who have lost their spouse and have not remarried or entered into a common-law relationship.

These two benefits continue to be paid while you are outside of Canada as long as the “residency” requirements are met.

Related: CPP vs OAS – How Do They Differ?

what happens to oas and cpp if you retire abroad

Can You Collect CPP While Living Abroad?

The Canada Pension Plan (CPP) is well-known as the second main pillar of Canada’s retirement income system. It is designed to replace about 25% or more of a senior’s average salary during their working years. In Quebec, this pension plan is referred to as the Quebec Pension Plan (QPP).

Unlike the OAS which is non-contributory, you must have worked in Canada and made contributions to the CPP/QPP before you can qualify to receive CPP benefits. The standard age to receive a full CPP pension is age 65. However, you can elect to collect CPP/QPP as early as age 60 (reduced CPP) or delay it till as late as age 70 (increased CPP). 

Your CPP benefits continue even if you decide to relocate permanently from Canada and are not subject to the residency requirements of the OAS.

Similar to OAS pension, your CPP/QPP is subjected to a flat 25% withholding tax rate except if you are residing in a country that has a tax treaty with Canada. The taxes withheld in Canada will normally reduce taxes you need to pay in your country of residence.

For example, non-resident Canadians living in the U.S. pay a 0% tax rate on CPP/QPP benefits as they are expected to file a U.S. tax return. If you are living in Barbados, Ecuador, Spain, or Mexico, you can expect to pay a 15% withholding tax rate.

How About CPP Survivor’s Pension and Children’s Benefits? You are also eligible to receive the CPP survivor’s pension and children’s benefit even if you live outside Canada. 

How To Receive Your OAS and CPP Payments Abroad

Your OAS benefits and CPP/QPP pension can be received as direct deposit to your local bank account and in the local currency. If the Receiver General of Canada (Service Canada) is unable to issue direct payments because of restrictions where you reside, a cheque is made out in Canadian dollars and sent to you via mail.

Check out the OAS and CPP payment dates and amounts for this year.

For more information on your pension eligibility when outside Canada, contact Service Canada at 1-800-454-8731 (if calling from Canada or the U.S.) or at 1-613-957-1954 if calling from all other countries. If you are calling about the QPP, contact Retraite Quebec at 1-800-463-5185.

What Happens To Workplace Pensions?

If you contributed to a company defined benefit or defined contribution pension plan, you will continue to receive your payments while outside of Canada. Similar to OAS and CPP payments, a withholding tax applies if you are a non-resident of Canada, and may be eliminated or reduced depending on the tax treaty Canada has with your country of residence.

If you left your employer before reaching the prescribed or maximum pension age, your vested pension funds may be commuted and transferred into a locked-in retirement account (LIRA/LRSP). 

Most provinces allow you to unlock your locked-in pension funds once you become a non-resident of Canada for 2 years. Read more about LIRA, LIF, LRSP, PRIF pension plans.

What About Provincial Retirement Benefits if you Retire Abroad?

Supplemental provincial retirement benefits like the 55 Plus Program, British Columbia’s Senior’s Supplement Program, Alberta’s Senior’s Benefit Program, and Ontario’s Guaranteed Annual Income System are directed at low-income citizens who reside permanently in the province and who receive the GIS/OAS.

What this means is that if you live outside of Canada, you are unlikely to qualify for provincial benefits.

Conclusion

As a Canadian retiring abroad, you may be able to get your pension benefits while enjoying the sun and paying less in taxes and for your daily upkeep.

Depending on your country of residence and existing tax treaties with Canada, a 25% withholding tax or less may apply to your OAS and CPP/QPP benefits. GIS benefits are non-taxable, but do stop if you leave Canada for longer than 6 months.

In addition to your retirement benefits, you should also consider other factors such as healthcare and personal safety when relocating to another country. Your provincial healthcare plan coverage may stop after you have been absent for some months. 

For example, to keep your healthcare benefits, you must at a minimum be physically present in these provinces (in a 12-month period) as follows:

  • Manitoba: 6 months
  • Alberta: 183 days
  • Ontario: 153 days
  • New Brunswick: 153 days
  • Quebec: 183 days
  • Prince Edward Island: 6 months plus 1 day
  • Saskatchewan: 183 days
  • Nova Scotia: 183 days

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