It’s Your Money > Taxes

Canadian Pension Income, Canadian Employment Income, Philippine Income Tax

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iamjames:
Doesn't your years of Tax paying make a difference to your pension? If so I would consider it best for any foreigner to continue registering for tax in their native country rather than opting for non-residential status.

Hestecrefter:
iamjames,

Years of paying tax is not what counts towards entitlement under the Canada Pension Plan.  It must be tax on employment income, including self-employment.  Actually, paying tax is not what triggers the requirement to contribute to CPP and it does not determine entitlement.  In Canada, one pays tax on various forms of investment income, interest income, rental income but, regardless of the magnitude of that income or amount of tax paid, it won't count at all towards eventual CPP entitlement.

For those working as employees in Canada, or considered to be in Canada for tax purposes, both the employer and the employee must contribute a percentage of earnings to the pension plan, up to a certain maximum each year. The "maximum pensionable earnings" for 2015 is CAD53,600. Those self-employed must pay in both the employer's and employee's share.

Also, insofar as melissag is earning income in the Phils from an employer there (apparently), while I have not checked on the CPP website, I would very much doubt that she (the moniker "melissag" suggests a female) would be permitted to report that income in Canada, have the CPP premiums paid on it, and have it counted as pensionable service under the CPP. 

In short, I do not see many cases in which one may "elect" to have income counted as income for CPP purposes.  The rules regarding residency and income nature and source will govern, regardless of individual preference or choice.

Finally, CPP pays a pittance.  I have contributed the max for nigh on 30 years. That might get me about CAD750/mo. at age 65.  One needs about 40 years of contributions to top out.  Even then, the max pension in 2015 is the princely sum of CAD1,065 per month, or about USD800.  According to the CPP website, the average recipient is getting about half of that.  So the point is, it's hardly worth thinking about.  It won't be sufficient live as a squatter in the Phils, never mind anywhere else.  As Art pointed out in another current tread, today, a monthly income of about USD5,000 is needed to live with a modicum of comfort in the RP.  Even the max CPP benefit won't help much in meeting that requirement.

Art, just a re(tired) Fil-Am:

--- Quote from: Hestecrefter on October 16, 2015, 03:55:08 AM ---iamjames,
Finally, CPP pays a pittance.  I have contributed the max for nigh on 30 years. That might get me about CAD750/mo. at age 65.  One needs about 40 years of contributions to top out.  Even then, the max pension in 2015 is the princely sum of CAD1,065 per month, or about USD800.  According to the CPP website, the average recipient is getting about half of that.  So the point is, it's hardly worth thinking about.  It won't be sufficient live as a squatter in the Phils, never mind anywhere else.  As Art pointed out in another current tread, today, a monthly income of about USD5,000 is needed to live with a modicum of comfort in the RP.  Even the max CPP benefit won't help much in meeting that requirement.

--- End quote ---
That's sad to read what Canada's maximum pension amounts are depending on one's contribution to their tax system and to what their pay scale are, but I could only assume that because of what free benefits Canada provides their citizens, of what they are I haven't a clue.
What is Canada's average pay scale and tax bracket in comparison to that of the U.S.?
Not to insult or offend anyone from Canada, I couldn't live in the Philippines on a Canadian pension of what I read on here. I am not being boastful or bragging what some U.S. citizen's pensions are, but that is what some do earn, but it really depends on one's earning power and contribution to the tax system in the U.S. and maybe depending on which state one lived in.
I know a few retired Fil/Am couples living in our subdivision from the U.S. and Canada who both worked 40 yrs or less and their combined total monthly pensions comes to around $5,000, $8,000 and or $10,000! I would say WOW to that and I do! That's an adequate pension to live on anywhere in the Philippines and or in any non-snobbish and or uppity country with an attitude! :o
We would have stayed in California only if I had the adequate retirement pension (my wife never worked in the U.S.) at that time when I retired at age 49, but it wasn't meant be with my meager pension when I retired in 1997. So, a year later, we moved to the Philippines with just "a leap of faith", but we've now been here going on 18 yrs and life is wonderful!
We only moved to Philippines due to the low cost of living, because when I retired we couldn't afford to retire and still live in N. California at that time back in the late 90s.   

Hestecrefter:
It is a bit sad, Art. From the 2013-14 CPP Annual Report we learn this:

"The amount of contributors’ pensions depends on how much and for how long they have contributed and at what age they begin to receive the benefits. In 2014, the maximum monthly retirement pension was $1,038.33, and the average payment in 2013-2014 was $535.96." 

That's about $400 U.S.  I am not surprised.  Very few people manage to stay employed steadily for about 40 years, earning the max CPP contributory rate.

I should add, however, that it's a bit less bleak in some ways than the picture I have painted.  In addition to CPP, most Canadians get the federal Old Age Pension at age 65.  I think it pays a max of about $570 a month at present.  It is not related to work, or contributions, but just to putting in your time in Canada.  Anyone who has lived in Canada for at least 10 years after age 18 qualifies.  To get the max amount, you have to put in 40 years.  For people with low incomes, they can also get the "Guaranteed Income Supplement" of up to $772 per month. For those with incomes over about $70,000 per year, the OAP gets reduced, down to zero by $118,000 per year.

Art, as for your query about average tax brackets, pay scales, I have lived and worked in both Canada and the U.S. and, overall, my observations are that wages on both sides of the border are similar, for similar work.  U.S. taxes are, overall, lower.

As is occurring in the U.S. right now, employees are being told not to count on things such as social security payments, or Canada Pension Plan payments, to allow one to live in retirement.  Those things should simply be looked at as providing a bit extra.  Both governments are telling people to find other ways to fund retirement.  In both countries, the "traditional" pension from one's employer is dying out.  Fewer and fewer companies provide pension plans.  So, it's become 401ks, Roth IRAs and, in Canada, RRSPs (registered retirement savings plans) that we are told to look to.  Those tend to relegate to the individual the duty to save, invest, manage, etc.  Some are better at it than others.  Some are abject failures.  Even the most prudent investor can be hit hard my market downturns, etc.

It appears to me that traditional pensions are now enjoyed primarily by those in government jobs, at the various levels of government.  They are the envy of many.  With good reason.  In Canada, a great many government pensions work like this:  you take the average of your best 5 years' salary (usually your last 5 years).  You earn 2% of that average figure for each year of contributing (along with the employer) to the pension plan, to a max of 70% after 35 years.  So, someone who started at age 20 and retires after 35 years at age 55, would get a pension of $70,000 a year if they were earning $100,000 in the last 5 years.  Those amounts are almost always indexed for inflation.  No worries about unfunded liability, should that occur, because the taxpayers will, in effect, fund the shortfall.  So that pensioner will get his $70,000 a year, plus CPP, and a portion of the OAP. 

The unfortunate reality for many is that they never were members of a pension plan and were never diligent about saving for retirement.  While governments have sought to encourage saving, by making contributions tax deductible and eventual withdrawals taxable, many people fall woefully short of the mark in arriving at age 65 or so with significant sums stashed away.  Some of those fall for the lure of the totally false mantra of "Live like a king in the Philippines for $1,000 a month." 

starrt:
No wonder my ears were burning  :P hehehehehe...did somebody mention my name here? (just joking)...

I have read what everyone has written and I have to say that what Hestecrefter has written pretty much covers the CPP and OAS situation.

As for Meliisag, as I keep saying each and every time that taxes, pension, etc are discussed, each person's situation and tax liability is different, and everyone has to get the proper answer directly from the government. The CRA (Canada Revenue Agency) has a toll free number and will also accept collect calls. Mellisag has to call them and give them all of her information, employment, etc, and they will let her know if she is deemed non resident or not for taxation purposes in Canada. There also has to be a determination on whether or not her income is taxable in Canada. As for recommending somebody to talk to, first try the Canadian government, as it will only cost you time. After that check with the major international accounting firms to see if they have anyone in their office with experience in dealing both with the CRA and the Philippine BIR for individuals. The tax treaty between Canada and the Philippines covers all sorts of incomes, except for CPP and OAS.

Please keep us informed as to what you find out, to help others here.

Thomas

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