LIRA FAQ

A Locked-In Retirement Account (LIRA) is a registered retirement account funded by money transferred from a company pension.  Those funds are 'locked-in' and cannot be withdrawn until retirement. There are specifics circumstances when funds can be taken out from LIRA before retirement which are addressed below.

To open a LIRA you must be a Canadian resident under the age of 71 and a former member of a pension plan. LIRA accounts are funded by money from your previous employer's pension plan. There are two circumstances when a spouse can open a LIRA: marriage breakdown and death of the LIRA account holder. 

Typically, LIRA funds are locked until age 55 when you can start receiving payments based on government guidelines. In cases where life expectancy is shortened or there is financial hardship there is an ability to access your LIRA account beyond the minimum and maximum withdrawals allowed.

The most common strategy to access your LIRA account is by converting the LIRA account to a Life Income Fund (LIF). At conversion to a LIF, there are minimum and maximum withdrawals that are allowed and increase over time. Another popular strategy is unlocking your LIRA account to gain better access to the funds. You can download the retirement income table for your reference, or use our RRIF/LIF minimum payment calculator to estimate your payment.

In most provinces, at age 55 you can unlock up to 50% of your LIRA account. Unlocking simply means that up to 50% of your LIRA funds can be transferred to an RRSP/RRIF account where there are no limits as to the maximum you can access. Unlocking rules vary by province. If you have already converted your LIRA to a LIF you have 60 days to move 50% of that balance into an RRSP.

When you are unlocking your LIRA your spouse or common law partner needs to sign an attestation allowing the unlocking to occur.

There are other provision when a LIRA can be unlocked, such as: shortened life expectancy, financial hardship, small account balance and possibly becoming a non-resident of Canada.  

No, you cannot make new contributions to a LIRA, nor do you want to add money unless it's from another pension plan. A LIRA is designed to hold transferred (locked-in) pension funds and accessing money from a LIRA is much more restrictive. You would be better off using RRSP/TFSA/OPEN accounts. 

Speaking to an advisor will help you in making the right decision as to which accounts to use based on your needs and goals. You can gain further knowledge on the types of accounts in the F.A.Q. section.

At death, the LIRA account becomes "unlocked" and those funds can be transferred to the surviving spouse's RRSP/RRIF account or paid out as cash.  If the cash option is chosen then the lumpsum will be subject to income tax in the year it is received. In the even that the spouse is not eligible for the LIRA death benefit, due to separation or divorce, the LIRA account then forms part of the deceased's estate and will be subject to taxes and probate. 

Children can also be beneficiaries of a LIRA account. If they are minors, then the funds will be held in trust until the age of majority. If you plan including minor children as beneficiaries, you should consult a lawyer and your financial advisor.

Yes, pension or locked-in assets can be subject to family law division under the Net Family Property (NFP) calculation. Generally, the only portion of the LIRA account subject to being divided is the amount the LIRA increased in value from the date of marriage. You will need your LIRA statements and a copy of the divorce paper and a T2151 completed to make the transfer. If you are experiencing a martial breakdown you need to speak with your lawyer and financial advisor. 

LIRAs can hold a wide range of permitted registered investments (mutual funds, ETFs, GICs, stocks, bonds, etc.).  The fees charged depend on the financial institution and the investments chosen. As an investor you would want transparency of fees and the most flexibility in your investment choices. Limiting yourself to simply the institutions investment offerings may not be in your best interest. Work with an independent wealth manager if you can. You can also compare your fees here and see how much fees will cost you in the long run.

Making transfers requires you to contact the pension plan administrator and your financial institution. You’ll need transfer forms, identification, and details of the pension benefit; the plan administrator will process the locked-in transfer per each provinces rules.