Locked In Retirement Accounts (LIRAs) were created to transfer vested pension funds that you take with you if you leave your employer prior to retirement, such as when you change jobs.
The commuted value of the pension is transferred to a locked-in plan and must remain locked-in to be available when you retire to provide a lifetime income.
Generally, accumulated savings in a Locked-in RRSP cannot be to transferred to a regular RRIF or withdrawn as a lump sum. They are transferred to a Life Income Fund, a Locked in Retirement Fund or a Life Annuity.
Pension Legislation
All the provinces and the federal government have different rules with locked-in accounts regarding minimum withdrawals and the age you can start to withdraw the money after transferring to a LIF. One difference from regular RRIFs is that there is a maximum amount that can be withdrawn annually so as not to deplete the account too soon.
Different provinces have different names for their plans.
- Locked-in Retirement Account/Locked-in RRSP
- Restricted Locked-in Savings Plan
- Life Income Fund
- Locked-in Retirement Income Fund (Newfoundland)
- Prescribed Retirement Income Fund (Saskatchewan and Manitoba)
- Restricted Life Income Fund
The legislation applies to the province where the pension was set up. So, if you worked in BC and your company’s Head Office is in Ontario, you likely are under Ontario legislation. Some people, such as government employees, may be under federal legislation. Don’t assume you know. Ask your former employer or consult your pension agreement for details.
Unlocking The Funds
One of the major problems with a locked-in account was that people did not have access to their money if they really needed it. Because of the subsequent pressure put on the governments, many provinces have now introduced rules to permit a little more flexibility.
Some provinces provide for a one-time unlocking of funds.
- Albertans over the age of 50 can unlock up to 50% when their funds are transferred from a LIRA to a LIF. This money can be transferred into an RRSP, RRIF or taken in cash.
- Manitobans have a similar option but must transfer the unlocked money to a PRIF
- Ontarians can unlock up to 50% within 60 days of transferring their money into a LIF.
- In New Brunswick, individuals can unlock up to three times the maximum annual withdrawal of a LIF up to a limit of 25% of the value of the LIF.
- Individuals with federal pensions can do the same as Albertans but must be age 55 or over.
This is a one-time opportunity. You can unlock less than 50% but you won’t be able to take the remainder at a later date.
The benefit to unlocking the funds is that you have more flexibility to withdraw the funds when you want them without being limited to the maximum amount. If the money is transferred to an RRSP there are no immediate tax consequences.
If you already have a LIF or LRIF and you live in Ontario you can also take advantage of this option if you wish. Decide fast though. The deadline to act is April 30, 2012 and then the opportunity will be lost.
Other Ways To Access
If you have a small balance in your LIRA you may be able to withdraw all the money. Most provinces allow this but may have different dollar amount and age restrictions. Make your request at your financial institution.
Likewise, you may be able to claim financial hardship. You may need the money for medical expenses or rent payments, for example, but be prepared to prove the need. However, not all provinces offer this option.
Taxes And Fees
Be aware of any fees that may be charged by your financial institution or the investments (such as some mutual funds) when withdrawing from your locked-in account. Also, income tax will be withheld at the time of withdrawal and you may have to pay additional tax when you prepare your tax return.
Keep in mind that withdrawing any money may affect your eligibility for government benefits.
In Conclusion
Consider your options when looking into withdrawing from your locked-in accounts. They are intended to provide you with retirement income for life and withdrawals could have a negative impact on your future.
This is an excellent article – thank you! I’m in Ontario and have an LIF/LRIF, but never really thought much about. It’s nice to know what my options are.
@Ellen: The changes to locked in plans were much needed.
When I worked for the bank some of my clients had paid into their company pension plans for years and then were “early retired”when they were in their 50′s. They were very much restricted by the maximum withdrawal amounts allowed at the time even though the commuted values at first glance seemed quite substantial.
They had financial problems when there were no other resources available to them – too young for government pension plans and having difficulty finding other work because of being deemed “too old.”
Do you know where we can get information about our locked in RRSP? Is there a government website that outlines the details? I believe ours is an Ontario plan as it was from Nortel. Thanks for any info you can give me.
@Marypat: First you should find out what you can from your pension documents you would have received when you left Nortel and then check with your financial institution.
If there’s no help there go to the Financial Services Commission of Ontario – http://www.fsco.gov.on.ca
Do you know where we can get information about our retirement plan in Quebec? Is there a government website or something else that outlines the details?
@Wanda: Info on the Quebec pension plan is found at http://www.rrq.gouv.gc.ca/en
Provincially regulated private pension plans for Quebec is found at Autorite des marches financiers – http://www.lautorite.qc.ca
If I had my LIF transferred directly to an RRSP in early 2012 and accordingly received an RRSP contribution slip for the 1st 60 days of 2012, can I claim all or part of the RRSP contribution against 2011 income, in spite of the fact, my T4 slip won’t be received until the 2012 tax year? I don’t have any RRSP room, but don’t think this matters for a direct transfer, and my 2011 is substantially higher than expected 2012 income.
@Bob: A contribution slip in the first 60 days of the year can be used for either the current year or the previous year. The amount will offset the T4 and won’t have any bearing on RRSP contribution room because it is a transfer.
To clarify the original question: The T4-LIF will not be received until 2013 (for the 2012 tax year). The RRSP contribution slip has been received in the 1st 60 days of 2012. Can I use the RRSP deduction against other 2011 income, a higher income year and then deal with paying the tax on the T4-LIF next year? OR do they HAVE to offet each other as a direct transfer? Thanks for your help!
@Bob: They do offset each other, but in my opinion I don’t believe they both have to be claimed the same year. As long as you realize that you will be taxed the following year.
If in doubt, call your taxation office (please let me know if I’m wrong).
Hi Boomer,
I am trying to unlock + cash-in the funds from my locked-in RRSP.
This RRSP originated from my company pension funds while I worked + resided in BC. I still work + reside in BC.
The company’s Canadian Head Office was (is) located in Toronto + they were (are) a worldwide organization.
I worked for the company from 1992-98 + when I left their employ, the pension funds were set up in a LIF account in Alberta.
On an aside – their current Market Value would qualify for unlocking under the federal option for ‘small balance unlocking’ (up to $25,050 for 2012) — if they were federally regulated. I am 58 years old.
When I spoke to my financial institution (here in BC) to arrange unlocking, their records did not indicate jurisdiction (federal/provincial). It was then that I contacted the original investment company (in Toronto) + discovered the LIF was set up in Alberta. They will be providing me with written confirmation of same.
Apparently, these funds were transferred over to my current financial instution (from the original investment company) in 2004.
After reading your article, I am a little more hopeful of my prospects to successfully unlock these funds, but ask now for a bit more clarification/direction, as follows:
My question:
Under which province’s legislation does unlocking my locked-in RRSP fall?
. BC (where I currently work + reside; and where I worked + resided at time pension set up)?
. Alberta (where the LIF was set up)?
. Or, Ontario (where our Canadian Head Office was + where I expect the pension was set up — although I will obtain confirmation of this)?
If possible, could you please respond with your thoughts/suggestions through my email?
Thank you for your assistance.
Helen
Hi I have a locked in rrsp and was wondering if I could access the funds.It originated as a union pension in Ontario and was turned over to a locked in rrsp. I now live in NL.How or can I access this money.
@Kevin Guy: Briefly, for Ontario plans:
– You need to be at least 55 years old,
-Total funds in ALL locked in accounts must be less than $20,040
OR within 60 days of transferring to a LIF you can withdraw up to 50%
OR life expectancy is 2 years or less
OR experiencing financial hardship such as low income, facing eviction, medical treatment expenses, etc.
For more information go to http://www.fsco.gov.on.ca
You need to complete the appropriate form and take it to the financial institution that is holding your LIRA.
some one know if there is a agency that can help me to unlock my rrsp?
I got my LIF in 2011 but my financial advisor didn’t unlock
50%, as we had discussed. She is no longer with my bank & I have a new advisor. He said there is nothing he can do about unlocking 50% of my funds. I’m very upset….is there anything I can do since my bank messed up.
PS: I live in Ontario
@Linda: I think your only recourse at this time is to contact your bank’s complaint department or ombudsman’s office. Their purpose is to try to resolve customer concerns or complaints. They can also refer you to additional help.
Check with your bank (or it’s web site) for the phone number or email address.
Good luck.
Hi I’m 27 yrs old. I transfered my military pension to a locked in rrsp when I left after about +3yrs. I reside in Alberta, is that $$ pretty much going to sit there until I am older or is there Any way to access a portion of this, say to pay off a line of credit? The total amount is less than $20,000. thanks
@mongo: I’m assuming that your military pension is federally regulated. Unfortunately for you the regulations are pretty strict and you can’t access your funds – regardless of amount- until you are at least 55 years old.
The only exception to unlocking a partial amount is claiming financial hardship, but the requirements for this are very stringent.
You can get information at http://www.fin.gc.ca
thanks for the reply
Hello. I am currently working and living in the Yukon since 2009. In 2011 I transferred my BC pension into an RRSP (locked in) at RBC as of September 2011, I had to terminate my position in BC so I could transfer my pension to my new home. RBC will not allow me to transfer any money into a Federal RRSP stating that it falls under BC Regs. But FIC states that because I was working in another province when I terminated employment that the locking – in regs do not apply to me, but instead the regs of the Yukon where I am now living and working…So who can assist me with this???FIC won’t help neither will BC Pension???
Please help…
@Gordon Kilpinen: Company pensions – and their subsequent locked in RRSPs are regulated by either provincial or federal legislation usually depending on where the head office of the company is located.
RBC is correct in that you can’t change this. You can however transfer your account to the Yukon for easier administration. It’s only when you start withdrawing the funds that you must abide by BC pension legislation no matter where you live.
Hi!
I have a locked-in RRSP. I was wondering if it is possible to transfer it to my husband. Whether it is a partial amount or all of it.
I thank you for your time and help =)
@Stephanie: RRSP’s are not transferrable – locked in or not. The only way it can go to your husband is on your death if he is the beneficiary.
My locked in RRSP is now with BMO. My husband does business with RBC. We live in Alberta. Thanks.
I will be leaving my employer shortly to move east. I have locked in pension funds that will need to be transferred. It is under Federal as I worked in banking. I am 54 this year. I may need money when I move to set up house, etc. Will I be able to do this before 55 or do I have to wait til after I turn 55, under Financial Hardship rules?
@Jean Night: Financial hardship rules are pretty strict and you need documented proof. Go to http://www.fin.gc.ca to see if the rules will apply to your circumstances.
Good luck.
I have a Lira account purchased in Alberta in my bank right now from a former plan. It is just under $49,000. I also have one just under 5,000 purchased in Ontario.
Can you please advise if there is any way to get access to this money?
I’m 49, 50 in August and we are on the verge of financial issues. We have two credit cards going into collection. We do make good money, but a events and bad choices have cost us dearly.
Can you please provide me with any advise you may have?
@Tazz: Go to http://www.finance.gov.ab.ca and download the Alberta Financial Hardship Application Form and read it carefully to see if you might qualify for a partial unlocking. Briefly, the usual situations are low income, eviction or foreclosure,or medical expenses.
I don’t know if you will be successful. Good Luck.
Hi B&E,
My financial advisor has notified me that there will be a $500 min annual charge for handling my lif & rrsp investments (all in bond funds). Do you know of any reputable institutions who will manage my money without additional fees? (ie: for a share of the interest on my capital)
Thanx
@IanJ: Most financial institutions will handle RRSPs free of charge if held in mutual funds (or a small fee if not their own funds). Discount brokerages will waive their fee (about $100 annually) if the total of all accounts is greater than $50,000 – $100,000.
Do you need your financial advisor to manage your accounts and provide ongoing advice and other services? If not, drop him and go to your own financial institution first to see if they can provide the service you need. Some advisors provide excellent service that is worth the fees they are paid but if that’s not what you require there’s no point in paying so much.
Hi there, I have a lira from the closure of John Deere Welland Works
in 2009. The amount is under 10,000. I have been living in
Saskatchewan for 3 years now. I have read in the legislation that
early this year there was a window that allowed you to withdraw a
portion of the funds. I stumbled upon this today so obviously too
late. I also read that the financial institution was required to
inform us of these changes, and after talking to several former
co-workers I’ve learned that they did not do this for any of us. Just
wondering if I was correct in what I read, and if there’s anything I
can do about it at all. I don’t need the money, have excellent income
and great company paid pension, but If I had the choice I would have
moved it to my daughters resp. Thanks for any advice….even if I’m up
the proverbial creek without a paddle.
@Garnet: Personally, I would never rely on my financial institution to advise me on any changes in legislation that would affect my holdings. I think, by law, they are only required to advise on changes to fees and terms and conditions to their own products.
I’m supposing your employer was in Ontario (?). Ontario allowed the unlocking of up to 50% of a LIF up to April 2012 so yes, you are too late for that. Otherwise, if you are older than 55 you can unlock a plan if less than $20,040 or $9,600 for all ages. Go to http://www.fsco.gov.on.ca for further and/or updated information and an application form. Be aware you will still be required to pay tax on unlocked funds.
Thanks for the quick reply….it would have been nice….but I guess I have something to look forward to for the next 23 years haha.
I do have another question; I am just getting started with investing and have an rrsp, resp, and tfsa. I would like to “play” around with stocks a little. Could you recommend some reading or books that would help someone who is very fresh and little to no knowledge? Thanks
@Garnet: Here is a list of good beginner investing books:
Wealthy Barber
Wealthy Barber Returns
Millionaire Teacher
The Millionaire Next Door
How Not to Move Back in With Your Parents
To find your investment style check out these websites:
http://www.canadiancouchpotato.com and http://www.dividendgrowth.ca
Good luck with your investing.
Hi, I have a lock-in RPP with great-west Life, in Ontario. I’ve
recently changed jobs so now I have my options with what I can do with my fund.
My question is, is there anyway to unlock any of this fund.
I am in a bit of debt so this would help greatly.
@chris: I would contact Great West Life directly. You may be able to take the cash depending on the amount and whether it has vested (usually 2 years). You will have to pay tax on the withdrawal.
Another option is to transfer your RPP to you new job and carry on, or transfer to a locked in RSP.
http://www.fsco.gov.ca can give you further information.
Our original investments thru our advisor was in segregated funds.
When my husband passed, it was at the very end of the lock-in.
I met with the advisor to transfer the investments to my name as I was sole beneficiary and he invested everything in segrated funds again!
Was this in my best interests? Also I have continued a RRIF which we had previously been getting for a couple of years from FEL and since my husband’s death I am now being charged a fee on each withdrawal from my RRIF.
Thank you for your advice and time.
@Diane: Ask your advisor for the reasons why he made this investment – make sure you understand how it benefits you. In my opinion you should definitely get a second opinion. Find a fee based financial planner who will take a look at how your portfolio is structured and give you some advice.
If you set up a RRIF withdrawal schedule – monthly, quarterly, annually, whatever works for you – there should be no fees for the minimum required amount. Some financial institutions will charge for withdrawals over the minimum limit, so if you need more, make a one time annual withdrawal to minimize the fees.
Any amounts over the minimum are subject to withholding tax which is claimed as tax paid on your income tax return. It is not a fee, so check to see if this is the case.
Shame on the locked in mutual funds in BC i am in serious financial distress but in BC i lose everything before i can withdraw a small amount from my money. what kind of system do we have when in will be homeless but hey that’s ok I’ll have money when I’m 55 big deal locked in mutual funds should be accessible in any province in Canada when there is financial distress wtf is going on with BC.
@Brent Petch: What people don’t seem to realize is that these funds were set aside by your employer to provide pension income when you retire. If it was still in the pension fund you wouldn’t have access to the money anyway until then. When you leave the company you are given the option to administer the funds yourself instead of leaving the money in the pension plan. This doesn’t mean you can access it whenever you like. It still has to perform it’s original function – pension income. That’s why it’s locked in.
I’m sorry that you are in financial distress. I hope you are able to find a solution.
Hi Boomer, i used to work for a union company in Alberta. Certain amount of my hourly wage was being accumulating in a pension plan managed by a company out of B.C. I was laid off after working with the union company after 4 years. The Pension management company informed me to either leave the funds with them and it’ll grow or take it out. so i took the funds out of the management company’s account and had to place the funds in to a locked-in RRSP in my bank. I am a Precious Metals investor i physically hold silver and gold bullion in my possession. I would like to purchase silver bullion with the Locked-in RRSP and physically hold the bullion my self. i was informed by my bank that i won’t be able to do that or buy certificates for silver. Is there any way i could purchase precious metals as an investment and hold it myself.
@M. KHAN: Physical gold, silver and precious metals that you have in your possession are not eligible investments for RRSPs. You can hold shares in the form of ETFs and mutual funds. (Keep in mind the higher MERs of mutual funds).
Example are:
Royal Canadian Mint (TSX -MNT)
SPDR Gold Trust (NYSE-GLD)
Central Fund Canada (TSX – CEF.A) is one fund that holds actual gold and silver in its vaults.
I have a LIRA account currently with RBC in the amount of $40,000. I want to move this into a questrade LIRA account and invest in safe ETF’s. However, I am not sure if I can rebalance within a LIRA account (ex. sell some stock ETFs and buy some bond ETFs). Would I be allowed to do this since apparently I cannot add or subract from this account? Given that I have decades before I turn 55, what would you recommend I do with this money? Mutual funds? ETF’s ? GIC’s?
@Ben: If you want to open a self-directed LIRA account you will be able to purchase and trade any eligible investments within the account. You just can’t add any more money to it.
When you open your account, make sure you have all your pension paperwork handy as you have to give info on which province your ex-pension is legislated under.
Which investments you hold in the plan depends on your overall financial situation, you tolerance for risk, etc.
What is your investment style?
In general, unless you have a very low tolerance for risk, I would not invest totally in GICs as the low interest rate will hamper growth.
You could choose 4 or 5 diversified ETFs and hold them indefinitely, rebalancing periodically. Or you could purchase strong dividend paying stocks and reinvest the dividends.
One point to keep in mind is whether the discount brokerage charges an annual RRSP fee. Typically, in most cases there is a $100 fee for accounts below $50,000.
LIRA withdrawal
My sister received approval to withdraw the max yearly allowed of $25,050 (for financial hardship reasons) from funds she has in a LIRA account.
In order to minimize withholding taxes she asked the bank to deposit the money to her account in 5 monthly payments of $5,000 which would cost her 10% in withholding taxes.
The bank refused saying they could only do a one time withdrawal which would cost her 30% in withholding taxes.
Is the bank making this up or are they following government guidelines? Is there anything at all my sister can do to minimize withholding taxes short of reducing the LIRA withdrawal to $15,000 which is the point at which the bank increases withholding taxes from 10 to 30%?
@Christian: Normally you can withdraw RRSP funds in increments of $5000 to reduce the withholding tax. In your sister’s case I would suspect that for the special reason of financial hardship, only one withdrawal is allowed.
Financial institutions must follow government guidelines and they can be quite strict.
Did she make the withdrawal in 2012? If so, she will likely receive all the tax withheld when she files her income tax (do it soon). Otherwise, unfortunately, she’ll have to wait until next year to be reimbursed.
Thanks Boomer
My sister spoke with someone over at the government offices (the people who approved the LIRA withdrawal).
They indicated that she could either withdraw the $25,050 in one lump sum and take the 30% withholding tax hit OR opt for 12 equal monthly withdrawals which would reduce withholding tax to 10% on the first $15,000.
Option #2 while attractive from the tax rate perspective is not acceptable because my sister needs to withdraw the amount in 5 monthly installments of $5,000 (NOT 12).
Looks like she’s been ‘snookered’ as are most people when it comes to cashing RRSP’s and, in this case LIRA, funds and having to cough up 30% in withholding taxes and then wait a year for the tax refund.
This is a game the government’s been playing for years. I myself was hit hard (RRSPs) over 20 years ago and my father was hit in the 1960′s and 1970′s !
Nothing new or surprising in the end. It’s easier for the government to levy 30% from someone who can’t afford to argue and fight back than from someone who can!
Hi Boomer, I have a Locked In RRSP (LIRA I think) from working with a major airline for over 16 years – which was federally regulated. I left there four years ago and was repeatedly told I could not access these funds in any way except being of proper age or financial hardship. However, I’ve been looking into this more and some financial specialists say that it can be access for specific investment purposes. I do have my financial investor currently managing the funds but I still cannot access them. Is there any way to access these funds towards purchasing a home or even an investment property? If so who could I contact because no one seems to be aware, yet others say it is possible.
Help please.
@Phil: As mentioned, you can’t access locked in funds earlier unless the amount is small or you are suffering from financial hardship – the rules depend on the provincial (or federal) legislation for your plan.
You can however purchase the same investment vehicles in a LIRA as you can with a regular RRSP. This can include holding a mortgage on your residence if you have enough funds available. There are restrictions and costs involved and you need to open a self directed account. Ask your financial institution if they offer it. Research it carefully to see if it will work for you.
Check out http://www.boomerandecho.com/pros-and-cons-of-holding-your-mortgage-in-your-rrsp/
There’s less flexibility once you have to convert to a LRIF. By the time you celebrate your 80th birthday, you must purchase a life annuity from the remaining funds.
Hi Boomer. I’m confused about something I read on a govt site. If I was to w/d locked in rsp’s due to Financial Hardship, what is the tax calculation, assuming 30%. Assume I w/d $20,000. Is the tax taken FROM the $20,000 therefore netting about $14,000 or is it taken from my rsp in ADDITION. In other words $20,000 to me and $6000 wd on top of that? Thanks for your help!
Tony
@Tony: The tax comes off your withdrawal amount. So, if you need $20,000 you would have to withdraw approximately $28,600.
Boomer,
I have a locked in rrsp 85000.00 with cibc was in contact with an investment company in Montreal which said the could cash it in for 50% of face value but i had to transfer it to National bank,Ive done this but im having trouble making contact with them again my friend did this last year and got about 20000.00 from them do you know of companies that offer this
@liam: Sorry, I know of no reputable companies that will cash in locked in RRSPs except for the situations I’ve mentioned above. This money was originally set up to be a pension plan on retirement and the government rules are very strict to keep to the original intention.
laid off from a telecom organization in 2011 and my pension was transferred to a locked in rsp, however due to financial situation need to be able to take some funding out… is it possible? i live in ontario and under 55 years of age.
@Ryan: Look at your documentation to see if the pension regulations are federal or provincial (Ontario). Check the appropriate website (mentioned above) to see if you qualify for any withdrawals.
Good luck.
I took an early retirement at age 57 and was in a contributory defined benefit pension plan since 1980. I am in Ontario and the pension is also registered in Ontario. I have build up a good sum in Pension and 50% in what they called it cummulated fund. I have been given a choice to transfer to annuity at 2.3% for 1st 10 yrs and 3.6% for next which I think is too conservative. To transfer out to other opportunities, I have to take the cummulated funds as an income and pay higer percentage of taxes on it, while the locked in pension funds will be allowed to transfer intact. Are there options available to trasnfer out while keeping the tax rates at minimum….Thanks…Dee
@Dee: I’m not sure what you mean by “cummulated fund” but generally your options at early retirement are as follows:
- You can remain in then company plan and start receiving your monthly pension income immediately, or you may be able to wait until 60 or 65 to take the income (sometimes not)
- You can transfer the accumulated company pension plan funds to a locked-in plan (LIRA) or an annuity.
Funds in a LIRA must be converted to a life income funds (LIF) or an annuity by December 31 of the year you turn 71.
If you choose the LIF you a subject to minimum and maximum annual withdrawals. By age 80 you much convert the remaining funds into an annuity.
In any event any money you receive as payment or withdrawal (whether LIRA, LIF or pension or annuity) is taxable at your marginal tax rate.
Dee if I’m missing something here about your situation, please clarify.
Hi
Last year in November I left my job and transferred my RPP out to an RRSP with TD Waterhouse. I think I messed and and didn’t transfer it to a locked-in RRSP. TD Waterhouse still accepted the transfer from the pension company. I only learned about having to transfer to a locked-in RRSP account today.
What course of action should I take to rectify this situation? I’m in BC.
Thanks