Canadian expat retirement needs to consider cross-border financial and legal considerations, including tax residency status, foreign income taxation, and access to Canadian retirement benefits.
Without proper planning, expats risk unnecessary tax burdens, healthcare gaps, and restrictions on pension withdrawals.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).
This includes if you are looking for a second opinion or alternative investments.
Some of the facts might change from the time of writing, and nothing written here is formal advice.
Canadian expats planning for retirement must understand how their pensions, registered retirement accounts (RRSPs, RRIFs), and non-registered investments will be taxed abroad. Some countries offer tax-friendly retirement options, while others impose heavy taxation on foreign pension income.
Additionally, retirees must consider whether they will permanently live abroad or eventually repatriate to Canada, as this decision impacts tax obligations and eligibility for benefits like Old Age Security (OAS) and provincial healthcare.
What is retirement pension in Canada?
Canada Pension Plan (CPP)
The Canada Pension Plan (CPP) is a contributory pension that provides income in retirement based on a retiree’s lifetime earnings and contributions. To qualify, individuals must have made at least one valid contribution to CPP during their working years in Canada.
The monthly payout amount depends on how much and for how long contributions were made, as well as the age at which benefits are claimed. The standard retirement age for CPP is 65, but retirees can begin receiving payments as early as 60 (with reduced benefits) or as late as 70 (with increased benefits).
CPP benefits are fully portable, meaning expats can receive their payments anywhere in the world. However, payments are subject to a 25% non-resident withholding tax, unless reduced by a tax treaty between Canada and the retiree’s host country.
For example, under the Canada-U.S. tax treaty, the withholding tax on CPP is reduced to 0%, meaning no Canadian tax is deducted at the source. Additionally, some countries tax CPP payments as foreign pension income, requiring expats to account for these deductions when planning their cash flow.
Old Age Security (OAS)
Old Age Security (OAS) is a government pension based on residency in Canada, not employment history or contributions. To qualify for OAS, retirees must have lived in Canada for at least 10 years after the age of 18.
However, to continue receiving OAS payments outside Canada, expats must have lived in Canada for at least 20 years after age 18. Those who do not meet the 20-year rule will have their payments suspended after six months of living abroad, unless they move to a country with a Social Security Agreement with Canada, which may allow payments to continue.
OAS benefits are subject to the OAS Clawback (Recovery Tax) if an expat’s worldwide income exceeds the annual threshold (CAD 90,997 in 2024).
Expats earning above this limit may have a portion—or even all—of their OAS payments reduced or eliminated.
Additionally, OAS is subject to the 25% non-resident withholding tax, though tax treaties can lower this rate. For instance, U.S. residents receiving OAS may only be taxed at 15% due to the Canada-U.S. tax treaty.
Guaranteed Income Supplement (GIS)
The Guaranteed Income Supplement (GIS) is a needs-based benefit designed for low-income seniors receiving OAS. Unlike CPP and OAS, GIS is only available to Canadian residents, meaning expats cannot receive this benefit while living abroad. If a retiree moves back to Canada and meets the low-income eligibility requirements, GIS payments can resume.
Can you collect Canadian pension if you live abroad?
Yes, Canadian expats can receive CPP and OAS while living outside Canada. CPP is always payable abroad, but OAS has a 20-year residency requirement for payments to continue outside Canada.
If an expat does not meet the 20-year rule, OAS payments stop after six months abroad unless the expat moves to a country with a Social Security Agreement with Canada.
Canadian Retirement Abroad: Canadian Pension for Non Residents
What happens to my RRSP if I retire abroad?
Expats can keep their Registered Retirement Savings Plan (RRSP) while living abroad, but contributions are no longer allowed for non-residents. Withdrawals are subject to a 25% withholding tax, unless a tax treaty lowers this rate (e.g., 15% in the U.S.).
Should I convert my RRSP to an RRIF?
By age 71, an RRSP must be converted into a Registered Retirement Income Fund (RRIF) or annuity. RRIF withdrawals receive preferential tax rates under some tax treaties. Expats can use RRIFs to minimize taxes by taking periodic withdrawals instead of lump sums.
How are RRSP and RRIF withdrawals taxed for expats?
- Non-residents pay a flat 25% withholding tax on RRSP withdrawals.
- RRIF withdrawals may qualify for lower treaty rates (e.g., 15% for U.S. residents).
- Withdrawals must also be reported as income in the host country, potentially leading to double taxation.
A retirement financial advisor can help determine whether to withdraw funds before leaving Canada or optimize withdrawals as a non-resident.
How are CPP and OAS taxed for expats who choose Canadian retirement abroad?
CPP and OAS payments to non-residents are subject to a 25% withholding tax, unless a tax treaty reduces this rate (e.g., 15% for U.S. residents). Many countries also tax foreign pension income, so tax planning is necessary to avoid double taxation.
Can I receive my Canadian employer pension while living abroad?
Yes, Canadian expats can continue receiving defined benefit (DB) or defined contribution (DC) pensions from former employers. Payments are subject to the 25% non-resident withholding tax, which may be reduced under a tax treaty.
Are private pensions taxed differently for expats?
Private pension income is generally taxed similarly to CPP and OAS—subject to withholding tax in Canada and local taxation in the expat’s host country. Tax treaties can help reduce double taxation, but expats should plan for possible currency fluctuations and tax rate differences.
Can I contribute to a foreign pension plan while living abroad?
Yes, many expats contribute to foreign retirement accounts in their host country. However, Canadian tax laws may not recognize these plans as tax-deferred. Some key considerations include:
- U.S. 401(k) and IRA: Canadian tax treaties allow for deferral of U.S. retirement accounts. Withdrawals are taxable in both countries but may qualify for foreign tax credits.
- European Pensions (UK, Germany, France, etc.): Some foreign pensions may be tax-exempt in Canada under treaties. Others may require reporting on CRA’s T1135 form.
Canadian Expat Retirement: Returning to Canada
Repatriation affects tax residency, pension eligibility, healthcare access, and investment structures. Expats who fail to plan properly may face unexpected tax liabilities, loss of benefits, or delays in re-establishing essential services.
Once an expat returns to Canada and re-establishes residency, they become a Canadian tax resident once again, meaning they are required to report worldwide income to the Canada Revenue Agency (CRA) and pay Canadian taxes accordingly.
Once residency is re-established, CRA will tax all future income under Canadian tax laws. This may impact retirees who continue receiving foreign pensions or rental income abroad, as these may now be subject to Canadian taxation in addition to local taxes in the host country.
What happens to my tax obligations in my former country?
Depending on the country of residence, an expat may still have tax obligations in their former country upon returning to Canada. Many countries have exit tax rules or require individuals to file a final tax return before they officially terminate tax residency. Some countries may also tax foreign pension income, even if the retiree no longer resides there.
Can I transfer my foreign pension to Canada?
Retirees with foreign pensions must determine how their pension income will be taxed once they re-establish Canadian residency. Some foreign pension plans allow lump-sum transfers to Canada, while others must be paid out periodically. The tax implications vary based on the country and type of pension:
- U.S. 401(k) and IRA accounts:
- Can be transferred tax-deferred into a Canadian RRSP under certain conditions.
- Withdrawals may be taxed in both Canada and the U.S., requiring foreign tax credits to offset double taxation.
- U.K. Pensions (e.g., SIPP, QROPS):
- Some U.K. pensions can be transferred into a Canadian RRSP via QROPS (Qualifying Recognized Overseas Pension Scheme).
- Without a QROPS transfer, pension withdrawals may be subject to U.K. withholding taxes and Canadian income tax.
- European Pensions:
- Some European pensions may be tax-exempt in Canada if they qualify under a tax treaty.
- Others may require full reporting to the CRA and be taxed upon withdrawal.
Retirees should review their host country’s pension regulations and Canadian tax treaty provisions before transferring funds. Consulting with a cross-border tax expert is highly recommended to structure transfers in a tax-efficient manner.
How should I restructure my RRSPs and RRIFs after returning?
Once back in Canada, retirees may need to:
- Resume RRSP contributions (if they have contribution room).
- Convert RRSPs to RRIFs by age 71, ensuring tax-efficient withdrawals.
- Adjust asset allocations to optimize investment returns under Canadian taxation.
Investment strategies should be reviewed with a financial planner to ensure compliance with Canadian tax laws and estate planning objectives.
How does repatriation impact my will and estate plan?
Expats returning to Canada must update their wills, power of attorney, and beneficiary designations to comply with Canadian estate laws. Some key changes include:
- Foreign wills may not be recognized in Canada.
- Canadian estate laws do not impose inheritance tax, but capital gains tax on death applies.
- Trusts or inheritance plans set up abroad may have tax implications upon repatriation.
Expats should review and update their estate plans with a legal professional specializing in cross-border estate management. For more guidance, it is recommended you see an expat financial advisor.
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