The Retirement Gap: Why Do Newcomers To Canada Work For Longer Than Canadian-Born Workers?

Which Factors Contribute To Immigrants Working For Longer? 

There are a range of factors that may lead to immigrants working for longer than their Canadian counterparts, by choice and by necessity. While the reasons for working longer will vary between individuals, these are some of the reasons we predict immigrants may work for longer than 

Lower Canada Pension Plan Payments To Immigrants

The Canada Pension Plan does not purposefully ‘discriminate’ against immigrants. However, the amount that you receive from the Canada Pension Plan is based on how many years you contributed to the fund, and how much you contributed each year. This system favours Canadian-born workers because they are more likely to be in the workforce for a longer period than immigrant workers. 

As a result, it’s unlikely that immigrants will be eligible for the maximum pension amount, and it’s less likely they will be eligible to receive the average payout. 

With lower pension payments, it’s unsurprising that immigrants will need to work a little longer than their Canadian-born counterparts to afford retirement. 

Immigrants Have Less Time To Save For Retirement

It’s no secret that immigrating to another country can be expensive. While Canada is relatively affordable compared to other countries (like Australia) in terms of the application fees payable, immigrating comes with a host of costs. A short list of associated costs includes medical exams, health insurance for your first few months, language tests, time between jobs, flights, securing accommodation, and shipping your belongings. 

Since many newcomers spend a huge portion of the funds that they’ve saved in their earlier adulthood on immigrating, it’s not uncommon for them to arrive without having saved for retirement. They are often essentially starting over after arriving in Canada. 

Beyond this, newcomers to Canada tend to initially see lower wages than their Canadian-born counterparts. Or, they experience disruption or ‘a step back’ in their career that leads to them holding a lower wage for longer than they may have had they not chosen to immigrate to Canada. So, they may have less money to contribute for their first few years in Canada, compared to those in similar positions who have lived and worked in Canada for longer. 

All this to say – with less time to save for retirement, immigrants may need to compensate for this by working for a few years longer.