# Lif unlocking of funds



## timejester (Jan 23, 2011)

Hello everyone,

I've been working as a university professsor in Thailand which pays about 950 CDN a month so I've been eagerly awaiting the opportunity to access my pension, an LIF which was set up a couple of years ago. I am 58 and will be returning to Canada this summer hopefully but since I've been away from my chosen profession in accounting for a good ten years, I'm not expecting the job market to greet me with open arms. 

So, I'd like to unlock some of my pension of ($250,000), which had a great return last year, to get some relocation money and to set up a little business of my own. Does anyone know the options available to me and where I might get forms and advice to proceed. 

Cheers,


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## Brian Weatherdon CFP (Jan 18, 2011)

*unlocking LIF*

Hi Jester,

I work with Ontario professors in this subject: here is a current overview. Step by step as follows:

1- If $ is currently in a LIRA go to #2. If $ is in an existing LIF it will be turned into a New LIF in order to quality for the 60 day rule.

2- New LIF once set up, you now have 60 days to unlock 50% into a RRIF.

3- Needing income, you can freely set the income withdrawal schedule as you choose from the RRIF, and near 5% withdrawal annually on the LIF.

Purposes: (a) Many use this strategy to "seed a new business" from existing pension values. (b) If your new business is eg. consulting and has little need for start-up costs, the pension fast-tracks an income to you while you get the consulting income up. 

Following through on your Wealth Trajectory: you have four income periods (horizons I call them): (i) beginning your new work while relying on LIF/RRIF income (eg age 59-62). (ii) Relying less on LIF/RRIF while drawing income from your new business (eg age 63 to 70. (iii) A period of continuing health after selling or closing the business (eg 71-85). (iv) Final years of higher health & personal expenses. Done right, your money lasts abundantly as long as you need.

The advisor you choose to work with should have everything at their fingertips.

That's it in a nutshell 
Brian


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## timejester (Jan 23, 2011)

*RE: unlocking funds in an LIF*

Thanks for your prompt reply Brian!

Indeed I do have a federal LIF but have been told by my bank that there are no un-locking options available to me and that the 5% annual is all that I can expect. Could you direct me to a place where I can get the support needed to convince them I do have options.....being in Thailand is certainly a hindrance at the moment so I pretty much have to rely on what I can do via e-mail etc.

I did However, find this release by the federal government that was promising. It indicates an allowable withdrawl of $22,450 which is just shy of what I'm shootin' for, that is if the net is at least $14,ooo. See below:

Federally-regulated pension plans - see the Office of the Superintendent of Financial Institutions Canada information on Pension Unlocking.
The following three provisions are included in the 2008 Federal Budget, and apply to federally-regulated LIFs:

1.	Individuals 55 or over with LIF holdings of up to $22,450 will be able to wind up their accounts with the option to convert to a tax-deferred savings vehicle, such as an RRSP or RRIF. ....this one doesn't apply to me...

2.	Individuals 55 or older will be entitled to a one-time conversion of up to 50% of LIF holdings into a tax-deferred savings vehicle with no maximum withdrawal limits. ....I think this is the conversion you are referring to.....

3.	All individuals facing financial hardship (low income, high disability or medical-related costs) will be able to unlock up to $22,450 per year. 
The threshold of $22,450 in #'s 1 and 3 is 50% of the yearly maximum pensionable earnings (YMPE), which is the maximum amount on which contributions to the Canada Pension Plan (CPP) are based. This threshold will change each year as the YMPE changes. See the CPP/EI page for the YMPE.
These provisions are now in effect (as of May 8, 2008), as the regulatory changes have been made. See the Department of Finance news release. .....this is the one I'm referring to.....I don't know what the YMPE IS FOR 2010....in fact I don't know what YMPE STANDS FOR....ANYWAY, GIVEN THAT i'M HERE IN tHAILAND AT THE MOMENT i WONDER WHICH ONE WOULD BE MOST CONVENIENT OR POSSIBLE FOR ME....

I like your idea of breaking the funds into an RRIF but worry that the time involved will be difficult for me.

Thanks very much for your considered advice.

Brian


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## MoneyGal (Apr 24, 2009)

YMPE = "yearly maximum pensionable earnings." 

In other words, the maximum amount upon which CPP contributions are payable. If you earn more than that, no contributions are payable on the excess. 

The YMPE for 2011 is $48,300.

This is the web page you want for more info on unlocking federally-regulated pension plans: http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=1556


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## OhGreatGuru (May 24, 2009)

timejester said:


> Indeed I do have a federal LIF but have been told by my bank that there are no un-locking options available to me and that the 5% annual is all that I can expect.
> 
> I did However, find this release by the federal government that was promising.
> 
> ...


Sounds to me like you should write back to your financial institution with this information, and quote the Supt's web site on Unlocking. Point out that yours is a federally regulated plan - maybe the clerk you talked to was following provincial rules.

http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=2660#1

Item 1 is just to allow small LIF's to be wound up. Most provinces have adopted small-amount exemptions as well - the limits will vary between provinces. $22,450 is the limit for federally regulated plans.

Item 3 as noted is specifically for financial hardship - probably not pertinent to you. The burden of proff of hardship is also on you.

Item 2 is probably the route for you to follow. It allows you to transfer 50% into either a RRSP or a RRIF, with no maximum limits on subsequent withdrawals from the RRSP or RRIF.


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## timejester (Jan 23, 2011)

*RE: unlocking LIF FUNDS*

Thank you very much for your considered reply. I have in fact forwarded the information you have provided and have received a positive reply......albeit, not a completely satisfactory result but certainly a marked improvement. Option #2, the 'financial hardship option' is now possible, but the preferred option #3 appears to have sailed. The following is a quote from my contact at the bank:

"As for the unlocking option, unfortunately, we didn't take advantage of the 50% unlocking at the time of opening to have half of the funds transferred into a RIF plan where you could have taken as much as you required each year. I tried to find a loop hole around it, however, they said we missed the 60 day mark upon opening the LIF."

Now Brian Weatherdon CFP has replied to me here and I quote:

"1. If $ is in an existing LIF it will be turned into a New LIF in order to quality for the 60 day rule.

2- New LIF once set up, you now have 60 days to unlock 50% into a RRIF."

Is this possible under federal rules?

Thank you so much for your valueable insight!

p.s. I looked up the section of the pension act that deals with this (thanks for the link Moneygal) and it doesn't indicate any restrictions to rolling the old LIF into a new one so perhaps that is possible. see below:

 provide that, if the restricted life income fund is established in the calendar year in which the holder of the fund reaches 55 years of age or in any subsequent calendar year, the holder of the fund may transfer 50% of the funds in that fund to a registered retirement savings plan or a registered retirement income fund within 60 days after the establishment of the restricted life income fund if
(i) the restricted life income fund was created as the result of the transfer of a pension benefit credit under section 26 of the Act or a transfer from a locked-in registered retirement savings plan or a life income fund, and
(ii) if the holder gives a copy of Form 2 of Schedule V to the financial institution with whom the contract or arrangement for the restricted life income fund was entered into.


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## Brian Weatherdon CFP (Jan 18, 2011)

*unlocking LIF to RRIF*

Hi Jester,

Thanks to you for opening a subject that can help many people -- and for the others who added their wisdom to help. Value in the group 

Yes the old-LIF can be moved into a new-LIF, with 1/2 unlocked into RRIF, and thereby create the flexibility you need for your next stages. Once you return to Canada the paperwork can be completed. As well be aware, we have no way to be certain how long LIF-unlocking will be available, so doing it sooner would add confidence.

Cheeers!
Brian


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## timejester (Jan 23, 2011)

*Thanks very much!*

I'd like to thank all the contributors. Your responses have definitely given me peace of mind.

Best regards,

Brian


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## Brian Weatherdon CFP (Jan 18, 2011)

*where in Thailand....*

By the way, where in Thailand you are, and what are you teaching? Delightful corresponding with you! Where's home when you get back?
Brian


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## timejester (Jan 23, 2011)

*Stuck in LIF limbo*

Hi Brian,

I'm sorry I haven't responded to your last post. I had no idea it was there. I'm not sure I was posted regarding an addition to this thread. 

So I'll first respond to your post, I am living in Bangkok, teaching at Silpakorn University right next to the 'Grand Palace' the most visited tourist spot in Thailand, if you've ever visited the land of smiles. 

I'm returning to Canada on April 17th, and will be living near Victoria B.C. in the short term where I hope to launch my new organization which I hope to grow from coast to coast; *although* I have just recently been told by my bank that I cannot make any of the changes we discussed earlier so I am a little perplexed to say the least.

I asked this forum about the possibilities of gaining access to my pension funds but my bank (RBC) in response to the options you suggested, SAYS: "As for the unlocking option, unfortunately, we didn't take advantage of the 50% unlocking at the time of opening (2009) to have half of the funds transferred into a RIF plan where you could have taken as much as you required each year. I tried to find a loop hole around it, however, they said we missed the 60 day mark upon opening the LIF" end of quote. 

Being 58 years old now, I don't really have many options. I can't re-establish my career in Canada to build up some financing. Anyway, I'm committed to getting my organization off the ground. I'll be providing some much needed economic activity to some dying communities along the Mekong Delta so I've got to find some way of getting access to these funds of mine and get this going. 

If you or anyone in the forum can offer any advice I'd greatly appreciate it. Perhaps I should just get another financial advisor at a more flexible financial institution.

Best regards,

Brian


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## Belguy (May 24, 2010)

I had an old LIRA and decided to unlock half of it last spring. I had not been withdrawing anything from it and had not planned to until I turned 71. And so, I was told that I would first have to set up something called a 'New LIF' and moved the full amount from the original LIRA to it first. Then, I was able to unlock and move 50 percent of my funds from it to my existing regular RRSP account from which I was also not making any minimum annual withdrawals.

Due to my own stupidity in not reading the fine print, I suddenly received a minimum annual withdrawal from my 'New LIF' at the beginning of this year when it was my intent to keep the locked-in monies intact until my 71st birthday. I was told that I had no other choice as a 'New LIF' required such minimum annual withdrawals.

And so, sure they let me unlock 50 percent of my savings, for which I am thankful. However, at the same time, they forced me to start taking minimum annual withdrawals before I intended to do so.

Why would they want to do this?


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## Four Pillars (Apr 5, 2009)

Belguy, it's unfortunate that you didn't realize about the mandatory LIF withdrawals. As for why they want to do this? They don't - the unlock provision is to allow people who need access to the money to withdraw some of it. It's something that you chose to do.

Someone like yourself isn't really a good candidate for unlocking - it's more appropriate for someone who:

1) Needs the cash. This person will probably welcome the mandatory annual withdrawals.

2) Can unlock the remainder because of other conditions (ie 55 years and small account size). This is what my Dad did.

3) Is already subject to mandatory withdrawals (ie the money is in a LRIF).


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