You want to leave harsh Canadian weather behind after you quit working. Can you retire abroad and still collect CPP and OAS?

These are the exact concerns raised by a reader who wrote to MarketWatch’s “Help Me Retire” column: “My wife and I would like to retire to Malaysia, but we would need to continue receiving our [government pension] cheques to make life more comfortable. We don’t want to lose them. Will [the government] allow us to live overseas while collecting retirement benefits, or would we have to forget about those benefits and live off other sources of income?”

The answer — for Canadians, at least — is more nuanced than a simple yes or no.

Collecting CPP and OAS when retiring abroad

The good news is that you can retire outside Canada and still receive both your Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, but specific conditions and tax rules apply to each program.

CPP is a contributory program — the benefits you receive are based on what you (and your employers) paid in throughout your working years. You aren’t required to live in Canada in order to collect it. As long as you contributed to CPP while working in Canada, those earned benefits will follow you wherever you retire.

However, OAS is a residency-based benefit — you qualify based on the number of years you lived in Canada after the age of 18, rather than on employment contributions. You need at least 10 years of Canadian residency after age 18 to receive a partial OAS pension abroad, and at least 20 years to have payments continue outside Canada without interruption.

Employment and Social Development Canada (ESDC), the federal department that administers these benefits, confirms that recipients can collect CPP and OAS while living in most countries around the world. Canada also has international social security agreements with dozens of countries, which can help fill gaps in your eligibility if you spent part of your working life abroad.

There are, however, some country-specific restrictions. Payments may be suspended or unavailable in some nations that are subject to Canadian sanctions. Always confirm the current rules with Service Canada before making a final decision.

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What the CRA says about your retirement income

This is where things get complicated — and where planning ahead can ensure your payments aren’t interrupted.

When you permanently leave Canada and become a non-resident, the CRA typically applies a non-resident withholding tax to your CPP and OAS payments. The standard withholding rate is 25%, though this rate may be reduced under a tax treaty between Canada and your new country of residence. For example, retirees relocating to a country that has a tax treaty with Canada — such as Malaysia — may see their withholding rate reduced, sometimes significantly.

Canada has tax treaties with more than 90 countries. The treaty provisions vary, so it’s critical to confirm the specific terms for your desired country with a qualified tax professional before you leave.

Your Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) are also subject to withholding tax once you become a non-resident. Withdrawals from these accounts while living abroad will be subject to Part XIII withholding tax — again, which may be potentially reduced under a treaty agreement. Unlike in the U.S., where specific retirement accounts (such as Roth IRAs) receive preferential tax treatment, there’s no equivalent tax-free withdrawal arrangement for Canadian non-residents drawing from an RRSP or RRIF.

It’s also worth knowing that when you leave Canada, you may need to pay a “departure tax” — a deemed disposition that treats most of your property as if you had sold it for fair market value on the day you left. This must be planned ahead, and your financial adviser or a cross-border tax specialist can help you prepare for any potential impact.

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Your provincial health coverage won’t follow you

One of the most significant financial risks Canadians face when retiring abroad is the loss of provincial health coverage.

Provincial health insurance plans — such as the Ontario Health Insurance Plan (OHIP) or British Columbia’s Medical Services Plan (MSP) — are typically suspended or cancelled when you leave the province for an extended period or establish residency elsewhere. The specific rules vary by province, but most require you to be physically present in the province for a minimum number of days every year to maintain coverage.

This means that once you retire abroad, you’ll need to arrange your own health coverage. Options include enrolling in an international health insurance plan through providers such as Allianz Care, Cigna Global or Manulife’s international division. Costs and coverage vary widely, so it pays to shop around, get quotes and factor premiums into your retirement budget.

In practice, many Canadian expats opt for a combination of private international insurance and paying out-of-pocket for routine care — which, in many lower-cost countries, is far less expensive than equivalent care in Canada.

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What to do about your bank accounts

Maintaining a Canadian bank account after moving abroad is generally a smart move — and in many cases, a necessity.