I recently wrote to the International Operations department of Service Canada to ask if making voluntary NI contributions in the UK will affect my entitlement to Old Aged Security in Canada. My letter contained the following:

Under current UK legislation I have the opportunity to make voluntary National Insurance contributions to enhance the UK state retirement pension I will receive. However, I note that article 8 of the Canada/UK social security treaty states:

For the purpose of calculating the amount of benefits under the Old Age Security Act:-
1. ..
2. if a person is insured under the legislation of the United Kingdom during any period of residence in the territory of Canada, that period shall not be considered as a period of residence in Canada for that person and for that person's spouse and dependants who reside with him or her and who are not insured under the Canada Pension Plan or the comprehensive pension plan of a province of Canada.

As stated above, I intend to retire in Canada and I do not want to prejudice my entitlement to Old Age Security. My question is: if I make voluntary National Insurance contributions in the UK now will this be counted as a period I am insured under the legislation of the UK and therefore disqualify me from claiming all the years I have, and will be, resident in Canada towards the Old Age Security pension?


The International Office replied:

This is in reference to your enquiry concerning possible entitlement to benefits from the United Kingdom.

Canada presently does not have an Agreement on Social Security with the United Kingdom which includes benefit provisions. It does however have a Convention which helps residents of the United Kingdom to receive to receive certain United Kingdom benefits because of their birth, residence or employment in Canada. The arrangement does not, however, help people in obtaining Canadian benefits.
Under the terms of the Convention, Canada assists the authorities in the United Kingdom by confirming periods of residence in Canada.
Unfortunately, this Convention cannot help you qualify for social security benefits from the United Kingdom because this arrangement only applies if you are living in the United Kingdom.


Now I, somewhat smugly, like to think I am quite good at deciphering technical or complex letters but having read this several times I think they mean no worries, go ahead and fill your boots. But I am not totally sure. Anyone got any ideas?

It looks to me like they didn't understand your question.

I have to say that I did wonder if that was the case.

Clear as mud. This bit is interesting though:

Does that imply that they confirm residence only, not contributions that would entitle someone to Canadian retirement benefits? If it does, then that sort of says it doesn't matter whether you claim both UK and Canadian benefits since the CRA won't give the DHS (or whatever it is now) enough information to reduce what they pay you.

I think the idea is that if you are a British resident who works in Canada and pays EI for a few years then you don't qualify for Old Age Security in Canada but have those years credited towards your NI contribution record in the UK.

I am quite sure that is the intent of the Convention, and Service Canada assists the UK by confirming that you were in Canada for those years.

My problem is determining if making voluntary NI contributions counts as being "insured under the legislation of the UK." If not, we all get the opportunity to double dip both state pensions. Gut feeling says this is not what either Government intends. From our point of view it would not be sensible to pay money to buy a pension that is not index linked when we can earn a pension that is index linked for free by just staying here.

What it appears to be saying is that it's outside the terms of the convention. It talks about residency, but voluntary contributions are made while you are a resident of Canada, so confirmation of terms of residency is academic.

As I recall in that case that went to the ECHR, part of the argument was the applicant had only been a resident of Canada for x years so was only entitled to x amount of OAS, so the lack of cost of living adjustments he was getting on his UK pension significantly impacted his ability to support himself. However the ECHR ruled the lack of adjustments was permitted due to the lack of any treaty provision that supported them and also - the interesting point - your pension is paid from general revenue, not NI, so the fact you made voluntary NI contributions puts no obligation on the UK Government to pay you a pension. Payroll taxes are merely a method of taxation and the pension obligation comes from statute that says they have to pay, but they are not obligated to pay because you paid the payroll taxes.

Anyway the point is that it is well-established that you can claim OAS and your UK state pension and the voluntary NI contributions you made have no bearing on your qualification for OAS. One would think the ECHR case would have brought their attention to it.

Don't agree, even under the scenario you describe for most people the UK pension would still be the better option, because you have to be resident in Canada for 40 years to get the full OAS benefit, whereas you have to make 30 years worth of contributions to get the UK pension. Presumably most immigrants are well on the way to that already and Class 2 voluntary contributions are peanuts.

Yes it's not indexed to inflation, but at least it is the full pension to start off with. You wouldn't get full OAS anyway (unless you were young when you immigrated), and assuming for some arcane legal reason you didn't get it at all, the CPP benefits you would get should more than make up the difference.

I always find these discussions a bit pointless, because for all we know by the time we can claim the pension, it might have been scrapped, or it might have been index linked, or something else might have changed.

At the end of the day Class 2 contributions cost very little so there's no real point not paying them, they're only about 150 quid a year at present.

Well what they say kind of makes sense in "read it a few times cos it's tax/legal guff" kind of way, but it just seems to be responding to something you didn't actually ask (especially the last sentence).

My understanding (and I'm fairly certain I'm right about this) is that you do get to "double dip". In fact you can get three state pensions: the UK pension, OAS and CPP.

Or more, if you've lived in other countries. I do laugh at the social security statement the SSA sent me, if it weren't for EFT I think it would cost them more to mail the cheque than what would be printed on it.

Edit: just looked it up actually and I get zero because I never reached 40 quarters of contributions. Nice of them to take the taxes though.

My husband won't get OAS either. He is Canadian but left when he was 24 and returned when he was 54. By the time he retires he will have clocked up 14 years work in Canada, but we are returning to the UK. He will get CPP and he is already entitled to a full UK state pension.

I think that you are right on that one! OAS is dependant on income level though so it is means tested cos its suppose to be a top up!

I thought it was only the GIS -- the Guaranteed Income Supplement, that was means tested.

Edit: Actually, I'm certain. I've just checked the Service Canada site.

Above a certain level of earnings (about $67,000 a year IIRC) the CRA claws back OAS. This is done as part of your tax filings so the OAS is not means tested as such. It does mean that people with high earnings in retirement, or who continue working in well paid jobs, effectively lose their OAS.

Edit: for 2011 the threshold was $67,668 and 15 cents of OAS was clawed back for each dollar of income above that amount. This means that the whole amount of OAS is clawed back if someones income was greater than $110,126.

Like I said above, OAS is a bit of a farce because of the 40 year requirement anyway, in fact the whole Canadian benefits situation is a joke because CPP is supposedly a quarter of your income but the cut-off of "your income" is around $50,000, so the maximum benefit is around $1,000 a month. And that assumes you've been earning at or above the cut off for your working life (40 years between 18-65), which is not likely. I doubt many people in their twenties earn above the cut off limit.

The way I look at it is, anything I get from OAS or CPP should make up for the difference with the UK state pension not being index linked.

The main positive of the Canadian pension system being so crap is that payroll taxes are really low in Canada.