LOCKED-IN RETIREMENT INCOME FUND
The Locked-In Retirement Income Fund or "LRIF" was
introduced through an amendment to the Regulation, which came into
force on August 14, 1998.
Who Qualifies
Plan members who are retiring under defined contribution or money
purchase pension plans, as well as individuals with locked-in pension
funds in locked-in RRSPs, Locked-In Retirement Accounts (LIRA), or
Life Income Funds (LIF) have the option of transferring their pension
funds to a LRIF. Plan members retiring under defined benefit pension
plans will only be permitted to transfer the value of their pension
benefits to a LRIF if the plan provisions permit.
Variable Income
Upon transferring pension funds to a LRIF at retirement, an
individual will receive an adjustable flow of retirement income,
subject to an annual minimum and maximum withdrawal amount. The
withdrawal range is calculated so that there is enough money in the
fund to ensure that the individual receives an income for their
lifetime. It is important to note that many of the rules that apply to
RRIFs also apply to the LRIF.
Minimum Income
The minimum withdrawal an individual must take from the LRIF in any
given year, other than the first year of the fund, is determined
according to the minimum withdrawal formula for Registered Retirement
Income Funds (RRIF) under the Income Tax Act.
Maximum Income
The maximum income payable is based on the investment income earned
in the fund in the previous year with a minimum of 6% of the fund in
the first two years.
In comparison to the life annuity and LIF, the LRIF is the most
flexible option for determining the flow of income. It is, however the
most volatile option because the amount that can be taken in any year
will change depending on investment earnings during the previous year.
Temporary Income
Effective May 25, 2005, the temporary income
provisions of the regulation were repealed. No amount shall be paid
out of a LRIF as temporary income.
A LRIF owner, who prior to May 25, 2005 was entitled to be paid
temporary income from his or her LRIF in 2005 and who does not make an
application for a “prescribed transfer” from that LRIF, may continue to
be paid temporary income in 2005 according to that LRIF contract.
Should these LRIF owners however subsequently make an application for a
“prescribed transfer” from that LRIF, no further temporary income may
be paid despite any provisions that apply to that LRIF contract.
No LRIF owner can be paid temporary income after December 31, 2005
despite any provisions that apply to their LRIF contract.
Death Prior to Conversion
Where the LRIF owner dies prior to converting it to a Life Annuity,
the balance of the LRIF will be transferred to the spouse or
common-law partner. Where there is no spouse or partner, the balance
of the fund will be transferred to the beneficiary, or where no
beneficiary exists, to the owner’s estate.
If the LRIF owner is a former or surviving spouse or partner of a
member or former member, the balance in the fund may be paid to the
designated beneficiary, or estate, in a lump sum.
Transfers
Funds in a LRIF may be transferred to another approved LRIF
contract, to a LIF, to a Locked-In Retirement Account, or be used to
purchase a life annuity.
Employers, RRSP/LIRA carriers, LIF carriers and LRIF carriers must
advise the financial institution issuing a LRIF contract, in writing,
that the pension funds are locked-in and must be used to provide a
pension.
NOTE: When a LRIF owner requests a transfer from one LRIF to
a new LRIF or LIF during a given calendar year, the financial
institution issuing the new LRIF or LIF contract cannot make any
payments, to the LRIF owner during that
year. The LRIF owner must be sure to make any desired withdrawals from
the old LRIF before making the transfer.
Pension Waiver Form Required
If the LRIF owner has a spouse or common-law partner and elects to
purchase an annuity with the fund, the form of pension must be a joint
life pension reducing to not less than 2/3rds on the death of the
owner or the spouse or common-law partner, unless the owner and the
spouse or common-law partner jointly complete the "Pension
Waiver Form" (form MG-1701) prior to purchasing the annuity.
If the LRIF owner is a former or surviving spouse or partner of a
member or former member, a joint life pension is not required in the
event the LRIF owner has a spouse or common-law partner and elects to
purchase an annuity with the fund.
Superintendent's List of Approved LIRAs/LIFs/LRIFs
Section 18.1 provides that a transfer of locked-in money to a LRIF
can be made only if the financial institution, which is to receive the
money, has
- filed with the Superintendent for approval a copy of the
standard LRIF addendum which contains all the contractual
provisions required in subsections 18.1(15) and 18.2(3),
- been notified in writing that its name has been placed on the
Superintendent's List of Financial Institutions for purposes of
the LIRA/LIF/LRIF, and
- not been notified by the Superintendent that its name has been
removed from that list.
To qualify as a LRIF, the financial institution must file the
standard form of contract it intends to use which must conform with
the requirements in sections 18.1(15) and 18.2(3) of the regulations
under The Pension Benefits Act. Please note that financial
institutions are not required to file their Registered
Retirement Income Fund Contract, Declaration of Trust or Application
Form. Only a standard addendum conforming with the requirements
in sections 18.1(15) and 18.2(3) need be filed for approval.
Confirmation that the RRIF contract has been registered with Canada
Revenue Agency along with the registration number must
also be submitted.
In the event the requirements of the regulation are met, the
financial institution's name will be placed on the Superintendent's
List of Financial Institutions for the purpose of the LIRA/LIF/LRIF.
Any amendment to the standard addendum must also be filed with the
Superintendent.
To facilitate the preparation of the addendum to be filed with the
Commission, a sample addendum
has been developed. Financial institutions may wish to refer to this
addendum in preparing their standard addendum. However, institutions
are also advised to review the applicable provision of the regulations
when preparing such addendum.
A copy of the most recent Superintendent’s List of Financial
Institutions may be obtained from the Pension Commission of Manitoba,
or by viewing our website.
Calculating the Maximum Withdrawal Amount
The following example demonstrates how the maximum withdrawal
amount is calculated.
Assumptions:
Previous year’s investment earnings =6%
Age
= 64
Capital
= $150,000
Minimum = minimum amount set for a RRIF by Canada
Revenue Agency. This formula applies for those 70 and under. For those
71 and older see Canada Revenue Agency table of factors.
Value of RRIF
(90-64)
Government Links: