Transferring employer pensions to LIRAs, LIFs and RRSPs

A. With the Nice Resignation looming, many employees who resolve to maneuver on from the roles they’re in at the moment can be transferring pensions from their former employers into locked-in retirement accounts (LIRAs), or into locked-in Registered Retirement Financial savings Plans (RRSPs). 

There are guidelines to bear in mind round these transfers. Outlined contribution (DC) pension plans may be transferred from a plan supplier to a LIRA. Outlined profit (DB) pension plan members who take a lump-sum commuted worth cost from their pension can switch a few of their pension right into a LIRA, topic to switch limits. 

A LIRA is like an RRSP, however topic to age and withdrawal restrictions. An everyday RRSP may be absolutely withdrawn by an account holder at any time. A LIRA has limitations, since it’s funded by a registered pension plan that’s meant to final for all times. 

Withdrawals usually can’t be taken immediately from a LIRA account. A LIRA may be transformed to a life earnings fund (LIF) or comparable account to start withdrawals, or it may be used to buy a life annuity from an insurance coverage firm that makes ongoing funds.

Locked-in plans from federally regulated pensions and pensions which might be regulated in British Columbia, Alberta, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, and Newfoundland & Labrador may be transferred to a LIF. In Saskatchewan, prescribed RRIFs are used for locked-in pension funds. Locked-in plans don’t exist in Prince Edward Island. 

Withdrawals earlier than a sure age is probably not permitted, relying on the province; however some permit withdrawals in extraordinary conditions. Examples embrace shortened life expectancy, monetary hardship, non-residency (when you transfer away from that jurisdiction), and when you maintain a small steadiness within the account. 

In your case, Andrew, it feels like you could be making an attempt to reap the benefits of a partial unlocking of your LIRA to switch among the steadiness to an RRSP. As much as 50% of a federally regulated LIF may be unlocked and transferred to an RRSP for these aged 55 and older. Alberta, Manitoba, and Ontario pensions additionally permit a LIF to be unlocked to switch as much as 50% to a non-locked-in retirement account after age 50 in Alberta, and age 55 in Manitoba and Ontario. Beginning on October 1, 2021, account holders aged 65 and older can absolutely unlock their Manitoba locked-in accounts. As much as 100% of a Saskatchewan pension may be transferred right into a prescribed RRIF as early as age 55, the early retirement age specified within the plan the place the cash originated. 

Usually, the unlocking course of requires a LIRA to be transferred to a LIF earlier than the switch to a RRSP or a RRIF.