# Locked-in Retirement Accounts (LIRA, LIF, etc.) - A Road Map



## avrex (Nov 14, 2010)

In Canada, the regulations surrounding locked-in retirement accounts are very confusing.

There is an alphabet of plans (LIRA/LRSP/LIF/LRIF) in existence.
I did some research to better my understanding of these plans.

The result of that research, is an article that I've written,

Locked-in Retirement Accounts - A Road Map

I could have researched and written more details about all of the different provincial rules.... but there's just too much legislation. It's exhausting. :fatigue:
I've tried to keep the article as succinct as possible.

I'm looking for some *feedback* from the members of CMF community.
Does the chart in the article and the information provided make sense, based on *your understanding or experience with these locked-in plans?*
Any errors or points that need clarifying?
Thanks in advance for any feedback.

Even if there's no feedback on the article, we can still utilize this thread to discuss specific Locked-in Retirement account issues.


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## Daniel A. (Mar 20, 2011)

I think you have captured things well.

I think when the USA changed and allowed 401 accounts this was a major mistake that left the little guy holding the bag.
In general when people are in trouble looking for money everything goes out the window as far as future planing.

This is not something that Canada should embrace at the end of the day people need something.


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## heyjude (May 16, 2009)

Thank you for writing the blog post and starting the thread. My own experience when leaving a job in Manitoba where I had a DC plan was that the only options open to me were an LIRA or an LIF. An annuity or a lump sum were not allowed. I don't know whether that was a condition specific to the pension plan at that organization. 

You could write another blog post about specific discussion points, e.g what happens if you move to another province? Will the LIRA still be governed by the regulations in the province you worked in, or will your new province of residence's rules apply? What are the pros and cons of unlocking some of the funds? What is the best time to turn an LIRA into an LIF? Tax implications? Et cetera........


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## Jon_Snow (May 20, 2009)

I'm likely to leave my current job (and its DB pension) in 2014, so this is of great interest to me. Thanks OP.. :encouragement:


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## Beaver101 (Nov 14, 2011)

Quite comprehensive overview (but I'm far far far from being an expert, more like a newbee :acne but 2 comments wrt:

*When I leave my company, what are my pension options?
◾You can leave the funds in the company plan. The company will continue to administer the funds on your behalf. When you retire, they can continue to administer your funds, if you choose. * ... not necessarily, the company will encourage you to port your pension plan or transfer it to a LIRA because they no longer want to administer it for you.
*◾If you are going to work for another company, you can move your funds to your new company’s RPP (if one exists). * ... very unlikely because your new company does not want the burden of your administering your pension monies and the plans may not be comparable.

On the roadmap/chart, how does the LIF flow to the RRSP or RRIF if it's "locked-in"?

Nevertheless, thanks for this comprehensive write-up. Doesn't hurt to know the details as we all have to retire one day. :encouragement:


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## GoldStone (Mar 6, 2011)

Avrex, that's a very nice chart. Well done.


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## Daniel A. (Mar 20, 2011)

Best thing said we all go at some point!!!!!!!

In the last four years I have collected in the order of 130,00.00 dollars from my pension DB that is.
I live a good life wintering in Mexico and return home is spring.

Most people will never see such a life.
I could have opted for a DC pension some years ago I'm glad I didn't mostly because I didn't want the hassle of watching my investments. 

Freedom 55 is what I live and enjoy.


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## heyjude (May 16, 2009)

Daniel A. said:


> Best thing said we all go at some point!!!!!!!
> 
> In the last four years I have collected in the order of 130,00.00 dollars from my pension DB that is.
> I live a good life wintering in Mexico and return home is spring.
> ...


I'm happy for you. You are a member of a dying breed.


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## Retired Peasant (Apr 22, 2013)

avrex said:


> Locked-in Retirement Accounts - A Road Map


'Server not found'


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## sags (May 15, 2010)

Interesting flow chart.

Beginning Jan 1, 2013.........GM employees were allowed the choice of taking the commuted value or staying in the pension plan.

Previously, this was not an option.........unless the employee was under age 55 and terminated their employment completely, which meant the loss of health care benefits, life insurance, and all other rights. After the change, the retiree can take the commuted value and keeps all the other "retiree" benefits including health care and life insurance.

Years ago, a teacher friend was given the choice at her retirement, so it would seem that it depends on the rules of the individual pension plan, although GM had to apply to the government for permission to offer the choice.

What would be ideal.........is for everyone to have the choice at any time, to commute the value of their pension plan, while keeping their other ancillary benefits.

There are as many different scenarios in retirement............as there are retirees.


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## sags (May 15, 2010)

I believe that Pooled Pension Plans, were they ever to be universally adopted, would channel people into a few mutual fund options from a financial institution that administered the plan on behalf of the employer.

There is no choice...........in a lack of options.

We had a life insurer visit our plant, with the approval of GM, and offered "their" RRSP plan to all the employees to invest their extra vacation pay, overtime earnings, and christmas bonuses. They offered a checklist of about 6 mutual funds the company promoted. 

I think those types of plans would be full of fees and charges, and the institutions would benefit more than the employee.

And before retirement...........the retiree would have to deal with the complicated rules and acronyms you show on the flow chart.

Too.......too much for most people to digest and understand.

An additional flow chart would need to be produced to show the tax and estate consequences of each choice as well.

Or..................could it be incorporated into the flow chart as is............??


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... 2 comments wrt:
> 
> *When I leave my company, what are my pension options?
> ◾You can leave the funds in the company plan. The company will continue to administer the funds on your behalf. When you retire, they can continue to administer your funds, if you choose. * ... not necessarily, the company will encourage you to port your pension plan or transfer it to a LIRA because they no longer want to administer it for you ...


I suspect it depends on the company & plan administrator - neither myself or a couple of people I've discussed it with were encouraged in any particular direction.




Beaver101 said:


> ... *◾If you are going to work for another company, you can move your funds to your new company’s RPP (if one exists). * ... very unlikely because your new company does not want the burden of your administering your pension monies and the plans may not be comparable ...


The "(if one exists)" should be changed to "(if one exists and allows the transfer)". So far, I've only moved to a company with a DB pension & some did allow the transfer where others did not.

Where they do allow the transfer - as the benefits are set by the formula, the option to transfer in should be carefully evaluated. In on such instance, the plan the money would have been transferred from had such a small payout that the total amount available for transfer would have bought whopping three months worth of service.


Cheers


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## Eclectic12 (Oct 20, 2010)

avrex said:


> ... I'm looking for some *feedback* from the members of CMF community.
> Does the chart in the article and the information provided make sense, based on *your understanding or experience with these locked-in plans?*


If the idea is for the * When I leave my company, what are my pension options? * to be complete, then there is another variation. 

In addition to the options listed, as the employee/company contributions exceeded the benefit earned - I was given the option for a part of the total amount to either transfer to an RRSP or take the amount as cash & report it as income. It was by far the smaller amount but it was a separate decision from the rest.


Cheers


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## livewell (Dec 1, 2013)

Thanks for the article. One question I have that I have not seen answered. If you hold a LIRA and you want to start to withdraw from it do you have to convert all of it to a LIF in one event? or can you say create a LIF with 1/3 of the LIRA, and maintain the 2/3 LIRA?


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## OptsyEagle (Nov 29, 2009)

Did they not do away with the requirement to turn the LIF money into a life annuity at age 80?


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## Toronto.gal (Jan 8, 2010)

^ Yes, I believe that amendment was made a few years ago [in Ontario at least].


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## edarte (Jan 28, 2014)

*What are the rules if you move*

I used to work for the City of Toronto under a DB plan in Ontario and took the commuted value when I left. It now sits in a Lira but now I live in BC.. Am I right that when I read something like "For example, 50% of the funds are allowed to be unlocked in: Ontario, Alberta, Manitoba, and federal based pensions." I should read this with the province the plan was originally administered in (i.e., Ontario) and not as the province I now live in (BC)?


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## OptsyEagle (Nov 29, 2009)

edarte said:


> I used to work for the City of Toronto under a DB plan in Ontario and took the commuted value when I left. It now sits in a Lira but now I live in BC.. Am I right that when I read something like "For example, 50% of the funds are allowed to be unlocked in: Ontario, Alberta, Manitoba, and federal based pensions." I should read this with the province the plan was originally administered in (i.e., Ontario) and not as the province I now live in (BC)?


Yes.


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## OptsyEagle (Nov 29, 2009)

livewell said:


> Thanks for the article. One question I have that I have not seen answered. If you hold a LIRA and you want to start to withdraw from it do you have to convert all of it to a LIF in one event? or can you say create a LIF with 1/3 of the LIRA, and maintain the 2/3 LIRA?


Yes.


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## My Own Advisor (Sep 24, 2012)

I think after age 55 in Ontario, you can convert whatever you want from your LIRA, and do not have to convert all of it. 

http://www.startingovertoronto.com/blog/2012/04/29/pensions-ontario/

I plan on selling assets in my LIRA at age 55, getting the cash for that, make the minimum withdrawals for living expenses or move assets to TFSA.

http://www.nbc.ca/bnc/files/bncpdf/en/2/E_C_REER_Autr_RetraitsMaxFRV.pdf


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## Eclectic12 (Oct 20, 2010)

sags said:


> I believe that Pooled Pension Plans, were they ever to be universally adopted, would channel people into a few mutual fund options from a financial institution that administered the plan on behalf of the employer.
> 
> There is no choice...........in a lack of options ...


... depends on the plan ... some are expensive & limit the choices and some are cheap & give a lot of choice. YMMV ...




sags said:


> ... We had a life insurer visit our plant, with the approval of GM, and offered "their" RRSP plan to all the employees to invest their extra vacation pay, overtime earnings, and christmas bonuses. They offered a checklist of about 6 mutual funds the company promoted.
> 
> I think those types of plans would be full of fees and charges, and the institutions would benefit more than the employee.
> 
> And before retirement...........the retiree would have to deal with the complicated rules and acronyms you show on the flow chart ...



Possibly ... but then again - if the RRSP plan being offered did not include employer contributions, my understanding is that the chart (as well as LIRA, LIF acronyms) won't apply. It's an RRSP plain & simple, where it could be transferred to one's regular RRSP.

Without the details of the contributions & costs - there's no way to tell.


For example, I accidentally sent some overtime to the company Group RRSP. There's no employer contributions so it was a bit of paperwork and the money is now in my personal RRSP.


Cheers


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