For newcomers to Canada, retirement planning can be particularly challenging, as they must not only adjust to a new culture and way of life but also to a new financial and legal landscape.
We will break down the components of Canada’s retirement income system, provide up-to-date figures for 2025, and offer actionable strategies tailored to the unique circumstances of newcomers. With the right knowledge and preparation, you can build a secure and comfortable retirement in your new home.
The Three Pillars of Canada’s Retirement System
First, it’s important to know that Canada’s retirement system is built on three pillars that work together:
- Government Pension Benefits: A foundational layer of income provided by the government.
- Employer-Sponsored Pension Plans: Workplace plans that supplement government benefits.
- Personal Retirement Savings: Your own savings, which play a crucial role in achieving your retirement goals.
Now, let’s explore each of these in detail.
What Are the Main Government Retirement Benefits in Canada?
Canada has two main national pension programs: the Canada Pension Plan (CPP) and Old Age Security (OAS), which provide a baseline retirement income, alongside provincial programs such as the Quebec Pension Plan (QPP).
Canada Pension Plan (CPP)
The Canada Pension Plan is a contributory social insurance program. This means your benefits are based on the amount you and your employer contributed during your working years in Canada (outside of Quebec, which has a similar Quebec Pension Plan).
In 2025, the standard CPP payment for someone retiring at age 65 is $1,433 per month. You can choose to take a reduced CPP pension as early as 60 or higher payments up to 70. The benefit amount you receive is based on your lifetime contributions and the age you start collecting.
Both Canadian citizens and permanent residents are eligible for CPP if they have made at least one valid contribution. As a newcomer, you begin contributing as soon as you start working and earning above the minimum threshold. The minimum annual earnings to contribute for 2025 are estimated to be around $3,750.
Old Age Security (OAS)
The Old Age Security program provides a basic pension to all Canadian citizens and permanent residents aged 65 and older who have lived in Canada for at least 10 years since turning 18. For the period from July to September 2025, the maximum monthly OAS payment is $734.95 for seniors aged 65 to 74, and $808.45 for those aged 75 and over.
Your income, marital status, and years lived in Canada determine your exact OAS payment amount. If your individual net income is above a certain threshold, your OAS payment will be reduced.
As a newcomer, you may not immediately qualify for the full OAS pension due to residency requirements, but making contributions to CPP as soon as you start working will pay off when you reach retirement age. You will likely receive a partial OAS pension, calculated as 1/40th of the full pension for each year you resided in Canada after age 18.
Guaranteed Income Supplement (GIS)
The GIS provides additional benefits in addition to OAS for low-income seniors. To qualify, you must be approved for OAS, be aged 65+, and meet income thresholds based on relationship status. For a single, widowed, or divorced senior, the maximum GIS payment from July to September 2025 is $1,097.75 per month. The amount varies based on marital status and combined household income.
Both CPP and OAS provide spousal benefits if your spouse qualifies, but you do not. For CPP, you can receive up to 60% of your spouse’s retirement pension. For OAS, spousal allowances can provide up to 55% of your spouse’s benefits.
Critical Information for Newcomers: Social Security Agreements
Canada has social security agreements with over 50 countries, which can help you qualify for Canadian benefits you might not otherwise be eligible for.
An agreement allows you to combine your years of residence or contributions in your home country with your time in Canada to meet the minimum eligibility requirements for CPP or OAS.
Note: These agreements only help you qualify for benefits; the amount of your Canadian pension will still be calculated based only on your Canadian residency or contributions.
What Types of Employer Pension Plans Are Available?
Some companies offer retirement income in addition to CPP through registered pension plans (RPPs). If your job offers one, it’s a powerful tool for retirement savings. The three main types of employer plans are:
Defined Benefit (DB) Pension Plans
These guarantee you a set monthly payment in retirement determined by a formula, usually based on your length of service and average salary during your final years of work.
DB plans provide predictable, stable retirement income, but are getting less common as they are costlier for employers.
Defined Contribution (DC) Pension Plans
DC plans have fixed contributions from your employer paid into your retirement account annually. You choose how these contributions are invested. Your retirement income depends on the performance of your investments and how much your employer contributed to your career.
DC plans come with more risk and variability but cost employers less than DB plans. Most modern pension plans now use a DC model.
Group RRSPs
Some employers provide access to a Group RRSP funded through payroll deductions. Group plans have lower fees than individual RRSPs and may include matching employer contributions.
For example, your employer may automatically deposit 3% of your salary into the group RRSP each pay period and match your own contributions up to 2% of your salary. This helps you save for retirement in a tax-advantaged way.
What Types of Personal Retirement Savings Options Are Available?
Government benefits and employer pensions provide a good base, but individual savings are still critical for most Canadians to maintain their standard of living in retirement.
Canadians have lower workplace pension coverage than in prior generations. Only about 37% of the labour force has an employer plan, down from 45% two decades ago.
With Canadians depending less on company pensions, personal savings must fill the gap. Registered accounts, such as RRSPs and TFSAs, are important retirement savings tools.
Let’s compare RRSPs and TFSAs in more detail:
Registered Retirement Savings Plan (RRSP)
RRSPs are accounts that give you tax breaks for retirement savings. Your contributions are tax-deductible, reducing your taxable income for the year. The investments grow tax-deferred, meaning you only pay tax when you withdraw the money in retirement (when you are likely in a lower tax bracket).
For newcomers, your RRSP room is based only on earned income reported in Canada. You will not have any RRSP room in your first year of arrival. It will begin to accumulate after you file your first Canadian tax return.
TFSAs
Tax-Free Savings Accounts are flexible, general-purpose accounts that provide tax-free growth on savings and investments within them. The annual TFSA limit for 2025 is $7,000.
Newcomers begin accumulating TFSA contribution room from the year they turn 18 and become a tax resident of Canada. If you arrived in Canada in 2025 at the age of 30, you would have $7,000 in room for 2025. Unused room carries forward indefinitely.
Four key considerations in choosing between RRSP and TFSA:
- Current tax bracket – RRSPs benefit those currently in a high tax bracket more.
- Anticipated retirement tax bracket – If you expect to be in a lower bracket when retired, RRSPs give you a tax break now and later.
- Flexibility needs – TFSAs allow withdrawals at any time for any reason with no tax impact.
- Eligibility for income-tested benefits – TFSA withdrawals don’t affect benefit eligibility the way RRSP withdrawals do.
Ideally, newcomers should strive to utilize both accounts based on their specific circumstances each year. RRSPs reward long-term discipline, while TFSAs provide flexibility.
Actionable Strategies for Newcomers to Canada
As a newcomer to Canada, you may feel behind on saving for retirement compared to those who have worked here for decades. However, some proactive strategies can help you kickstart your retirement funds.
Get Your Social Insurance Number (SIN)
This is your first step. You need a SIN to work, open bank accounts, and start saving in a TFSA or RRSP.
Prioritize Your TFSA
Open and start contributing to a TFSA as soon as you have a SIN. Invest for growth by holding ETFs, blue-chip stocks or mutual funds within your account. Even small, regular contributions will benefit from tax-free compound growth. This is your most flexible tool, which gives you a head start on your savings.
Make RRSP contributions strategically
Once you file your first tax return and generate RRSP room, start making contributions. This is especially beneficial if you are in a middle or high tax bracket, as the tax deduction is very valuable.
If your job offers a Group RRSP or pension with a match, contribute enough to get the full employer contribution. Don’t leave this free money on the table.
When changing jobs, continue to build your RRSP while meeting vesting periods for new employer plans.
Maximize CPP/OAS benefits
Delay receiving CPP until 70, if possible, to permanently boost payments by 42%. Defer OAS to 65-70 to increase payments by up to 36% if it won’t impact other benefits.
File your taxes every year
Filing taxes is crucial. It establishes your residency for OAS, generates your RRSP contribution room, and ensures you are assessed for any benefits you might be eligible for.
Starting as soon as possible, making consistent contributions, and utilizing all available programs give newcomers the best chance of securing a comfortable retirement in Canada.
The bottom line
Planning for retirement as a newcomer requires understanding how Canada’s system of government benefits, employer pensions and personal savings fit together. The keys are to start early, be consistent, and understand how the different pillars of the system work together for you.
While retirement may seem far away, taking these steps today will ensure you can enjoy your golden years with financial security in your new Canadian home.
FAQs About Retirement Planning as a Newcomer in Canada
Why are personal retirement savings important?
Personal savings through RRSPs and TFSAs fill gaps left by shrinking employer pensions. Most Canadians rely heavily on their own savings in addition to government benefits.
Do I need to be a Canadian citizen to receive CPP or OAS?
No, you do not need to be a Canadian citizen. To receive the CPP) you must have made at least one valid contribution. For OAS, you must be a legal resident (e.g., a Permanent Resident) and meet the minimum residency requirements (typically 10 years in Canada after age 18).
Is retirement planning different in Quebec?
Yes, in some ways. Quebec operates the Quebec Pension Plan (QPP) instead of the CPP. While the plans are very similar, their contribution rates and maximum benefit amounts can differ slightly. Quebec also has its own provincial tax system and additional benefits for residents.
As a newcomer with limited funds, should I contribute to an RRSP or a TFSA first?
For many newcomers in their initial years, the TFSA is often the better starting point. This is because you may be in a lower income tax bracket when you first arrive. The tax deduction from an RRSP is less valuable at lower incomes. A TFSA provides tax-free growth and the flexibility to withdraw funds for emergencies without a tax penalty, which is crucial when you are getting established.
What happens to my CPP and OAS if I move away from Canada after retiring?
You can generally receive your CPP and OAS payments even if you live outside of Canada, provided you remain eligible. CPP payments can be sent to most countries. OAS payments can also be sent abroad, but a non-resident tax will be withheld. If you have lived in Canada for less than 20 years after age 18, your OAS payments will stop if you are absent from Canada for more than six months.
How does Canada tax my foreign investments or rental income?
As a tax resident of Canada, you are taxed on your worldwide income. This means you must report and pay tax on any income generated from foreign investments, rental properties, or other assets held outside of Canada. You may be able to claim a foreign tax credit for any taxes you have already paid to the foreign country on that income to avoid double taxation.
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