# 25% hacked off for taking yourself elsewhere! Why?



## HermesHermes (Mar 24, 2017)

I heard this before, but it was so devastating that I somehow buried it. It is completely non-intuitive, to me anyway.*

If one has a pension from* Canada, and on this topic I am not talking about GIS (essentially welfare for seniors) and I am not talking about gov't health insurance either, but actual contributed-to pension and legally-mandated pension called 'old age security' AND you figure you can live cheaper outside of Canada, so you move to another country...

The Canadian gov't keeps 25%. They don't do this in AustralIa do they?

Ten percent would be bad enough. But a *quarter*? What's the reason? Do any other modern western countries do this? 

It's like a prison sentence living in Canada - I want to leave this cold expensive country and go live in tropical Asia. But if I do I will be penalized so severly that living will be impossible. This is devastating news. I calculated that I could just barely manage to live like a pauper in India on $700 per month income (my OAS and CPP). Now I must live like a super-pauper here (sure, adding 907 GIS, but Canada costs five times the price of South Asia). It sounds completely irrational. I don't see the benefit to the tax-payer, the citizen or the government. This looks very much like a nationalism tax.

Have I missed something?


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## m3s (Apr 3, 2010)

HermesHermes said:


> Have I missed something?


Is your pension not tax deferred like an RRSP? That would mean you didn't pay any income tax on pension contributions, which likely would have been more than 25%

You pay income tax on pension income just like withdrawals from RRSP. 25% is actually pretty reasonable for income tax

The bigger loss of departing is the access to free health care paid for by said income taxes


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## OnlyMyOpinion (Sep 1, 2013)

This?
If you live outside Canada and are not considered to be a Canadian resident for income tax purposes, a non-resident tax is withheld from your monthly OAS pension benefit payments. The tax rate is 25 percent unless reduced or exempted by a tax treaty between Canada and your country of residence. If you have tax—related questions, contact Canada Revenue Agency's International Tax Services Office.

Otherwise, too bad so sad I guess.

Added: I think it is fair to suggest that OAS (funded from general revenues) is intended for senior Canadians in Canada. You want to live in the south seas, have at it, but I don't see why OAS should be expected.


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## pwm (Jan 19, 2012)

HermesHermes, you don't understand what OAS is. In no way is OAS a pension. A true pension plan requires that plan members make regular contributions. It maintains a portfolio of investments which earn investment income to help pay retirees. The employer contributes the remaining money required to make those payments. One does NOT contribute to OAS. The only requirement is to have lived in Canada and reach the age of 65. The money comes out of general revenues and is just a Government hand out. The Government likes to call OAS a pension, but they are wrong to do so. If you had an actual pension, it would continue to pay you wherever you lived. And by the way, when you need medical care in "tropical Asia", what will you do? Return to Canada for treatment? That's what normally happens, so the Government of Canada is doing just what it should in withholding that 25%.


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## Longtimeago (Aug 8, 2018)

This kind of thing comes up in Retirement forums all the time. As I read what you have written, you have only CPP and OAS to rely on, along with GIS if you remain in Canada.

First, you need to realize that Canada will pay you CPP and OAS anywhere in the world AND continue to increase payments based on the Cost of Living Index. That's a good thing, not all countries offer the equivalent. Ask Brits who choose to retire in Canada, Australia and many other Commonwealth countries what happens with their UK Government Pension payments. They are FROZEN at the amount they are receiving when they leave the UK. With no increases for the cost of living, their income in 'real' buying power decreases each year as a result. https://www.theguardian.com/money/2018/oct/13/frozen-state-pensions-petition

So don't think you are being particularly badly treated by Canada, others have it worse than you do.

Second, you need to realize that if you only have CPP and OAS (with GIS only if you remain in Canada), you have a very minimal income and as a result, your options of where to live are going to be very limited. You don't have any 'right' to have enough income to live in say India as per your example. If you cannot find a country where your income will be enough for you to live as you would LIKE to live, then you are going to have to do the best you can on what you have. 

Don't try to suggest that Canada is somehow responsible for your lack of income and that having to pay Non-resident tax if you leave is somehow unfair to you. They could refuse to pay you any OAS at all if they chose to or freeze your payments as the UK does. Canada is actually one of the best countries when it comes to paying CPP and OAS compared to the equivalent from other countries, if you chose to live elsewhere.

The reality is that yes, you can live like a pauper in Canada on your income or live like a pauper on less income in some other country. It's your choice and no one else is to blame for those being your only choices. It's unfortunate that so many people have no other income to rely on in their retirement than CPP, OAS and GIS HermesHermes, but it is just a fact of life. But you should also realize that living on a low income in Canada is far preferable to living on an equivalent income in most other countries. You do get GIS which guarantees you a minimum income, you do get good healthcare, ask a poor American how they fare in that regard. In other words, it's better to be a poor Canadian than a poor person pretty much anywhere else.

It is also important to understand if you are looking at living elsewhere, just how big a factor currency exchange can make in your income if you do move. It is not unusual for the exchange rate between two 'stable' currencies to fluctuate as much as 25%. For example, suppose someone from Canada decided the cost of living was lower in the UK than in Canada and they chose to move there. In the last 10 years or so, the exchange rate between the Canadian dollar and the UK pound has fluctuated by as much as 25%. So what do you think that does to someone who moves on the basis of having very little margin to cover such fluctuations? 

When someone talks about retiring overseas, the received wisdom is to tell them to allow for a margin of at LEAST 25% fluctuation in currency exchange. So it isn't just a question of having enough income when you look at the figures today and saying, 'I'll have enough to get by', you have to look today and say, 'I"ll have enough PLUS a cushion of 25%. It doesn't look to me like you have considered that factor HermesHermes. If you would need $700 today to live in India (as per your example) at a basic level, then you need to know you have $700 + $175 = $875 income when you go. Oops.

Many Brits for example retired to Spain with 'enough' income to live there. Then they found the exchange rate between their UK Pound and the Euro dropping. As a result they could no longer afford to remain in Spain, they had to move back to the UK where they could get free healthcare and other advantages that a Senior living there was entitled to. Moving countries to live on a 'shoestring' is never a good idea for a retiree.


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## Joe Black (Aug 3, 2015)

As others have said, OAS is not a pension, I'm actually surprised that you would get any of it if you lived out of the country. It wasn't something you "contributed" to (can you find "OAS" payments in your income tax forms - like the CPP contributions which is a pension?). Would you have liked to pay even more tax during your working years to fund all the Canadians who retired before you to live wherever they wanted?


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## timemoveson (Nov 22, 2017)

Have you missed something? Yes, unfortunately, you missed the entire point, as elegantly outlined by our fellow posters.


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## Prairie Guy (Oct 30, 2018)

I don't think anyone who moves out of Canada should get OAS.

That being said, OAS pays $607 a month if you've been here 40 years since age 18. Since you're only getting $700 between OAS and CPP you either have only been here a short while or didn't work long enough to get more than $93 CPP. 

And now we have to give you senior welfare because you didn't bother saving for retirement.


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## Trex (Apr 6, 2009)

HermesHermes said:


> I heard this before, but it was so devastating that I somehow buried it. It is completely non-intuitive, to me anyway.*
> 
> If one has a pension from* Canada, and on this topic I am not talking about GIS (essentially welfare for seniors) and I am not talking about gov't health insurance either, but actual contributed-to pension and legally-mandated pension called 'old age security' AND you figure you can live cheaper outside of Canada, so you move to another country...
> 
> ...


I think you have missed quite a bit actually.
As someone who did contract consulting work outside of Canada for 35 odd years I think you should probably rethink your strategy.

I have spent years living and working in India and SE Asia but I now choose to spend the majority of my retirement time based in Canada.
$700 CDN is not much money to live no matter where you live in the world.
Do you plan to live like a lower middle class native Indian or continue on as a somewhat privileged Canadian who won the great birth lottery.

Rice and dal twice a day to eat and not much else for variety.

Are you experienced in using outdoor squatters for bathrooms while sick with intestinal issues?

No free healthcare, its all pay as you go and private hospitals with western medical standards while available are also expensive.
SE Asia does not provide social assistance and welfare like Canada does, get down on your luck or sick and you could find yourself in a major pickle quickly.

Having said that Goa is a nice spot and I would tend to recommend Vietnam over Thailand if you are trying to cheap out.

My advice would be to save up $4200 in cash, book a cheap bucket shop flight to Asia and see how your standard of living works out over 6 or 7 months.
Best of luck with it.


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## Longtimeago (Aug 8, 2018)

Prairie Guy said:


> I don't think anyone who moves out of Canada should get OAS.
> 
> That being said, OAS pays $607 a month if you've been here 40 years since age 18. Since you're only getting $700 between OAS and CPP you either have only been here a short while or didn't work long enough to get more than $93 CPP.
> 
> And now we have to give you senior welfare because you didn't bother saving for retirement.


I don't agree with you on not paying OAS outside of Canada Prairie Guy. Think about where the money to pay it comes from. It comes from taxes on everything. Taxes that the person deciding to live overseas has paid for at least 20 years in order to be able to qualify to receive the payment. If the OP has been here the full 40 qualifying years, then obviously much more has been paid IN in taxes over that time. CPP is based on contributions but OAS is ALSO based on contributions, in the form of everyday taxes we all pay when we live here.

Also, regarding saving for retirement, you are making the assumption that the person earned enough to be able to save. But the fact is a large percentage of people earn a basic wage all of their working lives. In return we provide them with a basic living in retirement. They didn't have to have done anything 'wrong' like wasting their money etc., they just have to have been unfortunate enough to never earn more than a basic wage. There is no doubt that many could do a better job of managing their finances than they do and as a result improve their retirement income but not ALL fall into that category and I think you are trying to suggest that the OP is one of them Prairie Guy. "_because you didn't bother saving for retirement._" We don't have enough info to make that judgement.


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## Longtimeago (Aug 8, 2018)

Joe Black said:


> As others have said, OAS is not a pension, I'm actually surprised that you would get any of it if you lived out of the country. It wasn't something you "contributed" to (can you find "OAS" payments in your income tax forms - like the CPP contributions which is a pension?). Would you have liked to pay even more tax during your working years to fund all the Canadians who retired before you to live wherever they wanted?


Really? Are you sure you don't want to reconsider that comment?

Where do you think the money to pay for OAS comes from Joe Black? It comes from taxes we pay every day. You contribute to OAS when you buy groceries, gas, a new TV, etc. etc. etc. That there is not a line on your income tax form that says, 'OAS contribution' is meaningless. We all do pay taxes during our working years to fund all the Canadians who retired before us and qualify to receive OAS payments. Why should we dictate to them where they should live after they retire? 

This idea some have (not just you Joe Black) that OAS is something we haven't 'contributed to' is simply wrong.


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## Eclectic12 (Oct 20, 2010)

Contributions ... no contributions - I don't see anyone talking about what IMO is a big thing that those who are offended by a non-resident having to pay the 25% (or possibly a tax treaty reduced amount) are missing.

Stay in Canada to receive OAS or move to another country while receiving OAS - it is taxable income.

Is it all that rational to expect those receiving OAS in Canada to pay taxes while those who are non-resident living in a another country are not taxed?



Cheers


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## Longtimeago (Aug 8, 2018)

Eclectic12 said:


> Contributions ... no contributions - I don't see anyone talking about what IMO is a big thing that those who are offended by a non-resident having to pay the 25% (or possibly a tax treaty reduced amount) are missing.
> 
> Stay in Canada to receive OAS or move to another country while receiving OAS - it is taxable income.
> 
> ...


Umm, I'm not sure what you are really trying to say Eclectic12. If the OP only has CPP and OAS for income, even with GIS he will pay NO tax in Canada. His income will be below the tax threshold. If he leaves however, he will pay withholding tax on BOTH CPP and OAS payments. So his argument is that since he would pay no tax in Canada, why does he have to pay tax if he leaves?


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## Prairie Guy (Oct 30, 2018)

Longtimeago said:


> This idea some have (not just you Joe Black) that OAS is something we haven't 'contributed to' is simply wrong.


There are a lot of things we contribute to as taxpayers that we never get in return. I see OAS as something that is available for Canadians who live in Canada so that the money gets put back into our economy.


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## Eclectic12 (Oct 20, 2010)

Longtimeago said:


> ... If the OP only has CPP and OAS for income, even with GIS he will pay NO tax in Canada. His income will be below the tax threshold.
> 
> If he leaves however, he will pay withholding tax on BOTH CPP and OAS payments.
> So his argument is that since he would pay no tax in Canada, why does he have to pay tax if he leaves?


Fair enough ... though someone who would have paid no tax as a Canadian tax resident should be using the section 217 election to file a tax return. Where the total tax payable on line 435 is less than the tax withheld, there should be a refund.

https://www.canada.ca/en/revenue-ag...section-217-income-tax-act-2016.html#P60_1499


Cheers


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## Longtimeago (Aug 8, 2018)

Prairie Guy said:


> There are a lot of things we contribute to as taxpayers that we never get in return. I see OAS as something that is available for Canadians who live in Canada so that the money gets put back into our economy.


Then you see it differently than how it is determined Prairie Guy. It is determined based on years of residency in Canada and by extension, having put money into the economy and contributed to the good of Canada in whatever way during those years.

Consider why we have OAS separate from CPP in Canada. There are many scenarios under which your view that it should only be paid if someone continues to live in Canada would be very unfair to individuals.

For example, suppose a Canadian man meets a Polish woman during WW2 and they marry and she comes to live in Canada. There were a heck of a lot of them as you no doubt realize. He works and she raises a family but as a 'housewife' never pays in to CPP. That is one reason why we separate them, to provide in income in retirement to someone who never paid in to CPP. I hope you would find that acceptable. The alternative would be that if the husband dies first, she is left with no income at all since his CPP ends with his death.

Now further suppose that their children now live in different provinces from her and have little contact with her anymore, being more or less fully involved with their own lives, their own jobs, their own spouses and children. Further suppose she wants to return to Poland to live with her sister who is also a widow. Do you think it would be reasonable to say to her, 'it doesn't matter what you have done while in Canada, that you have raised a couple of productive members of Canadian society who now contribute to Canada and that you worked just as hard as your husband throughout your marriage, if you leave Canada you will get nothing from us.'

It is not as cut and dried as you want to make it out to be Prairie Guy. If someone has been a productive member of Canadian society for many years, why should it matter if they choose to spend their last years somewhere else? Why should they be less entitled to receive OAS than someone who stays in Canada and perhaps was even an unproductive member of society? Did you know that even convicted murderers were (I don't know if they still are or the bill was passed to end it) paid OAS?
https://www.cbc.ca/news/canada/prison-inmates-to-lose-old-age-benefits-1.888490

If you are going to try and JUDGE who should and should not be entitled to a benefit, then you will have to either judge each case individually or make general changes to the law that will still be unfair in some instances.


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