# Help: Defined Benefit Plan Transfer > RRSP > Cash



## NorthernSlave (Oct 21, 2018)

I am ~30 Years old and have been self employed for the past 2 years.

My pension funds from a previous union job in Alberta where I still currently live will be unlocked Jan. 1 -2019. (2 full calendar years after leaving)

The value commuted value of my fund is roughly ~$80,000. I'm not exactly sure but I will see at the year end when they send my report.


I am looking for advice from anyone who has been successful in transferring from a Locked in pension > Cash


It looks like there is a few options to try for Financial Hardship, First and Last Months rent + damage deposit etc. I am not looking to do anything illegal but if there is anything on my end that can expedite or make the transition from the pension to a LIRA, RRSP or into cash and investments that I have control over I would love to hear them.


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## OhGreatGuru (May 24, 2009)

I am not at all clear on what you are being allowed to do in January. "Unlocking" usually refers to being allowed to unlock a LIRA. Money in a LIRA is usually locked until a certain age, and there are usually annual limits on what you can withdraw after that.

If they are transferring a commuted value to you, most often that has to go into a LIRA. If it doesn't it will be treated as taxable income. I believe Alberta allows you to unlock up to 50% at the time of transfer; and if you have available RRSP room some of that transfer can go directly to an RRSP with immediate tax consequences. But this has to be done by the pension fund - otherwise they can't report correctly on what is or is not taxable.

The former employer (or pension fund manager) should be able (And I think is required) to tell you your options - whether some or all of it can just be paid out to you in cash. But you received tax deductions for your pension contributions, and it was tax sheltered money, so you are not going to be able to convert it to cash without paying some taxes. Proceed cautiously and clarify just exactly what this transfer is.

https://finance.alberta.ca/publicat...-17-Locked-in-Retirement-Accounts-(LIRAs).pdf


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## Eclectic12 (Oct 20, 2010)

+1.

If "locked in pension" means the original pension then what I have done so far is "original pension" -> "LIRA". The LIRA was setup to offer GICs, stocks, bonds, MF, etc. so I now have control of the investments. Leaving the original pension is what's required to take control over the investments.

When I hit the appropriate age, I will unlock what I can. This means "part of LIRA" -> "RRSP". This grants control over withdrawals as the LIRA has more limited options for withdrawal/payout. I won't be able to qualify for "financial hardship".


Cheers


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## OnlyMyOpinion (Sep 1, 2013)

Here is a link more relevant to accessing locked-in pension funds: https://finance.alberta.ca/publications/pensions/pdf/info_accessing_pension_funds.pdf

But it sounds like OP is already familiar with the rules.

As E12 notes, rules are from pension to LIRA, then after age 50 to LIF if you want, at which time you can unlock up to 50% and pay taxes on it (with permission of spouse if applicable).

You can only unlock a LIRA under the 5 conditions described in the link above and mentioned by the OP, including small pension amounts (under $11,180). It doesn't sound like any of these will apply?

The OP's best route might be to just transfer to a LIRA as intended by the regs - a LIRA is just like an RRSP and can be set up as a self-directed plan. Buy something like VBAL etf with the $80k and forget about it for 20 or 25 years. It should be worth $250-$300k then. After all, that is what the pension is for!


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## Eclectic12 (Oct 20, 2010)

The section that talks about unlocking does mention unlocking up to 50% and pay taxes on it (with spousal permission if needed). However, a later section indicates that another choice is to transfer the unlocked portion into one's RRSP or RRIF, so the taxes may be delayed instead of one lump sum.


Cheers


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## NorthernSlave (Oct 21, 2018)

@Guru I shouldn't have referred to unlocking in January, you're correct about LIRA being locked in. I meant that I will be able to Start the process of transferring my Defined benefit pension into a LIRA in January. I beleive that the 50% unlocking is only available for people 50 or over

The options the pension fund manager told me was that I could:

A: Leave the funds with them (I definitely don't want this due to it basically appreciating at no more than inflation and risk of union pension becoming underfunded)
B: Transfer to a LIRA


From what I am reading and the comments here it looks like Transferring to the LIRA is the only option I have as a first step.


@E12 How long did the process take for you to go from Original Pension into the LIRA?

@MyOpinion On of the 5 conditions could apply to me and I would like to weigh the options and see potentially how much I could convert to cash and what the penalties would be 



I have a few liabilities that I am working at paying off so knowing what the options are and if makes sense to settle them with some of this as cash vs leave it all in a LIRA is what I am looking to figure out. 

I have been doing an investment account with play money for the past 7 years averaging ~30% yr so I really want to invest the money but my current liabilities do to poor (no planning) are making me consider withdrawing cash at a penalty to have a fresh start and firm foundation


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## Eclectic12 (Oct 20, 2010)

NorthernSlave said:


> ... From what I am reading and the comments here it looks like Transferring to the LIRA is the only option I have as a first step.


Sounds about right ... keep in mind that should you setup a LIRA with a discount broker offering a wide range of investments - it is almost the same as a DIY RRSP.
You can't make contributions or withdrawals like the RRSP but in terms of controlling what the investments are - it is pretty much the same.




NorthernSlave said:


> ... @E12 How long did the process take for you to go from Original Pension into the LIRA?


What I recall was that the option letter that spelled out that I could stay in the DB pension but have no further credits or I could transfer to a LIRA showed up in a month. After that, I think I had a month to let them know what option was chosen and return the required paperwork.

Once everything was filled out, it was three or four week before the brokerage account, under the LIRA account number showed the $$ deposited. After that, it was a question of what I wanted to buy for investments.


Cheers


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## NorthernSlave (Oct 21, 2018)

Awesome, thanks for the reply. That really helps


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## Eclectic12 (Oct 20, 2010)

I should add that for the first DB pension I left, as soon as I received the letter from the employer spelling out my choices - I took it into the discount broker's office to get the paperwork filled out to open the LIRA account. That way, the account would be open before any funds were transferred.


Cheers


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