Unlocking pension money: Getting money out of a LIRAs

If you left a company with a pension before retirement, chances are you had to move the money into a Locked in Retirement Account (LIRA). That’s because both the federal and provincial governments do not permit you to convert your pension into cash.

LIRAs are designed for accumulation of money that originated from a pension plan. People who leave employers with either Defined Benefit Plans (DB) or Defined Contribution Plans (DC) can move their pension funds into LIRA where they can self manage their asset (with or without the help of a financial advisor).

LIRAs do not allow for lump sum withdrawals and there are no options to create income. If you want income from your LIRA, you will have to either transfer to a Life Income Fund (LIF) or a Life Annuity. Typically the need for income from happens when your retire.

How can you get money out of a LIRA?

Financial ProblemsThis is one of the most common questions I get. So many people, especially in tough times are trying to access these funds for use.

Back in 2008, Finance Minister Jim Flaherty introduced changes to allow Canadians easier access to their Locked-in retirement accounts (LIRA). Prior to 2008, it was very difficult for Canadians to access their own pension money because the rules were designed with the intent of trying to ensure lifetime income. As a result, there were restrictions in place preventing people from spending their pension funds too quickly.

Generally speaking the only way to get money out of your locked in accounts is to retire, in most cases after the age of 55 (Some situations allow for access to funds before the age of 55 – see below). When you need income, you have 2 or three options depending on the province you live in. You can Transfer to Life Income Fund (LIF), a Life Annuity and where applicable a Life Retirement Income Fund (LRIF).

Exceptions to every rule.

You cannot access pension funds prior to 55 years of age except for a few exceptions:

  1. Different provinces mean different rules. Pension rules can be pretty complicated and confusing because every province has it’s own set of laws. For example, Alberta allows for access to locked in accounts at the age of 50. Taxtips.ca does a pretty good job giving information on each of the different provinces.
  2. Access to small amounts. Amounts held in a locked-in contract are considered to be too small to provide a useful pension if the dollar value of that account falls below a set level (20% of the YMPE). For the year 2013, the set level is less than $10,220 in any single locked in account at any age on the day you request the withdrawal. If you are over the age of 65, the amount is $20,440. For individuals 55 or older with total holdings in federally regulated locked-in funds of up to $25,500 will be able to wind up their accounts or convert to a tax-deferred savings vehicle with no maximum withdrawal limit, such as a Registered Retirement Income Fund or a Registered Retirement Savings Plan (RRSP). The threshold for small holdings will increase with the average industrial wage.
  3. Shortened Life expectancy. If you have a terminal illness or a disability that is expected, in the opinion of your doctor, to shorten your life considerably, then your LIRA or LIF may be unlocked. Your doctor must provide the shortened life opinion in writing. Also, you may not withdraw the funds unless your pension partner consents to giving up his or her entitlement to a joint and survivor pension.
  4. Becoming non-resident of Canada. If the Canada Revenue Agency (CRA) determines that you are a non-resident of Canada for tax purposes, and confirms this in writing, then you may unlock your LIRA or LIF. Once unlocked, the funds may be transferred into a regular bank account or transferred into an investment account that is not subject to the Act. You do not have to wait until age 50 to access those funds, nor do the funds have to be paid out in a set manner. Taxation still applies on withdrawal.
  5. Financial Hardship. If you are facing a situation of financial hardship, you may apply to the Superintendent of Pensions to release of some or all of the funds in your LIRA or LIF. There are a number of situations of financial hardship. Federally, no permitted withdrawals are allowed under financial hardship when expected income is 75% of the YMPE (i.e. $38,325 for 2013) or higher.  Those with high medical or disability-related Costs can also apply for unlocking under the financial hardship rules: The amount of medical expenditures up to a maximum of 50% of the YMPE (i.e. $25,550 in 2013) provided that medical expenditures exceed 20% of expected annual income.
  6. 50% Unlocking. The 50% unlocking does not apply in all jurisdictions. If you live in Alberta or you have a Federally regulated locked in account, you may qualify to unlock up to 50% of your holdings and transfer them to an RRSP where there is no restrictions on withdrawal. This can only occur at the time when you are moving money from a LIRA to a LIF or Annuity.

Other related Articles

Unlocking Pension Funds due to Financial Hardship Rules

Learning about Locked in Retirement Accounts

Federal rules for unlocking (OFSI)

Rules for unlocking pension funds (Alberta rules)

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace.For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

66 Responses to Unlocking pension money: Getting money out of a LIRAs

  1. My question is about your exception #2, what province follows the unlocking rule that says, if the LIRA is less than 20% of YMPE (ie $9,440) at any age (eg under 55) the small amount can be withdrawn? I spoke with FSCO and they indicated this was not an option in Ontario.

    • Yes, I called also and they say this is not an option. You ave to be 55, please check the facts before publishing false information

  2. i have downloaded the file regarding Instructions for Completing Form 6
    It does not mention my reason for needing the money.
    Revenue Canada has sent a letter stating my spouse and I owe 10,000, yet there is no catagory
    for me to chose stating revenue canada will proceed with legal action for this money owing
    can i just state in writing why i need thee money and attach it to the form?
    can you please respond through my email listed above
    and thanks very much.

  3. Can I start withdrawing from my locked in pension at age 55
    It was a company pension that was transfered to the bank

    • Greg, did you ever find out anything about our LIFS (locked in at the bank) I can’t beleive this happened when I transferred it- I thought I could draw from it right away & so far all I have received is $3780 last June & will again this June. How do you live off that?

  4. I would also like to know when I can withdraw my locked in pension. I will be 59 in June. I worked for the BC government & had my pension transferred to the bank-in a RRIF account.

    I never realized I could access some of my funds at the age 55. My first draw of $4000 was last July 2011 @ 58 years old which is hardly a living. I received a notice saying this year at 59 I would receive my draw of $3800 in July 2012.

    I wonder why I did not receive a retro payment last year back to age 55. This would have been $12000? I should have been given those payments all along if I knew about it.

    Is there a better way of having my money managed? I don’t think this is right. I look forward to hearing back from you.

    Patti

  5. I am a non-resident of Canada living in the USA. I moved 4 years ago. I have a DB Pension through Suncor Energy and need to decide what I will do with it. I read above that I can withdraw it and it will be taxed. I think we want to just withdraw it and break all ties with Canada. Will I receive the amount of money in the plan less 25% withholding tax? And do you think this is a bad move. We just want to not have to worry about having any Canadian accounts in the future. Your advice is greatly appreciated.

  6. I am 62 years old, I have an investment in Lira-Lock-in a little over $100,000. I am not working and suffering financial heartship. I would like to get access to some cash, and I would like to put some of the funds to work in Stocks, Trades, and what ever else that I can make my money work for me. My advisor do not want me to take from it for the exception of monthly withdrawal. I am not pleased with that. What steps should I take to request my funds. Please respond!

  7. I was told I do not and cannot have access to my LIRA pension until I am 65 years old. The only way would be if you could prove hardship or you were terminally ill & you would need Dr’s verification. I take mine once a year a small amount compared to what I feel I should be able to take out. This is for my BC Govt pension and our beloved Gordon Campbell put a 6% only per year cap on our pensions in LIRA’s-I am sure he is taking alot more than 6%. Oh well such is life of the poor.

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  9. I cash in a lira under financial hardship to pay revenue Canada. Which I now know the couldn’t have me do. However my question now is am I know able to make any money this tax year? How will that effect what I did as under financial hardship you have to show zero income. Now I have an opportunity to make some money. What can I do and what are the Ramifications .

  10. Hi,

    I have federally regulated pension. Now I am unemployed will I abe able to use portion or all of it towards downpayment of buying a home?

  11. Hi I have a DCP that is locked in. I live in Newfoundland and was wondering if I could access my money. I’m 42 years old. Thx

  12. I’ve taken my money out of a B.C. pension plan, now it is in a Alberta bank as a lira. I’ve got a costing to buy back time in my current pension, but the bank says it can’t transfer the funds, due to differences in B.C. and Alberta pension laws. Can this be true? Is there anyway to make this transfer possible?

  13. The most frustrating move I ever made was taking my govt pension & putting it into my bank. As with everything the govt has to even be involved in our pension money. I don’t know what or if anything can be done-I figured I worked long and hard and I would be entitled to the retirement income I paid into-not so. I feel I have signed over my pension money back to the government. It’s not fair but it’s what it is. Hope you have better luck.

  14. I’m 46 & have a federally regulated pension plan. Working for over 20 years I have a nice little egg. Last year my home flooded & lost everything. Do you know if I’d be able to access some of my locked-in RRP under the financial hardship guidelines? Would I be able to use a portion of these funds to either rent or make a down payment on another residence. I deal with I have all my holdings with GWL if that matters. I really need some advice…Thanks Michael

  15. Hi just left message regarding my home being flooded I also rec’d no compensation from either level of GOV’t or the insurance company. Thanks again Mike

  16. Does anyone know why my locked-in GIC’s I have had in my bank from my government pension would turn into RRIF’s this quarterly June/12 to Sept/12?? What is a GIC & what is a RRIF’s?

    I am not even sure if this site is still active but if anyone knows I would appreciate hearing from you.

    Thanks

  17. Thanks Jim – very informative article.

    I’m still curious about the 55-year rule before funds can be moved from a LIRA — I am retiring at 44 with 25 years of service at my company (federally-regulated DB plan) so although I am eligible for pre-retirement pension, because of my age I can also commute the value of my DB plan to part-LIRA, part-cash.

    If I’m eligible for a monthly pension, shouldn’t I also be able to move $ from LIRA to LIF? Or are the pension plan rules now irrelevant after commuting?

    Merci
    François

  18. Well all i can say,get good advise ! get all the doc’s from your PPA (2nd time will cost you a fee) ,read them ,take them to CGA who is up to date on pension law an pension tax. Now get CFP who has a track record with pensions like yours. Don’t be cheap – pay the fees for good advise ,even if your a DIY investor ,pay for good advise on this pension stuff.

  19. I am only 60 yrs of age, If Alberta provincial LIRA in one investment account … can I split it into three or four separate accounts and only unlock one account at a time to put 50% in RRSP and 50% in LIF, instead of unlocking the whole LIRA account at one time

  20. I have to put money in my company pension to qualify for the very small yearly match but there will be less than $16,000 in the account when I retire.

    My hope is to take it with me when I go. I had hoped to do a straight withdrawl in my first year or retirement and that would be my income for the first year. I will have to come up with a new plan.

    If I leave it in the pension plan they tell me I will receive less than $2,000 per year. I guess that would cover my car insurance or my long term health care insurance.

  21. Lots of great info here Jim thanks for sharing. We have a LIRA that is managed by an advisor and were not aware of most of what you talked about in your post except for the only way to get the cash is to retire.

  22. I have a locked in LIF with the Federal Government. It came from a Military Pension. Is there any way I can get this money? I would like to buy a house and there is more then money in my LIF to cover the down payment. I keep getting told there is nothing I can do to unlock it/use it.

  23. Have you ever considered about adding a little bit more than just your articles? I mean, what you say is important and everything. But just imagine if you added some great pictures or video clips to give your posts more, “pop”! Your content is excellent but with pics and video clips, this website could certainly be one of the greatest in its niche. Very good blog!

  24. As a non-resident I can collapse a LIRA and 25% tax is withheld. If I file a tax return as a non-resident can the LIRA amount be included as income and possibly some or all the tax recovered?

  25. I have about 30k from a University pension locked into a LIRA in Alberta. I’m planning on moving to the UK so I know I can claim it as a non resident, but I’d really like to have some of it to help the move. If I move it into an RRSP for the 2012 tax year, can I withdraw 50% before being able to prove I’m no longer a resident? Tax law is soooooo confusing. Thanks for any info provided. Cheers.

  26. I have a small LIRA (23K). It came about from an audit that I did on my DB plan. The DB plan allowed for a small extra contribution-3 percent of salary to be used for DB enhancements.. My employer matched this on a 1.5 percent basis (all monies should have been going into an ACP account to purchase DB plan enhancements). Three mergers later I discovered that my contributions have not been matched or a number of years. It seems the only option that my employer had was to deposit missing money in a LIRA-which they did.

    Fast forward 8 years. I am about to start my DB pension. I will be using the ACP monies to buy enhancements to the normal form of pension.

    Question: Will I also be able to the balance in this LIRA account towards the purchase of these DB enhancements-in this instance joint survivor rights.

    I have asked my former employer’s pension folks this question and am waiting for a response. I do not have a great deal of confidence in this group so hence this question to you.

    Thanks for your time Jim.
    PS: I really like the website!

  27. I have a complex lira question
    My fiancé is currently going through divorce and will be receiving lira as part of settlement. 23000 is from a lira In alberta and 6000 from a lira in Manitoba. We currently live in alberta. How can we unlock or move this into an rrsp account to use towards a home buyer credit?

  28. I have $150,000 in a Lira. I lost my job 10 months ago and now I have nothing left to live on. Rent, car payment, bills, is there anyway to unlock?? I was able to unlock 25,000 as financial hardship a while back but now I am just about broke and have nothing other than my Lira. Is there anyway to unlock this now. I am under 55 years old.

  29. I have a locked pension fund with Carpenters union local 27 Toronto Ontario I am no longer a member I was wondering if it is possible to transfer the fund to another investment something that is not locked that will pay dividends and also withdrawal some cash for it.

    • Jamie: You’ll have to leave it in the locked portion for the time being. @ retirement, you can unlock up to 50% (transfer 50% into a rrsp)

  30. Hello, I am trying to have my LIRA and/or LRSP unlocked under the small amount approach. both are under 20% of YMPE … however my bank does not know what form to use, as in what CRA form. I am under age 55, however, due to it being under 20% from what I understand I can access this money.

    Can somebody please assist me in locating the needed info/form?? Thanks in advance

  31. I have some questions.

    I have a RETIREMENT SAVINGS PLAN – LOCKED-IN from the Canadian forces (31,000$)
    Is this just a locked in rsp or a lira?
    What can I do to unlock my funds before the age of 50?

  32. Funny that Jim doesn’t respond to any comments on this post,ok he did once but maybe he’s just using this blog to troll for poeple who want to be under his advisment for 2% aum :)

  33. The simple course of action to everyone’s comments on Jim’s blog is go see your own financial advisor or go find one that you like and is trustworthy (shameless plug – like myself)
    Dj: Jim does not work for free. Do you work for free? Appreciate the info he shares please.
    Lastly, giving out answers to comments/questions for people is downright dangerous if the advisor does not know the respective person’s financial situation. That’s common sense.

  34. Agree with Martin,
    I actually booked a phone consultation with Jim and spent a couple of hours obtaining custom tailored advise based on my personal situation — money very, very well spent!

  35. Hey DJ, thanks for commenting. Unfortunately for everyone, it is very difficult for me to answer questions via the web. I have a full time business (not managing people’s money for 2% AUM) putting financial education programs in the workplace trying to help people with information, and not selling products. Retire Happy is designed to help people with free, unsolicited information. I hope some of the information has helped you.
    Jim

  36. I am 42 years old and have 2 LIRA’S. I have a high amount of debt to the point I am considering a consumer proposal. I just started a 3rd LIRA with the new company I am working for. I live in Ontario. I have done a lot of math and feel that if I had access to about 40 percent of my LIRA’s I could do much better in the long run. The interest I pay monthly is very high. I have tried to work with banks but all they do is keep me treading water. I am just curious if there is a way I could cash out any of my current LIRA’S.

  37. I have a $50,000 in a LIRA. I want to take some try and get access to any amount as I want to buy a home with it. I understand I can’t utilize the HBP, any suggestions of ways to get access to some funds?

  38. Hello Jim,
    Many years ago I worked at a company for 5 years that had a DB Plan along with my own contributions into the plan.
    I am eligible for a monthly pension of $858 at age 60 from this Plan. (I just turned age 60).
    Or I can transfer the commuted value of $107,000 into a self-directed LIRA + receive another $52,000 of registered funds in Excess Over the Tax Limits subject to a 30% withholding tax.
    I am considering transferring all the monies into a self-directed LIRA and invest it in a very secure investment that would pay me 8% annual on a monthly basis.This would provide me with a cashflow of approx $958 vs $858 and name a beneficiary for the full principal vs just the balance of a 10 year guarantee.
    Which do you feel is the better option?

    • Hi Peter,
      Well can’t argue against those numbers Peter. Not to mention, you can unlock half of the LIRA’s funds(assuming your from Ontario). However, as a professional that is in an advisory role, I’d be immediately skeptical of that 8% return figure based on your description. Not speaking for Jim, but it would be dangerous in my opinion to give advise in a decision as serious as this, without seeing the entire “picture”.
      Regards,
      Martin

  39. hey look iam 50 yrs old and i have a pension throught the labouers hall local 92 in edmonton ab am i able too transfer that monies too anouther locked in account they say i must be out of work for 2 yrs to do this . is there any other way ? thks

  40. Just a clarification for anyone still in a company registered pension plan (RPP) and considering leaving: you can actually transfer the locked-in portion of your commuted value to a Life Income Fund (LIF) immediately, regardless of age, and start drawing income — subject to the yearly minimum and maximum. You do NOT have to transfer to a Locked-In Retirement Account (LIRA) and wait to retirement age before moving to LIF. Actually, per the income tax act a LIF meets the definition of a LIRA, hence the possibility to move your commuted value to one immediately.

    This is something that was not clear to me, and apparently not to many since two financial advisors who advised me never mentioned that option. The ‘unlocking’ options were mentioned (financial hardship, small amount, shortened life expectancy…) but not the fact that I could start drawing income immediately from a LIF without having to unlock even though I am only 44 years old.

    Perhaps this information can be valuable to someone else in my situation…

    Cheers,

    fg

  41. BC’s bill 38’s regulations are expected in draft form this summer. Among other things they will prescribe the unlocking of funds involved in hardship cases. Have you heard any rumours as to the framework for this.
    FICOM is tight lipped. I have a $40,000 LIRA that would help me avoid bankruptcy. I spoke to the Superintendent of Bankruptcy’s office and they were out of the loop as a stakeholder during the draft stage. I would rather a Trustee assess my assets/debts and level of hardship instead of the bank. Why should I pursue bankruptcy or a consumer proposal when I could pay my creditors by unlocking my LIRA. In my case I have another significant pension outside of my LIRA.

    • Hi, I have $66,000 in LIRA funds under the federal jurisdiction. I live in Alberta and am ccurrently unemployed. I am carrying about $22000 in debt and would greatly appreciated any advice. Thanks!!!

  42. I got terminated/forced to resign from my job. I got a notice saying my commuted amount I can transfer into a LIRA is 38,900. I am 42 years of age and live in Alberta. I don’t think I will find a job close to that in the near future. Will struggle in the near future. Guessing I will transfer into a LIRA with TD bank. Is there any way I can gain access to anywhere from $5000-$8000 of these funds in the rather quick near future??

  43. Hi

    I have over $60K in a Lira and will be turning 53 in about a month. Can I transfer 50% of this lira into a LIF and cash out 50%.

    Dan

  44. Transfer 50% to a LIRA and 50% to a RRSP. What you do with the RRSP and how you withdraw is between you and hopefully a capable Financial Planner.

  45. I’m leaving a Government Job and they want to transfer my pension into a LIRA account. I’m in my 30s and would like to use my first time home buyers plan with some of my LIRA funds. IS there anyway to do this? If not, is there a better alternative to putting it into a LIRA account with a big 5 bank and getting charged a high MER?

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