Pension is the life support after retirement. But the question is what happens to your OAS and CPP pension if you want to move to an entirely different country or city after you are free from all the office work? The growing trends suggest that most Canadians prefer to move to a place near warmth and moderate living conditions after retirement. We all need some changes in life after some time, don’t we?
Some people like to spend their winters near the sun like the migratory birds while others prefer to leave the country and stay there. The people reading this article will get an answer to the much-anticipated question that looms for every Canadian Expat and hence they will have a worry-free journey towards the new chapter of their life.
Today we will cover the various changes that come in the government retirement benefits, and OAS and CPP pension when a Canadian resident retires in someplace foreign.
OAS Pension Collection Abroad
OAS or Old Age Security benefit forms the main foundation of income for retirees in Canada. The seniors at the age of 65 are usually eligible for this benefit, and they can claim it if they retire at this age, or when they reach this age.
People living abroad after retirement will be eligible to receive these benefits if they fulfill the age requirement firstly and their residence time in Canada totals to 20 years, following the age of 18.
In case you are not meeting the 20-year residence point, the people who work in countries who have entered into a social security agreement in Canada can still acquire this benefit. Another way can be leaving Canada for less than six months throughout the year.
The receivable OAS amount is dependent on the Canada residence years that you have accomplished. If you are aiming for the maximum OAS pension, you should achieve a living time of at least 40 years in Canada. For instance, if you have lived 20 years in Canada, then you are eligible for half the OAS pension.
If you are an immigrant in Canada, and you have not lived here for at least 20 years, or do not hail from a country that has a security agreement in Canada, then you run the risk of losing the right ott get the OAS pension.
Taxes Implied on OAS Pension
Taxes on OAS and CPP pensions are based on the total income that you get and the tax purposes that your income serves. It is also dependent on residency or non-residency in Canada.
If you are a non-resident, your OAS pension benefit is subjected to 25% withholding tax. The tax can be zero or lower if your current residing country has a tax treaty with Canada.
For example, in case you have gone abroad or moved to Arizona or Florida, they have a tax treaty with Canada and hence zero withholding tax will be taken out from the source of OAS and CPP pension or QPP pension.
If you fulfill the requirement of an NR5 application, you will be able to lower your withholding tax still regardless of the fulfillment of the aforementioned requirement.
Recovery Tax of OAS Pension
The clawback of OAS pension leads to an excess 15% tax on all OAS payments for the time when the payments exceed the annual net world income for a currently running year.
For 2020-2023, these amounts are:
- July 2022, and June 2023 – $79,845.
- July 2020 and June 2021 – $77,580.
- From July 2021 to June 2021 – $70,054.
To understand this comprehensively, if the net income amounts to $89,054 for 2020, your recovery tax on the amount of $10,000 will be $1,500 or $125 monthly, from June 2021 to June 2022.
Your OAS pension payment will also become zero if it comes under:
- $128,149 from July 2021 to June 2022.
- $126,058 from July 2020 to June 2021.
- $129,075 in July 2022 in June 2023.
However, if you live in 41 countries that have the tax treaty in Canada, you don’t have to pay the OAS recovery tax even when the income threshold limit is passed. You also don’t need to file a return that is called OSARI or Old Age Security Return Of Income. However, if you are not a resident of these countries, you will have to file OSARI for April 30th for the same.
How to Receive a CPP Pension Abroad?
CPP or Canada Pension Plan is the second thing to solidify the foundation of retirement. It is the substitute for 25% for the average salary of the senior in the working days. In Quebec, it is also called the QPP or Quebec Pension Plan (QPP).
While OAS is a non-contributory benefit, you are required to be a working resident in Canada and make contributions for the CPP/QPP to get the CPP benefits.
People of 65 years of age are eligible to get CPP benefits. Moreover, you can decide to get an increased CPP if you delay it by age 70, or get an early or lowered CPP if you get it early at the age of 60.
CPP pension differS in the residency requirements. Meaning, you will receive the CPP pension even after moving out without any hindrance. And the withheld taxes will help lower your taxes in the foreign country. You are also eligible to get CPP children’s benefit and survivor pension after moving abroad.
How to Get the OAS and CPP Pension in a Foreign Country?
The benefits of OAS and CPP are sent as a direct deposit to the bank account in the form of local currency. If the Receiver General Canada is facing issues with the direct deposit, a mail-in Canadian dollar will be mailed at your current address.
If you want to get more data about the eligibility of these payments, you can call on this number from Canada or the U.S., 1-800-454-8731 or 1-613-957-1954 for other countries. For QPP, you can call Reiterate Canada at 1-800-463-5185.
Retiring in a foreign country after working in Canada makes you eligible to enjoy the benefits, along with the sun, and lower taxes if you are aware of all the eligibility criteria.
On the basis of where you live, you can also continue with the GIS benefit if you come back to Canada within six months. Moving to a country with tax treaties with Canada is more beneficial as it enjoys flexibility. Hence, your move abroad will be swift and obstruction less.