Description
Locked-In RSPs and Locked-In Retirement Accounts are investment vehicles that can be used to transfer pension fund assets once employment with the pension provider is terminated. LRSPs and LIRAs are typically governed by the same legislation that governs the pension plan from which the assets were transferred. LRSPs usually fall under federal legislation while LIRAs usually fall under provincial legislation.
Setting Up an LRSP/LIRA
Required documents:
- LRSP/LIRA application form
- LRSP/LIRA Addendum (The Addendum specifies the locking-in provisions)
Why Are Funds Locked In?
Pension plans are regulated by particular legislation. Each province has it's own legislation (Pension Benefits Acts), while federal legislation governs the pension plans of certain types of companies. When an employee with a pension plan terminates his or her employment, the Pension Benefits Acts permit the employee to transfer vested pension benefits to an acceptable alternative plan. Since most pension benefits are locked-in, the alternative plan must also be locked-in. Thus, the locking-in provisions ensures that the characteristics of the pension plan are maintained and provides the annuitant with an income stream similar to that which the pension fund would have paid upon retirement.
Locking-in Restrictions
Restrictions on locked-in accounts are set out in a "locking-in" addendum that must be included with the LRSP/LIRA or LIF application.
Typical restrictions:
- The funds may not be withdrawn, commuted or surrendered prior to maturity (as determined by the applicable pension legislation), except to transfer to another acceptable locked-in vehicle. At maturity, the funds must be used to provide the former pension plan member with a pension that will continue for life, or jointly for the member and the spouse's lives.
- The benefits may not be assigned.
- Locked-in funds may not be co-mingled with non-locked-in funds or with locked-in funds of another jurisdiction. Separate accounts are required.
Other provisions include stipulations on withdrawals for financial hardship and other permissible transfers.
Early Payouts
Shortened life expectancy
Jurisdiction |
Withdrawal for Shortened Life Expectancy |
Spousal Consent Required? |
Federal |
Yes |
No |
British Columbia |
Yes - for physical disabilities only. |
Yes |
Alberta |
Yes |
Yes |
Saskatchewan |
Yes |
No |
Manitoba |
Yes |
No |
Ontario |
Yes |
No |
Quebec |
Yes |
No |
New Brunswick |
Yes |
No |
Nova Scotia |
Only if the pension plan allows it. |
No |
Newfoundland |
Yes |
Yes |
All jurisdictions require a physician's certificate stipulating the shortened life expectancy.
Financial hardship
Only Ontario allows for an early payout for financial hardships. Permission must be obtained from the Superintendent of Pensions.
Non-residency
Only three jurisdictions allow an early payout for annuitants who become non-residents: federal, British Columbia and Alberta.
Plan Termination
LIRAs must be converted to an acceptable income plan in order to disperse the accumulated assets.
- A Life Income Fund (LIF).
- A locked-in RIF (LRIF). This is only available in Manitoba, Saskatchewan, Alberta, and Ontario.
- An acceptable annuity.
LRSPs/LIRAs must be converted to an income fund according to the pension legislation that governs them.
Jurisdiction |
Earliest Age to Convert to LIF/LRIF/Annuity |
Federal |
Any age. |
British Columbia |
Age 55 or earlier if the pension plan allows it |
Alberta |
Age 50 or earlier if the pension plan allows it |
Saskatchewan |
Age 55 or earlier if the pension plan allows it |
Manitoba |
Any age |
Ontario |
Age 55 or earlier if the pension plan allows it |
Quebec |
Any age |
New Brunswick |
Any age for a LIF; age 55 for annuity |
Nova Scotia |
10 years earlier than normal retirement age provided in the pension plan |
Newfoundland |
Age 55 or earlier if the pension plan allows it |
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