– When you leave an employer where you had a pension plan, the funds in the
plan are transferred to a Locked-In Retirement Account. At times they may
also be transferred into a locked-in RRSP. Essentially, these are a special
type of registered retirement fund designed to work like a pension plan
until you retire. In other words, the plan can hold stocks, bonds, mutual
funds, exchange-traded funds, and generally all the qualified investments
that can go into a regular RRSP or pension plan. The difference is that you
can neither contribute more money nor withdraw funds from the plan. The
principle is that these are your retirement funds, and they’ll be locked in
until you actually retire, at which point you must choose from a number of
LIRAs are governed by provincial regulations, which are pretty strict about
the conditions for withdrawals. As the name suggests, generally you may not
withdraw or transfer any money from a LIRA before maturity, unless it’s to
transfer into another LIRA or a Registered Pension Plan with a new
There are certain very limited conditions under which you may access (or
unlock) LIRAs, for example, in cases of financial hardship (including low
income as set out in provincial regulations), a balance in all your LIRAs
below a level specified by provincial rules, shortened life expectancy.
Rules and regulations vary by province, so it’s prudent to check with your
advisor if any of these apply in the province in which your LIRA is
In most provinces, you won’t be able to choose a maturity option for your
LIRA before you turn 55. In any case, by the end of the year in which you
turn 71, at the latest, you may roll over the funds in your LIRA into one
or a combination of the following options:
* An immediate or deferred life annuity. An annuity is a
contract offered by insurance companies that provides a guaranteed income
stream for the duration of the annuity. Rates, payouts, and durations vary
widely, and the choices and alternatives can be bewildering.
* A Life Income Fund or Locked-in Retirement Income Fund.
These are similar to a Registered Retirement Income Fund, in that you can
direct the investments in your account. Withdrawals are subject to annual
minimums and maximums as set out by the province of registration.
Retirement income planning can get complicated, especially for current or
former members of pension plans who have significant value to their
pensions. Choosing the right maturity option for lifetime retirement income
can be like navigating a maze of rules and regulations peppered by all
sorts of hidden investment traps and tax pitfalls. Your best bet is to
consult a qualified independent financial planner (that is, one who is not
tied to selling a particular insurance or investment product).
Robyn Thompson, CFP, CIM, FCSI, is the founder of
Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management
for high net worth individuals and families. Contact her directly by
phone at 416-828-7159, or by email at
for a confidential planning consultation.
Notes and Disclaimer
© 2018 by the Fund Library. All rights reserved. Reproduction in whole or
in part by any means without prior written permission is prohibited.
The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned are illustrative only and carry risk of
loss. No guarantee of investment performance is made or implied. It is not
intended to provide specific personalized advice including, without
limitation, investment, financial, legal, accounting or tax advice. Please
contact the author to discuss your particular circumstances.