If you have a Locked-in Retirement Account (LIRA) or Life Income Fund (LIF) and are experiencing financial difficulties due to the Covid-19 pandemic, you may be eligible to access some of the funds.
Chances are if you left a previous employer and transferred your pension monies to another financial institution the money now sits in a Locked-in Retirement Account (LIRA). These accounts are very similar to your regular Registered Retirement Savings Plans (RRSP), except for a couple of notable differences; normally you cannot redeem the funds until you are over the age of 55, and even then, there are annual limits.
However, in 2008 the government released guidelines that detailed how individuals could access their Locked-in funds, these included:
Financial Hardship. Under this rule, even if you are under the age of 55 there are several ways in which you may qualify to redeem monies from your plan. These include:
Low Income – your expected income from all sources must be below $39,133 for the 12-month period following your application.
Debt Against your Principle Residence – to avoid legal action against you due to unpaid mortgage or property taxes.
Unpaid Rent – Need money to avoid eviction due to unpaid rent.
First and Last Month’s Rent – Need money for a place to live.
Medical Expenses – You, your spouse or dependant need money to pay medical or dental expenses to treat an illness or physical disability.
Renovate Your Home for Medical Issue – You, your spouse or dependant need money to renovate principle residence to accommodate illness or physical disability.
Renovate Dependant’s Principle Residence – You, your spouse or dependant need money to renovate that dependant’s current or future principle residence to accommodate illness or physical disability.
One Time 50% Rule. If you are 55 years of age or older you are eligible for a one time unlocking of 50% of your funds. To accomplish this; you would first have to transfer your LIRA or LRIF (Locked-in Retirement Income Fund) into a new LIF (Life Income Fund). Once the transfer is complete you have 60 days to move 50% of the money into a regular RRSP or withdraw the money in cash. Be advised if you take the cash, it is fully taxable.
Small Balance Accounts. If you are over the age of 55 and the total value of all your Locked-in plans are less than 40% of the current year’s Yearly Maximum Pensionable Earnings (YMPE), you can apply to unlock your funds. Therefore, if you LIRA account balance is less than $23,480 in 2020 you can transfer the money to your RRSP or decide to redeem the cash and pay tax on it.
Shortened Life Expectancy. If you have a signed statement from your doctor stating that you have two years or less to live, you can apply to unlock your money.
Non-Resident for Two Years. If you moved away from Canada and have been a non-resident for more than 24 months you can apply to withdraw all the money from your Ontario Locked-in account.
Locked-in accounts are governed provincially, and the rules may vary per province. LIRA accounts are governed by the province in which the income was earned, regardless of which province you reside. If you are not sure, you can ask the financial institution where your Locked-in account is held, they should have the information on file.
If you have any questions or want more information, please do not hesitate to give me a call.
Happy Mother’s Day!
Tracey
Sources: moneysmartblog.com article by Mike Holman, Jamie Golombek at jamiegolombek.com, fsco.gov.on.ca MT 2017-05-29, MT2020-05-08