How Moving Abroad Affects Your Canadian Pension Benefits

Key Takeaway Box

KEY TAKEAWAY: If you retire abroad, you can still receive your Old Age Security (OAS) and Canada Pension Plan (CPP) payments. To continue receiving OAS, you must have lived in Canada for at least 20 years after turning 18. If your new country has a tax treaty with Canada, you may avoid the 25% withholding tax on your payments. However, you cannot receive the Guaranteed Income Supplement (GIS) if you are outside Canada for more than six months.

Planning to Retire Abroad?

Are you considering retiring abroad and wondering what will happen to your Canadian Pension Plan (CPP), Old Age Security (OAS), or Guaranteed Income Supplement (GIS) payments? Many Canadians dream of spending their golden years in warmer climates or countries with a lower cost of living. However, understanding how retiring abroad affects your pension benefits is crucial to make informed decisions. At HustleHub, we’ve got you covered with all the essential details.

Collecting OAS While Living Abroad

To receive OAS payments while living outside of Canada, you must meet specific criteria:

• Age Requirement: You must be at least 65 years old.
• Residency Requirement: You need to have lived in Canada for at least 20 years after your 18th birthday. If you don’t meet this criterion, you may still qualify if you have lived and worked in a country with a social security agreement with Canada or if you don’t leave Canada for longer than six months each year.

The amount of OAS you receive depends on how long you lived in Canada as an adult. A 40-year residency is required to qualify for a full OAS pension. For instance, if you have 20 years of residency, you would receive half of the full pension.

Taxes on OAS Payments

When you live abroad, your OAS payments might be subject to a default 25% withholding tax. This tax can be reduced or waived if your new country of residence has a tax treaty with Canada. For example, retirees moving to the United States may benefit from such a tax treaty, reducing their tax burden. You can check a list of countries with tax treaties on the Canada Revenue Agency website.

If your new country doesn’t have a tax treaty with Canada, you might still lower your withholding taxes by completing an NR5 application, which helps determine your residency status for tax purposes.

Receiving CPP and GIS Abroad

Your CPP payments continue regardless of where you live. Similar to OAS, if your new country has a tax treaty with Canada, the 25% withholding tax on your CPP may be reduced.

However, the Guaranteed Income Supplement (GIS) is different. If you receive GIS and leave Canada for more than six months, your GIS payments will stop. Once you return to Canada and requalify, your GIS payments will resume.

How to Receive Your Payments Abroad

Receiving your OAS and CPP payments abroad can be done through direct deposit, ensuring you get your funds in the local currency of your new country, potentially saving you on exchange rates and banking fees.

Here are the steps to set up your payments:

1. Direct Deposit: You can set up direct deposit to a foreign bank account by contacting Service Canada.
2. Tax Obligations: Ensure you understand the tax obligations in both Canada and your new country.

Notifying Canadian Authorities & Consulting with Experts

Before moving, notify Service Canada and the Canada Revenue Agency of your plans to ensure your payments are processed correctly. Consulting with a financial advisor or tax expert familiar with international tax treaties can provide additional peace of mind and help optimize your retirement income.

FAQ

By staying informed and planning ahead, you can enjoy a smooth transition to retirement abroad while maximizing your benefits. For more detailed information, visit HustleHub.

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