Unlocking Opportunity from a Locked-in Retirement Account (LIRA)

A Locked-in Retirement Account allows transfer of funds from defined benefit and defined contribution pension plans to a self administered savings plan with similar rules.

They were formerly known as locked-in RRSPs. However, confusion over the difference between a regular RRSP and a locked-in RRSP led the financial industry to adopt the term LIRA for new registered plans of this nature.

Some of the older plans may still be referred to as locked-in RRSPs, but they are essentially one and the same.

A Life Income Fund (LIF) requires conversion of funds in a LIRA to an income stream at a certain age governed by certain rules.

Since January 1st 2008, those who are age 50 and have a LIRA that is under the Alberta jurisdiction, can unlock 50% of this account.

At age of 50 and over, you can transfer it to a LIF or purchase an annuity. At the time of transfer, you have a one time opportunity of taking 50% of the value of the LIRA account as income.

You will pay taxes on that income in the year that you remove it. Or, you can transfer that 50% to your RRSP or RRIF. Doing so will give you more flexibility than leaving that amount locked-in.

At age 71, you have no choice but to convert to a LIF or purchase an annuity. You can unlock 50% then.

This 50% rule was established January 1st 2008. If you had a LIF prior to 2008, you cannot unlock 50%.

When converting a LIF or purchasing annuities, pension partners (spouses or common-law spouses) will have to sign a waiver giving up their entitlement to a survivor pension.

Different provinces have different rules. Be sure to consult with your adviser to clarify these details.

Click below for more information:-

Locked-in Retirement Account information and accessing pension funds