What is a Locked-In Retirement Account (LIRA)?
If you have a pension plan through your employer, and you leave the company, or if you are laid off, your pension will be transferred into a Locked-In Retirement Account (LIRA). Locked-In Retirement Accounts are sometimes referred to as the more appropriate name of Locked-In Retirement Savings Plans (LRSP).
What are locked-in accounts?
Locked in accounts simply refer to money that originates from a pension plan.
There are two kinds of pension plans – defined benefit plans and defined contribution plans. If you are fortunate enough to work with a company that offers either of these, your money remains in the pension as long as you are employed by the company.
But when you leave, you usually given the choice to transfer the money to your own retirement account with your preferred financial institution.
Many people assume you can just move the pension money into their personal RRSP, but that can only happen if it is a relatively small amount of money. A regular RRSP account is simply not set up to accommodate the many rules governing a locked-in retirement account.
What is a LIRA?
A LIRA is a Locked-In Retirement Account and is designed to accumulate and manage money that’s been moved from a company pension plan.
It’s important to understand that although a locked-in plan has similarities to an RRSP, it also has several restrictions.
It’s important to understand the limitations of a LIRA account if you want to avoid running afoul of regulation and make the best possible decisions with your retirement account.
The Main Purpose Of A LIRA
Until you reach a point where you need to draw income from your pension funds, usually after retirement, a LIRA allows you to personally manage the growth of your former company pension.
Think of a LIRA as just another type of registered account, much like an RRSP, but with 2 main differences:
- LIRAs hold pension money, whereas RRSPs comprise funds that you have contributed on your own. Because Locked-In Retirement Accounts hold pension money, you cannot just contribute money to a LIRA. The money can only be transferred in from a pension.
- With RRSPs, you can withdraw funds whenever you want, and there are no restrictions on the amount of money you can take out. Although it may not be ideal from a taxation standpoint, you can cash out all of your RRSPs at once. With LIRAs, there are restrictions placed on withdrawals. Firstly, you cannot make lump sum withdrawals from a Locked-in Retirement Account, hence the term ‘Locked-in’. If you want income, you must move the money into a LIF or Life Annuity, which I will discuss later.
Aside from these two things, RRSPs and LIRAs are very similar.
How a LIRA works
Once a plan is converted to a Locked-In Retirement Account, you cannot make further contributions to it. You are not allowed to make withdrawals from the account.
Unlike a “regular” RRSP, which allows for withdrawals, you cannot take money out of a locked-in account. Instead, you are required to convert your LIRA into another type of account that can provide you with the income you need in retirement.
LIRA Early Withdrawal Exceptions
There are some exceptions that may allow you to access the money in your Locked-In Retirement Account prior to retirement.
While the rules vary from province to province, generally they include the following:
- reduced life expectancy
- one-time unlocking of 50% of LIRA to a regular RRSP
- unemployment or low income
- unlocking a small account balance
- people who become non-residents of Canada.
It’s important to note, the rules governing your LIRA account aren’t set based on which province you reside in, rather the province where your company pension plan was registered.
Provincially Legislated Pension Plans
For example, you may reside in Manitoba, but if the pension plan of the company you worked for was registered in Alberta, the rules governing your LIRA account will be aligned with the province of Alberta, not Manitoba.
As such, it’s very important to make sure your financial institution is made aware of the proper provincial legislation for your specific LIRA at the time of account opening, to ensure the LIRA is being managed according to the proper guidelines.
Federally Legislated Pension Plans
Some company pension plans are legislated federally, which means that your Locked-In Retirement Account will follow the guidelines governing federal pension plans, and not any specific province.
Federally legislated plans are typically transferred into a locked-in RRSP, which is just another version of a LIRA.
Under federal guidelines, many of the conditional unlocking scenarios mentioned above also apply. You can use this Tax Tips resource to get more information on the specific qualifications to early withdraw from a LIRA or a Locked-In RRSP.
What Happens To A LIRA When You Retire?
Once you reach retirement, or at the latest, by December 31st of the year you turn 71, you are required to convert your LIRA to either a life annuity, Life Income Fund (LIF), Locked-In Retirement Income Fund (LRIF) or a Prescribed Registered Retirement Income Fund (PRIF).
Sounds complicated, doesn’t it.
Let’s take a closer look at these options:
A life annuity is purchased from an insurance company, and it provides regular periodic payments for life. The payment you receive depends on your current age, how much you use to purchase the annuity, current interest rates, and other factors. With a life annuity, you don’t have control over how the funds are invested, but you are guaranteed a specific payment on a regular basis.
With a LIF, or Life Income Fund, you control the investments in your account, but your withdrawals are subject to minimum and maximum annual amounts. The withdrawal limits are put in place to ensure that the pension funds are used as they were designed, to provide an income for the remainder of your life.
Available only in Manitoba and Saskatchewan. There are no minimum or maximum withdrawal requirements with this option. It is the most flexible of choices when it comes to your locked-in retirement account. However, realize that you don’t get a pension tax credit for the income in a PRIF until you are 65. So, if you retire early, you don’t get that advantage.
These were only available in Ontario. While you may still hold an LRIF account, the rules are now harmonized with the new LIF.
What is a LIF?
Eventually, you reach the point where you shift from the accumulation phase in life to the income phase. And when you do, a Life Income Fund (LIF) is one of the vehicles designed to provide you with a regular stream of income.
Put simply, a LIF is used to convert LIRA money to income, just like a RRIF is used to convert RRSPs to income. And as a LIRA has many similarities to an RRSP, the LIF product has much in common with the RRIF.
LIF vs. RRIF
Here’s a look at some of the similarities of LIFs and RRIFs:
- A Life Income Fund is designed to create regular income, as is a RRIF. If we used the bucket analogy, the LIF and the RRIF are just different buckets with holes in them.
- In both cases, there is a minimum income that must come out of the plan. The minimum income is determined based upon the age of the annuitant, and the balance of the LIF/RRIF account.
- Income is only taxed when you receive income. As with an RRSP, both LIFs and RRIFs are fully tax sheltered.
- In both the RRIF and LIF, you can invest in many different types of investments, like GICs, bonds, mutual funds, stocks, etc. I’ll touch on investment options in more detail further down.
With so many similarities, you may be wondering, what’s the difference?
Well, the biggest difference between a LIF and a RRIF is that the LIF not only has a minimum income but also a maximum income that prevents you from spending the money too quickly.
In other words, you cannot withdraw the full balance of a LIF account, maximum withdrawals are capped annually to ensure you are provided with an income for life.
Here is a helpful table of LIF minimum and maximum withdrawal percentages for 2018.
Investment Options For Your LIRA/LIF
As with any other government registered investment, such as an RRSP or TFSA, there are many options when it comes to investing the funds in your LIRA/LIF account.
If you are in the process of transferring a company pension into a LIRA, check with your preferred financial institution to find out what types of LIRA accounts are available.
Chances are, they will have a full range of investment options, from safety products such as GIC’s, to equity-based investments, such as mutual funds or individual stocks.
LIRA options for self-directed investors
If you are a self-directed investor, and prefer to make your own investment decisions, most online brokerages will enable you to open a LIRA account.
This way, you have access to a seemingly unlimited number of investment options, including ETFs and individual stocks.
In fact, Questrade, which is our top-rated online broker in 2018, offers clients a no-fee LIRA or Locked-In RRSP account, which is something most companies charge a hefty annual fee for.
In addition to having no annual fee on registered accounts, Questrade leads the competition by offering no-fee trading on a broad range of ETFs.
If you’re interested in learning more about self-directed investing, you can check out my full review of Canada’s leading online brokers, or head directly to Questrade using MapleMoney’s exclusive link, which will get you $50 in free trades.
Protecting your retirement
While a Locked-In Retirement Account has many restrictions, it’s designed to protect the pensions of those who change careers a few times throughout their life.
In this day and age, that’s something that is becoming more and more common, in fact, it’s now the norm. Thankfully, the LIRA, or Locked-In RRSP, is built to ensure you get the money you are entitled to.
I’m looking at leaving my current employer where I have been paying into a pension. As a result, to transfer my pension away from the corporate pension I must convert to a locked in RRSP or LIRA or pay tax on bringing the money out. The bad thing about converting to a LIRA is that you are not eligible to use those funds to participate in the Home Buyers Plan. What a shame!
I have a locked in retirement account, I need to access the funds. I am not and have never been a Canadian citizen. I used to be employed in Canada which is my only ties to this country. I am only 32yrs old, I am in the worst financial state I have ever experienced. Can someone out there help me?
Ron, please try this link on how to unlock your LIRA account due to financial hardship. https://www.fsco.gov.on.ca/en/pensions/Forms/Pages/default.aspx#unlocking
If my spouse dies and has a LIRA how are the funds distributed? Do I get a contribution receipt if I ask the estate to be rolled over to me (as the beneficicalry)?
I am about to put my pension in a LIRA. My plan is to have a financial analyst to manage part of it, and myself to manage the rest. Question is can I split the LIRA into multiple LIRA accounts under different management ? Thanks.
Just buy different funds,
Open an account at any investment house or bank etc.
And you can buy a greater spec of funds.
Ron – there is some hope – see http://www.taxtips.ca/pensions/rpp/unlockingrpp.htm
since you are not a resident and the amount may be lower than threshhold.
I am 54 years of age and need to use some of my money. I have only 28,000 in an LIRA and how caqn I access some of this money I need at least half of it. Can you tell what I can do to make this happen. Thankyou Patricia
lira is one big rip. MY money has been in the hands of 3 different investors in 16 years .all have done nothing but take out fees and watch it shrink .started at 54,000. now down to 39,000.retirement fund ??? right.. for the investment managers , certainly not for me. Still they say hang in there for the long haul. what a joke..
Why do you pay tax on my Lira funds,tax was paid before funds went in $36,000.00 Lira now $41,000.00. ,$5,000.00 increase , tax should be for increase only
Why don’t you open a LIRA account with one of the banks or discount traders? Buy shares of a blue chip company, or index funds with low MERS (you don’t want greedy fund managers who wine and dine, and play golf, or investment advisors with their hands in your wallet).
I recently did this and within a month I my picks are up 10%. Had I stayed with the stupid funds I wound have been down 20%. Take charge of your own!
Blue chip companies to look at (Cdn Banks, Telecom, Timmies etc. look at the financials before investing. This is not meant to be a recommendation of any sort). Talk to a professional you trust – before you invest.
Can I ask u something?
Which bank did u go with to be able to self-invest in blue chip companies?
Never mind banks… Questrade. Free to buy index/etf. $4.95-9.95 to trade equities/blue chip stocks.
I started with a 48000 LIRA and now at 423000. RBC direct investing over 5 years. Military lo locked it in until in 55…13 years to go. My question…. What happens when I’m 55?
Do you. Know if there are any restrictions on the the type of shares that can be purchased within a LIRA
I presently have a portion of my pension in a Lira. At retirement will I be able to access all of it or is it a fund that pays out interest monthly to live on? If the latter is that case then when I pass is the balance available to my spouse or children.
I am in hardship. I need help to complete a LIRA to 8unlock my RRSPs. Desperate for some help. Anybody from Revenue Canada
I am trying to open a LIRA while living in NZ but am having no luck as everyone I speak to tells me I need to be in Canada to do so. I have a Canadian government pension that I want to take a Transfer Value on but I need to open this account first before I can. Any suggestions? Anyone know an instituation that will do this for me while I am in NZ?
You will have to convert from an lira to an lif through the financial institution ie. cibc bank in canada in order to remove funds at 50% and then commence drawning the other funds in the lif on a monthly basis in Alberta, Canada the age to commence is 50 years of age.LIRA is a Lock in retirement fund and LIF is life income fund see bulletin 34 alberta finance .ca sincerely scp canada
Hi Tim, I have just moved back to NZ and just embarking on this process, would very much appreciate any clarity or guidance you could provide – I don’t even know where to start.
I have a husband and wife that have been living and working in the USA fo the last seven years. They will become US citizens in a few months. They both have LIRA and RRSP accounts in Canada (the result of a company that went out of business) that are held at Edward Jones Canada. They would like to bring the funds to the USA and merge into their USA Traditional IRA accounts here. How can we accomplish this? They are 54 and 53 years old.
Good day Tom,
Please help me with my question about the LIRA, I found this add on a news paper and its related about the locked in retirement pension account. I have to fax all my papers to him and 60% will be mine in cash within 3 months. can you please check this number 1- 888-993-8841, before i send my document for my locked in retirement account.. Oh, by the way I invested it to Mutual fund from TD bank.
Please check it for me, if this guy is legit, his from toronto.
Your help is very much appreciated.
Rock, did you find out anything? Is this company ligit?
NOT legit!! It’s a Scam! Kevyn is Right!
Any ideas of how to move this couple’s funds to a 401k or Traditional IRA in the USA?
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I called the 1 888 993 8841 number, and the guy straight up told me that it was not allowed in Canada to borrow from your pension. They told me they had to be discreet, for that reason, and that’s why they don’t have a proper business number or a website.
This is a scam. I have a paper from a few months back, with the exact same ad, and a different number.
Thanks man! I got this document from those guys! Just in time from your comment here! Yeah! This is a SCAM???? Bigtime???? I wanted you guys to see what’s in it! I wanted ALL to see the word they use, it’s a no brainer!
I can leave the pension with my last emplyer and they have defined what the payment at 65 would be. Alternativly I can transfer to one of these accounts and take the risk with the markets. There are pros and cons to each. The company is a blue chip and the pensin value is high.
What a great post on a type of savings account that is so rarely talked about. It’s always great for people to know about all the options they have available so they can make an informed decision and truly choose the one that’s best for them. Thanks for taking the time!
I am currently enroll with company pension plan. It is Defined Contributipn Pension Plan. I called my plan provided and said, if you are chaning the company then you can transfer your money to LIRA or CASH out or transfer it to RRSP account?
Is it true?
Based on your infomraiton, it looks like i cannot transfer it to RRSP?
If i have above options to transfer money, what should i have to choose? LIRA or RRSP???
If the value of a LIRA is less than 40K, it can be unlocked and transferred into an RRSP. I’ve just done it.
IS this true? Can I apply the LIRA amount seeing as it under 20K to my HBP that I removed last year?
Rob, please tell me this is true!! I’m at 39.6k now. Just left company. I need this cash to withdraw! Please help!!! Thanks so much!
Those basterds burned me for 25k what do i do i cant get ahold of any of them ..
Any body please help what should i do ?
I need to unlock some money from my LRA, I have unlocked some earlier this year, however I am still not well and need this money desperately. Is there anyway I can do this? I am 52 years old and university educated and highly employable.
I received short term benefits but they are over 15 weeks and am no longer receiving anything. I plan to go back to work as soon as I am able to.
HI janice..how are you?..:) i,m 53 and CANNOT do anything with my LIRA.(33,000) it was earned in ontario,now i live in BC and need to clear 2 old debt,,How did you do it?
You made certain good points there. I did a search on the topic
and found a good number of folks will have the same opinion with your blog.
Sweet blog! I found it while surfing around on Yahoo News.
Do you have any tips on how to get listed in Yahoo News?
I’ve been trying for a while but I never seem to get there!
i living in bc any new LAW take out some $ hardship
my pension fund $ 19000 dollars in td bank
can fee for locked-in retirement account be deducted or are they treated the same as RRSP fees paid?
My brother in-law has been out of Canada for many years now (+-10years), after working there for 6 years. Obviously the only way to move and withdraw his Registered Pension Plan is via a LIRA and only under special circumstances, which he fulfils.
But the the bank branch says the only way to open a LIRA account is if one is a Canadian Citizen or permanent resident may open a LIRA or any other type of Retirement account.
Is this true. If so how can he open a LIRA account?
Can someone tell me if I can transfer a LIRA into a registered pension plan?
I have had a LIRA with Royal Bank for 25 years. It is a self-directed trading account which has been satisfactory. Now I am 65 I would like to unlock it. It thought this would be straight forward. Someone from the Bank told me I can’t unlock it until I am 71. I fear I might not live that long and would like to use some of it now. The amount is about $45,000. I would be happy with a LIF and just withdrawing some of it on a yearly basis. The bank seems to think I can’t do this unless I prove special need or get a doctor to say I have a lowered life expectancy. I am pretty sure any doctor would say I have a lowered life expectancy as I have many serious health problems and had to retire 10 years ago due to health problems. I haven’t gone the route of claiming lowered life expectancy because I thought I could just access it at 65 and was willing to wait until then.
I feel very confused about it all. How long am I supposed to live? Is this based on some statistic? I really don’t think anyone knows how long we will live once we reach old age. I know many people younger than myself who just dropped dead without warning. Well I feel I have no time to lose at 65, and am not confident of reaching 71. Most of the questions I read online are about people wanting to unlock their money before they are 65, and it seems there is no instruction about how to do it after 65. Is the Bank just been stupid? I know they have reduced their workforce and I have the horrible feeling that perhaps no one there knows about this.
None of these questions are challenging for a decent advisor. Yes, LIRA and LIF accounts can sometimes be unlocked. No, they don’t need to be in place until 71. That’s actually the LATEST you can start taking payments, not the minimum.
Kelly, send me an email and I’ll help you out, gratis. This should be as basic as a withdrawal for your advisor. If they can’t handle this FIRE THEM. You are allowed to move your money to someone who knows what they’re doing and cares about you. Stop paying (around 2-3% per year) your money if they’re not doing your job!
Hello. Iam looking to move my pension out of a group pension to be able to access the amount of 27400 for hardship I have no expected income for the next 12 months I have been told I have to move it into a lira Will I be able to access this later on before 65 and May I also be able to manage it myself. Since I am not sure how this works I would appreciate some info regarding. Iam only 53. Thank you very much for any info you could provide Robert Knight
“Many people assume you can move pension money into a RRSP but that can only happen if it is a relatively small amount of money.”
Anyone know what this small amount is?? I was in a trade union and have a small pension, I would like to transfer this into my RRSP. I’m nowhere near 55 years old.
Good day everyone.
I’m vested in a Pension fund since I’ve been working for the company for more than 2 years and wish to leave but need to know what I should transfer my locked-in 50,000$ or so to be able to invest in the stock market.
Any help/advice would be appreciated.
I am Canadian.
My spouse and I are separating and she has an Ontario pension plan through her work. We are both Canadian, Ontario residents. This pension will be split in the division of family property as she cannot buy out my eligible portion. I do not have a pension. She is still working and has no intention of retiring when her pension can be drawn without penalty. I am considering retirement and am confused if I can access the ‘funds’ I will receive in settlement and the restrictions. I am approaching 63 if age is of any consideration. Any advice or knowledge is appreciated.
My husband and I would like to use his LIRA for a downpayment on a house. I have found the perfect house that would be suitable to his needs as he can not work any longer because of his illness.
Can we do this.
I just transferred my pension to a RBC bank LIRA, and they told me I could NOT use it for a downpayment on a house. Disappointing.
Also, I just realized that I consented to conservative investing and wondered if i made a mistake in doing so. I would hate that this decision comes back to bite me in losses over time due to “fee Management” as I read on here. Should I be concerned?
I moved from a company where I had a pension. I have been told i get a portion of my pension as a LIRA and the remaining amount will be paid out in cash. If the cash portion is directed straight into my current RRSP would i still have to pay the tax (30%)? I dont need the money and so do not want to have to pay taxes on it. I just want it to go go straight into my RRSP investment?
Thanks for the informative article. I now have a LIRA being managed by an investment advisor but would like to start self-managing it moving forward. Once I begin self-managing, what can I invest the money in? I’m looking to put some of it in online crowdsourcing/startup investments – will this be possible or do I have to stick to investment in publicly-traded companies/saving account/etc? Thanks!
Hi, is there any answer to the earlier question about transferring LIRA funds to a US 401k account? I am in the US but have a Canadian lira and rrsps I would live to transfer, hopefully without getting a tax beating. Thoughts or any suggestions who in Canada can help me with this.
Hi so I am in need of my locked in lira but I have already taken some out for this I am financial crisis I have a small amount of money left I was wondering if their us another way to take it out as I’m out of job.
I am drawing money out of LIRA and am curious if I can stop it.
Thanks for clarifying the various options available. I particularly liked the part dealing with the relationship between LIRAs and RRSPs.
A warning to those living in provinces that allow 50% unlocking of your LIRA when you convert to a LIF (so you can draw it down faster -without maximums on the unlocked portion – to minimize OAS clawbacks later): if you’re planning to retire in BC, BC doesn’t have the 50% unlocking provision. You must demonstrate financial hardship of meet other requirements to qualify for unlocking.
Hi all. I’ve since learned that LIRA rules are based on where the LIRA was originally registered (i.e. where you were employed), not where you live when you decide to convert it to a LIF. So I can still unlock 50% of my ‘Alberta’ LIRA even after I move to BC.
I am transferring funds from a company pension to a LIRA in January. I have made arrangements with TD Canada Trust. However my father told me that I should “shop” around for different institutions to hold my LIRA.
Do different banks offer better rates of return?
There was a comment by someone about self-directed/self managed LIRA……how does that work?
I have a LIRA. I have it through Ed Jones. The fees are killing. I’m 56, can I self direct my LIRA, by transferring it to my local bank?
My brother passed away and left me as beneficial for his payout pension plan .at the time he was divorced and we had it locked in a lira for 5 years at a bank. .1 year ago we switched it to a credit union with me still has beneficial. But he got remarried. And now the wife is going after the money and credit union will not payout until it’s goes to court .and the judge decides.who do you think has a right
I have $25,000 sitting in a LIRA account. The employer I worked for went out of business 9 years ago. Am I able to have this money transferred to another financial institution and reinvest it into another/different RRSP plan?
Hello, I have a bunch of money in a LIRA thru Sun Life, right now its invested in mostly mutual funds I think. I want to move it to another platform so I can manage it on my own. Is this possible or does my money have to stay with Sun Life?
You can invest your LIRA in stocks, bonds, mutual funds etc. Tell sunlife you are moving your LIRA to another institution. I have my LIRA at Quest Trade but choose any bank or institution you want.
I terminated my employment and now must decide what to do with my LAPP pension. From my resarch I believe leaving it in the pension fund is the best option. Moving it into a LIRA, the LIRA must double in value just to recieve the same amount annually at retirement.
EG. 130k pension (18 years of service) will pay me 14k/year at retirement.
130k in a LIRA must double in value in the stock market to then at age 65 purchace either a 260k life anuity or have 260k in a LIF. Both will pay a maximum 14k/year at age 65 per year.
What is the point of doubling the value in the LIRA if I still only get the same payout amount per year? I still have 20 years to go till I’m 65.
I am 65 and wonder how much 86k in fixed annuity can get us nowadays.
I am soon turning 61, I have about 160k invested with my local bank Cibc which of late has been performing nicely I need to start drawing from this at 65, what are my best options ???
I have a LIRA account with Olympia Trust in Calgary (Walton investment), I converted the LIRA to 50% RRSP and 50% LIF account recently. Can I withdraw any amounts. I am 67 years old living on CPP&OAS only. Olympia says they LIRA was locked-in, so I converted it and still unable to receive any money. Any advise.
My Step-Dad, who is Canadian, married my mother and they live in the US. He is 62 now. He still has Canadian Citizenship (I hope I’m saying that right).
Several months ago he was tracked down by a company he worked for back in 1992, they told him he has an LIRA, and since the company was in the midst of being dissolved, he had to make a decision on what to do with it. We have had very little luck on either side of the border on what the correct and best course of action is! Time is ticking away, if you have any advice, I would appreciate it!!