Canada Pension Plan

Written: December 20, 2015

Updated: January 20, 2016

Yes, You are Eligible to Receive Your Canada Pension Plan Even if You Live in Another Country, and it can be Direct Deposited to a Mexican bank account in Pesos

The CPP (Canada Pension Plan) is exactly what it is called, a "Pension". Anyone who worked in Canada and paid into CPP is eligible to collect. You will never lose the CPP...You paid into it, and it is your pension.

You can apply after you depart from Canada and are living in Mexico or anywhere else, but there are things you need to know about the application process and how CPP works today.

When Can You Apply?

You can apply as early as age 60, or delay up to age 70 and get higher CPP payments if you delay.

In addition, you can now get credit for CPP contributions you make if you work past age 65. At one time, anyone working past age 65 could not contribute to CPP and so they simply applied for CPP at 65 even if they were working. Until now, there was no advantage in delaying.

At one time, you could apply at age 60, but only if you were not working. Now, you can still be working and apply for CPP. However, if you are working and drawing CPP, you and your employer are still obligated to contribute into CPP... up to age 70. But don't worry; these contributions will result in higher CPP payments with adjustments being made each year to reflect those contributions. So you can be drawing CPP as well as working and contributing to CPP at the same time.

Should You Start CPP Early?

As of 2016 the penalty for starting prior to age 65 is 0.6% per month. This means that, as of 2016, if you start receiving your CPP at the age of 60, your pension amount will be 36% less than it would have been if you had taken it at 65.

If you start your CPP at age 70, your payments would be 42% more than it would have been if you had taken it at age 65. That is true even if you are not working between the ages of 65 and 70.

Since 2011, you have the option of contributing to CPP up to age 70 provided you are working. These extra contributions will result in even higher CPP payments.

Non-Resident Taxation

Your CPP is taxable and CRA will automatically deduct the non-resident 15% withholding taxes for Canadians living in Mexico. It is 25% for non-treaty countries.

While living abroad, you will occasionally receive a form from CRA advising you that if your income is low enough, you may be eligible for a tax reduction to something less than the 15%. The form is called an NR5 and we generally advise against filling out that form. Read More about the NR5

If your total taxable income is low enough, you can file a non-resident tax return under Section 217 of the Income Tax Act and receive a refund on the withholding taxes.

Payments

CPP payments can be direct deposited into your Canadian bank account, or into your Mexican bank. (OAS can also be direct deposited into your Mexican bank account.) A deposit into your Mexican bank will be made in Pesos.

There is an enrollment form to submit to CRA and the first direct deposit will be made approximately three months after receipt of your completed form. Please note that the amount of your payment may vary depending on the exchange rate.

For those living in our area, we will be happy to assist you in completing the enrollment process at no cost to you as part of our customer service. Contact us by email or phone to set up an appointment for assistance.

Read More about the NR5

Non-Resident Income Tax Refunds

You can download a CPP application HERE

You can download the CPP  & OAS Direct Deposit form HERE