Last updated: December 2007
On July 27, 2007, O. Reg. 416/07 under the Pension Benefits Act was filed. The Regulation makes numerous important changes to the rules governing locked-in accounts. Locked-in accounts include Locked-In Retirement Accounts (LIRAs), Old Life Income Funds (Old LIFs), New Life Income Funds (New LIFs) and Locked-In Retirement Income Funds (LRIFs). The following are answers to some of the questions that are likely to arise as a result of these changes. For ease of reference, the questions are grouped under the following headings:
Overview of changes
Changes that affect the Old LIF
Changes that affect the Locked-In Retirement Income Fund (LRIF)
The New LIF
The New LIF 25% Withdrawal
Questions that pertain to financial institutions
Option to transfer money from a locked-in account to an unlocked vehicle
Unlocking of locked-in accounts for non-residents of Canada
Unlocking due to financial hardship and shortened life expectancy, small amounts at age 55 and excess federal Income Tax Act amounts
Further Information
Overview of changes
Q: What are the key changes to the locked-in account rules?
A: The key changes are:
- A new Life Income Fund (the "New LIF") is introduced effective January 1, 2008. It will provide more flexible payments and allow owners a time-limited opportunity to withdraw up to 25% of the amount of money transferred into the New LIF.
- An option to directly transfer money from a locked-in account to an unlocked vehicle, a registered retirement savings plan ("RRSP") or a registered retirement income fund ("RRIF") is provided in certain situations.
- Effective January 1, 2008, owners of locked-in accounts who are non-residents of Canada, as determined by the Canada Revenue Agency ("CRA") for the purposes of the federal Income Tax Act, may apply two years after departure from Canada to withdraw the money in their accounts.
- The Old LIF and the LRIF will not be available for purchase after December 31, 2008.
Q: Which changes came into effect as of July 27, 2007?
A:
- Owners of Old LIFs are no longer required to purchase an annuity by the end of the year in which they reach 80 years of age.
- Owners of Old LIFs will be able to continue their LIF after they reach 80 years of age.
- Owners of Locked-In Retirement Accounts ("LIRAs") can now keep the money in their LIRA until the end of the year in which they reach the age of 71 rather than the end of year in which they reach the age of 69. This reflects a change made to the federal Income Tax Act.
- Owners of Old LIFs and LRIFs can transfer the money in their accounts to a LIRA prior to the end of the year in which they reach the age of 71.
Changes that affect the Old LIF
The "Old LIF" refers to a Life Income Fund governed by Schedule 1 of the Regulation.
Q: I currently own an Old LIF. Do I have to make any changes to it to comply with the new rules?
A: There is no need to make any immediate changes to your LIF as a result of the new rules. However, since an annuity purchase is no longer required, you can continue your LIF past age 80 and you can transfer the money to a LIRA until the end of the year in which you reach age 71.
Q: Can I still buy an annuity with money in my Old LIF?
A: Yes, at any age.
Q: Will there be any effect on the amount of the annual income payment from the Old LIF in 2007?
A: No. The minimum and maximum amounts for the annual income payment for 2007 were established as of January 1, 2007 and will not change.
Q: Will the new rules change the formula for determining the minimum and maximum amount of the annual income payment for the 2008 year?
A: No. The minimum and maximum for 2008 will be calculated using the same formula as in 2007.
Q: When will FSCO publish a LIF maximum annual income payment table that reflects the change that allows owners to keep their Old LIF after age 80?
A: FSCO will publish the 2008 maximum annual income payment tables for the Old LIF (Schedule 1 LIF in policy L200-404) and the New LIF (Schedule 1.1 LIF in policy L200-405) in December 2007. The tables will contain maximum income payment percentages for ages 80 and older.
Q: If I want to transfer money out of my Old LIF, to which vehicles can I make the transfer?
A: You can transfer money in an Old LIF to a LIRA until the end of the year in which you reach age 71, to another Old LIF or to an LRIF before December 31, 2008, or for the purchase of an annuity. After January 1, 2008, you will be able to transfer the money to a New LIF as soon as financial institutions make the New LIF available.
Q: I currently own an Old LIF and I want to use the money in it to purchase a New LIF in 2008. How are my income payments from the Old LIF and the New LIF affected when I make the purchase?
A: Once you purchase the New LIF with a transfer of money from your Old LIF, the amount you can be paid from your New LIF as income for the remainder of the year is set to zero. If no money is left in your Old LIF after the transfer, you will not be able to be paid any further income amounts from your Old LIF that had been calculated for your Old LIF for 2008. To ensure that you receive the maximum income payment possible for 2008, you should arrange to receive all of your possible income payments from your Old LIF before you purchase the New LIF. In any case, however, your transfer must be structured so that you will be paid at least the minimum income payment amount required from the Old LIF under the federal Income Tax Act for 2008.
Q: I currently have an Old LIF. Can I transfer a sum of new money to it after December 31, 2008, or must I make the transfer to a New LIF?
A: Under the rules that will come into effect on January 1, 2008, anyone who continues to own an Old LIF will be permitted to transfer additional money into it until December 31, 2008. After December 31, 2008, no additional money will be permitted to be transferred into an Old LIF, even from another Old LIF.
Q: What are the differences between the Old LIF and the New LIF?
A: The New LIF will have another option for determining the maximum annual income payments and you will have a time-limited option to withdraw in cash or transfer to an RRSP or RRIF 25% of the value of the money transferred into a New LIF.
Q: Can I withdraw or transfer 25% of the funds from my Old LIF?
A: No. The 25% withdrawal or transfer option is only available under the New LIF.
Q: What happens if I die while I still have my Old LIF?
A: Your surviving spouse is entitled to the full amount in your Old LIF in an unlocked lump sum after your death. If you do not have a surviving spouse on the date of your death, your named beneficiary, or if there is none, your estate, is entitled to receive the amount in your Old LIF. Effective January 1, 2008, your spouse will have the option of transferring the full amount to his or her own RRSP or RRIF where permitted by the federal Income Tax Act.
Changes that affect the Locked-In Retirement Income Fund (LRIF)
The "LRIF" refers to a Locked-In Retirement Income Fund governed by Schedule 2 of the Regulation.
Q: I currently own an LRIF. Do I have to make any changes to it to comply with the new rules? What happens if I do nothing?
A: There is no need to make any changes to your LRIF as a result of the new rules.
Q: Will there be any effect on the amount of the annual income payment from the LRIF in 2007?
A: No. The minimum and maximum amounts for the LRIF in 2007 were based on the amount earned by the LRIF in the previous fiscal year and will not change.
Q: Will the new rules change the formula for determining the minimum and maximum amount of the annual income payment for 2008?
A: No. The minimum and maximum for 2008 will be calculated using the same formula as in 2007.
Q: If I want to transfer money out of my LRIF, to which vehicles can I make the transfer?
A: You can transfer money in an LRIF to a LIRA until the end of the year in which you reach age 71, to an Old LIF or another LRIF before December 31, 2008, or for the purchase of an annuity. After January 1, 2008, you will be able to transfer the money to a New LIF as soon as financial institutions make the new LIF available.
Q: I currently own an LRIF and I want to use the money in it to purchase a New LIF in 2008. How are my income payments from the LRIF and the New LIF affected when I make the purchase?
A: Once you purchase the New LIF with a transfer of money from your LRIF, the amount you can be paid from your New LIF as income for the remainder of the year is set to zero. If no money is left in your LRIF after the transfer, you will not be able to be paid any further income amounts from your LRIF that had been calculated for your LRIF for 2008. To ensure that you receive the maximum income payment possible for 2008, you should arrange to receive all of your possible income payments from your LRIF before you purchase the New LIF. In any case, however, your transfer must be structured so that you will be paid at least the minimum income payment amount required from the LRIF under the federal Income Tax Act for 2008.
Q: I currently have an LRIF. Can I transfer a new sum of money to it after December 31, 2008, or must I make the transfer to a New LIF?
A: Under the rules that will come into effect on January 1, 2008, anyone who continues to own an LRIF will be permitted to transfer additional money into it until December 31, 2008. After December 31, 2008, no additional money will be permitted to be transferred into an LRIF, even from another LRIF.
Q: What are the differences between the LRIF and the New LIF?
A: You will be able to withdraw in cash or transfer to an RRSP or RRIF 25% of the value of the money transferred into a New LIF (within 60 days after the money was transferred into the New LIF), and one of the methods by which to determine the maximum annual income payment (the cumulative investment earnings since the inception of the LRIF) will be replaced by the maximum amount under the LIF formula. If you transfer from an LRIF to a New LIF, you will no longer be able to carry forward the unused portion of your LRIF maximum annual income payment amount. If you do not use up the unused portion of your annual income payment amount in a fiscal year before your LRIF money is transferred to a New LIF, you will no longer be able to add the unused portion to the maximum amount you can withdraw in future years.
Q: What happens if I die while I still have my LRIF?
A: Your surviving spouse is entitled to the full amount in your LRIF in an unlocked lump sum after your death. If you do not have a surviving spouse on the date of your death, your named beneficiary, or if there is none, your estate, is entitled to receive the amount in your LRIF. Effective January 1, 2008, your spouse will have the option of transferring the full amount to his or her own RRSP or RRIF where permitted by the federal Income Tax Act.
The New LIF
The "New LIF" refers to a Life Income Fund governed by Schedule 1.1 of the Regulation.
Q: When will the New LIF be available?
A: The regulation allowing for the New LIF will come into effect on January 1, 2008. After that date, financial institutions will be able to make the New LIF available to consumers once they get approval for their New LIF contract from the Canada Revenue Agency.
Q: Who will be able to purchase the New LIF?
A: An owner of an Old LIF, an LRIF or a LIRA may use the money in their account to purchase a New LIF. A member of a registered pension plan who has terminated employment and is entitled to commute the pension benefit and transfer it into a locked-in account, or a former spouse of a member who has a corresponding entitlement, may transfer their commuted value to a New LIF.
Q: What are the significant features of the New LIF?
A: First, you will be able to keep the New LIF past age 80. If you took the maximum income payment each year, your New LIF would be exhausted by age 90, but if there are assets remaining in the New LIF at age 90, you may continue to keep it and withdraw income from it in subsequent years. Second, the maximum annual income payment will be the greater of the amount you could be paid under the formula in the New LIF (which is the same as the formula in the Old LIF) or the amount of investment earnings of the New LIF in the previous year. Third, you will be able to withdraw or transfer to an RRSP or RRIF up to 25% of the amount transferred into the New LIF if you do so within 60 days after the money was transferred into the New LIF.
Q: Is the maximum annual income payment amount in the first year of a New LIF calculated based on the original amount transferred into the New LIF, or is it calculated using the adjusted amount after a 25% unlocking withdrawal has been made? For example, a New LIF is purchased with $100,000 deposited into it from a LIRA on the date of purchase. Fifty days later, the owner withdraws 25%, which leaves $75,000 in the New LIF. Is the first year maximum annual income payment amount based on $100,000 or $75,000?
A: The maximum annual income payment for the first year is based on the balance of the New LIF at the start of the New LIF’s fiscal year, regardless of any amount subsequently withdrawn. In this example, the maximum would be based on $100,000.
Note, however, that if the money deposited into the New LIF came from an Old LIF, LRIF or another New LIF, the maximum annual income payment amount for the New LIF for that fiscal year would be zero.
Q: Will the New LIF allow for the carry forward of any unused portion of the maximum annual income payment amount to future years, similar to what is allowed under the LRIF?
A: There is no carry forward feature in the New LIF.
Q: If I own a New LIF and I want to transfer money from it, to which vehicles may I make the transfer?
A: You may transfer money to another New LIF or use the money to purchase an annuity. You will not be able to transfer money from a New LIF to a LIRA.
Q: My retirement money is currently in a locked-in account in the form of non-redeemable GICs which will not mature for a few years. Can I transfer this money to a New LIF in their GIC form?
A: You are entitled under Ontario’s pension laws to transfer money out of your locked-in account to another locked-in vehicle (including a New LIF) without having to cash it in, provided that such an "in kind" transfer is allowed under the terms of your contract with your financial institution. You should check with your financial institution about making such a transfer and what issues might arise.
Q: What is the date on which the New LIF is established? Is it the date I signed the application, the date the financial institution deposits the money, or some other date?
A: The New LIF is established on the date the financial institution accepts the application, as determined by the financial institution. This could be the same date as the date the application is signed, and it could precede the date on which money is actually transferred into the New LIF. In any event, the date cannot be earlier than January 1, 2008.
Q: Can an Old LIF simply be converted into a New LIF?
A: No. The New LIF is a completely distinct locked-in account from the Old LIF, in the same way that an LRIF is a distinct kind of locked-in account from a LIF. If an owner of an Old LIF wants a New LIF, he or she must purchase a New LIF by transferring money from the Old LIF into a New LIF – the Old LIF cannot simply be converted into a New LIF.
Q: I want to transfer money from a New LIF to another New LIF. When must the financial institution transfer the money?
A: The financial institution administering a New LIF or an Old LIF must agree to transfer money to another LIF within 30 days after the owner makes the application. This does not apply to a transfer of assets held as securities whose term of investment extends beyond the 30-day period. In that situation, you should discuss the transfer with your financial institution.
Q: What happens if I die while I own a New LIF?
A: Your surviving spouse will be entitled to the full amount in your New LIF in an unlocked lump sum after your death or will have the option of transferring the full amount to his or her own RRSP or RRIF where permitted by the federal Income Tax Act. If you do not have a surviving spouse on the date of your death, your named beneficiary, or if there is none, your estate, is entitled to receive the amount in your New LIF.
Q: Will FSCO continue to publish an annual table that sets out the maximum withdrawal schedule?
A: Yes. The annual table will continue to be published and extended to ages beyond age 80.
The New LIF 25% Withdrawal
Q: How will the 25% withdrawal work?
A: Owners of a New LIF will have the time-limited option of withdrawing or transferring to an RRSP or RRIF an amount up to 25% of the total market value of the money transferred into the New LIF. The transfer of money to a New LIF may be from an Old LIF, an LRIF, a LIRA, or from a registered pension plan when an individual who is entitled to an immediate pension terminates employment and is entitled to a transfer of his or her commuted value. However, the 25% withdrawal will not apply when assets are transferred from one New LIF to another New LIF or from an annuity to a New LIF.
Q: When will I be able to make a 25% withdrawal? How do I apply, and to whom?
A: The owner of the New LIF will be able to apply to the financial institution that issued the New LIF within 60 days from the date the money was transferred to the New LIF. Application must be made on a form that is issued by the Superintendent of Financial Services. The form will be available in December 2007.
Q: What would happen if I failed to make the 25% withdrawal application within 60 days? Is there another opportunity to make the 25% withdrawal?
A: If you do not apply to make the 25% withdrawal within 60 days of a transfer of money into a New LIF, there will not be another opportunity to take advantage of this provision in relation to that transfer of money.
Q: Would you please clarify the time limits for the 25% withdrawal?
A: Each and every time money is transferred into a New LIF from a pension plan, a LIRA, an Old LIF or an LRIF (but not from another New LIF or an annuity), the owner of the New LIF has 60 days to apply for a withdrawal of up to 25% of the amount that was transferred into the New LIF. The 60 days begin on the date the money is transferred to the New LIF; if you are not sure about this date, please check with your financial institution. The application must be made to the financial institution that administers the New LIF on a form approved by the Superintendent of Financial Services.
Q: Is the 25% withdrawal under the New LIF in addition to the maximum amount that I can be paid as income for the year?
A: Yes. The 25% withdrawal amount is distinct from, and in addition to, the maximum amount that would be payable from the New LIF as income. The annual maximum and minimum income payment from a LIF always relates to the balance of the LIF at the beginning of the LIF’s fiscal year.
Q: The owner of a New LIF has 60 days from the date of transfer of money into a New LIF to elect to withdraw up to 25% of the money transferred into the New LIF. Will this option be available for New LIFs after 2008?
A: Yes. The 25% withdrawal applies to every transfer of money into a New LIF from a registered pension plan, a LIRA, an Old LIF or an LRIF, whenever that transfer occurs. The 25% withdrawal does not apply to a transfer of money into a New LIF from another New LIF or from an annuity.
Q: Does the 25% withdrawal require any changes to the provisions of pension plans?
A: No. The 25% withdrawal under the New LIF does not require any pension plan amendments. The 25% withdrawal will require an application to the financial institution holding the New LIF assets, not to the pension plan from which those assets originated.
Q: Must the 25% withdrawal application be made within 60 days from the date the New LIF was opened, or 60 days from the date the money was transferred to the New LIF?
A: The withdrawal application must be made within 60 days from the date money was transferred to the New LIF. A new application for a 25% withdrawal can be made every time money is transferred into a New LIF.
Q: Can the 25% withdrawal be made from the existing locked-in vehicle (e.g., LIRA, Old LIF, LRIF) prior to the transfer to the New LIF?
A: No. The 25% withdrawal must come from the New LIF after the money has been transferred into the New LIF. There is no authority to withdraw 25% from a LIRA, Old LIF or LRIF.
Q: If an individual has already purchased a life annuity with locked-in money, is it possible to switch back to a New LIF to take advantage of the 25% withdrawal?
A: It may be possible to commute the unexpired part of a guaranteed life annuity and purchase a New LIF with the proceeds, but the 25% withdrawal option would not apply to the transferred money. The 25% withdrawal only applies to money transferred into a New LIF directly from a pension plan, LIRA, Old LIF or LRIF, not to money transferred from an annuity (or from another New LIF).
Questions that pertain to financial institutions
The following questions pertain to financial institutions that administer locked-in accounts, but may also be of interest to other persons, especially those who own locked-in accounts or wish to purchase a New LIF.
Q: When must financial institutions notify owners of Old LIFs and LRIFs of the new rules?
A: Under Ontario’s pension laws, the financial institution that administers a LIF or LRIF must notify the LIF or LRIF owner of any proposed change to the LIF or LRIF contract at least 90 days before the change comes into effect. This would include a change that results from amendments to the legislative rules applicable to LIFs or LRIFs.
Q: If a financial institution receives approval for a New LIF contract from the Canada Revenue Agency (CRA) prior to January 1, 2008, can it offer the New LIF prior to that date?
A: No. Because the legislative changes that allow for a New LIF do not come into force until January 1, 2008, financial institutions are not permitted to offer a New LIF for sale until that date. However, financial institutions are free to take whatever steps they can before January 1, 2008, in order to have the New LIF available for sale on or after that date.
Q: According to the changes that were made in July 2007, Old LIFs and LRIFs cannot be sold after December 31, 2008. Can a financial institution decide to stop selling these products before that date, or must it make them available to clients until the deadline?
A: A financial institution can choose to stop opening new locked-in accounts (LIRAs, LIFs or LRIFs) at any time.
Q: When money is transferred to a New LIF, must the financial institution administering the New LIF be aware of the source of the money? Must the prior locked-in vehicle’s original date of purchase be validated?
A: The financial institution administering the New LIF will have to determine what kind of locked-in vehicle (i.e., pension plan, annuity, LIRA, Old LIF, New LIF or LRIF) the money was transferred from, because the 25% withdrawal under the New LIF only applies to money that comes from a pension plan, LIRA, Old LIF or an LRIF, not from an annuity or an existing New LIF. It is not necessary for the financial institution receiving the money to know the date on which any prior locked-in vehicle was purchased by the owner.
Q: If money is transferred to a New LIF from another New LIF, an Old LIF or an LRIF, must the financial institution keep track of the investment income earned by the transferring fund in the fiscal year up to the date of transfer? For example, if money is transferred to a New LIF from an LRIF on December 1, 2008, and there was investment income of $500.00 earned in the LRIF’s 2008 fiscal year prior to the transfer, how should the financial institution administering the New LIF record this amount?
A: The financial institution that administers the receiving New LIF must be aware of the investment returns attributable to the transferring fund’s fiscal year up to the date of transfer, so as to calculate one of the possible maximum income payment amounts for the New LIF’s next fiscal year. In the example, the financial institution must ensure it determines and records the $500.00 and uses it to calculate the maximum income amount payable from the New LIF in 2009.
Q: Should financial institutions use the Old LIF maximum annual income payment rules for Old LIFs in 2008 or can they use the New LIF maximum annual payment rules?
A: For the 2008 year, the maximum annual income payment rules currently applicable to Old LIFs will continue to apply to Old LIFs, while the new maximum annual income payment rules applicable to New LIFs will apply to New LIFs. However, for both Old LIFs and New LIFs, the maximum amount that may be paid in the year of transfer is zero, unless the money was transferred from a LIRA or a registered pension plan.
Q: Can a financial institution simply convert an Old LIF into a New LIF? If not, will the New LIF require a new specimen plan number or can the specimen number from the Old LIF be used?
A: A New LIF is a completely distinct locked-in account from the Old LIF, in the same way that an LRIF is a distinct kind of locked-in account from a LIF. As of January 1, 2008, financial institutions will be permitted to offer two distinct kinds of Ontario LIFs, the Old LIF and the New LIF. If an owner of an Old LIF wants a New LIF, he or she must apply for a New LIF and transfer money from the Old LIF into a New LIF – the Old LIF cannot simply be converted into a New LIF. Specimen plan numbers appear to be an issue for the Canada Revenue Agency (CRA), not for FSCO. You may wish to contact the CRA’s Registered Plan Directorate at 1-800-267-3100 to discuss this question.
Q: If an individual is merging two LIRA accounts from two different financial institutions into a New LIF, the funds are likely to be transferred into the New LIF at different times. Should the receiving financial institution determine the calculation for the 25% withdrawal when each amount is received separately, or on the total amount when both are received? Also, if an individual has two LIRA accounts but transfers them into the same New LIF several months apart, is he or she entitled to a second 25% withdrawal on the second transfer?
A: The 25% withdrawal applies to each individual transfer of money into the New LIF. Each and every time a sum of money is transferred into the New LIF from a LIRA, LRIF, Old LIF or pension plan, the owner of the New LIF has 60 days from the date of transfer to apply to the financial institution to withdraw up to 25% of the amount that was transferred into the New LIF. For each withdrawal, a separate application has to be made.
Q: If a client with an Old LIF wants to use the money in the Old LIF to purchase a New LIF, does the financial institution have to pay out the minimum annual income amount from the Old LIF and set the maximum income payment amount for the New LIF to zero?
A: If money is transferred from an Old LIF to a New LIF, any minimum amount required to be paid out of the Old LIF under federal income tax laws must be paid out of the Old LIF before the end of its fiscal year. The maximum amount that can be paid out of the New LIF during the New LIF’s fiscal year that includes the date of transfer is zero.
Option to transfer money from a locked-in account to an unlocked vehicle
Q: How have the rules for transfers of locked-in accounts changed?
A: Effective January 1, 2008, owners of LIRAs, Old LIFs, LRIFs and, when they become available, New LIFs will have new transfer options in two situations:
- When the owner of a locked-in account dies, his or her surviving spouse will be able to transfer the survivor benefit directly to his or her own RRSP or RRIF where permitted by the federal Income Tax Act. Under the current rules, the surviving spouse can only take the benefit in a lump sum.
- When the owner of a locked-in account is over the age of 55 and has less than 40% of the Year’s Maximum Pensionable Earnings under the Canada Pension Plan ($17,960 in 2008) in all of his or her locked-in accounts, the owner may transfer the entire amount directly to a his or her own RRSP or a RRIF rather than receiving it in a lump sum.
Q: When will the small amount transfer provision come into effect? How do I apply?
A: This provision comes into effect on January 1, 2008. Individuals will have to apply to the financial institution holding their locked-in accounts on a form approved by the Superintendent of Financial Services. The form will be available in December 2007.
Q: When the owner of a locked-in account dies, can the surviving spouse take the full value of the survivor benefit in cash or transfer the full value of the survivor benefit to an RRSP or RRIF? Can the surviving spouse take part of the survivor benefit in cash and transfer part to an RRSP or RRIF?
A: The full amount of the locked-in account at the time the survivor benefit is paid must be fully withdrawn or fully transferred to an RRSP or RRIF. A surviving spouse cannot choose to withdraw some of the survivor benefit in cash and transfer the remaining amount to an RRSP or RRIF.
Q: Must the transfer of the survivor benefit be made to the surviving spouse, or can it be made to a named beneficiary?
A: The survivor benefit must be paid to the owner’s spouse unless the spouse waives entitlement, or the spouse and owner were living separate and apart at the date of the owner’s death. If there is no spouse entitled to a benefit on the owner’s death, the survivor benefit will be payable to the owner’s named beneficiary, if any.
Q: Can the 25% withdrawal amount transferable from a New LIF to an RRSP or RRIF be transferred to a spousal RRSP or spousal RRIF?
A: Ontario’s pension laws allow the 25% withdrawal amount to be transferred to any RRSP or RRIF, not just to one owned by the owner of the New LIF. However, there may be restrictions under the federal Income Tax Act for such a transfer. Questions about the tax impact of any such transfer should be directed to the Registered Plans Directorate of the Canada Revenue Agency at 1-800-267-3100.
Unlocking of locked-in accounts for non-residents of Canada
Q: How have the rules changed?
A: Effective January 1, 2008, the owner of a LIRA, LRIF, Old LIF or New LIF who is a non-resident of Canada as determined by the Canada Revenue Agency for the purposes of the federal Income Tax Act may apply two years after departure from Canada to withdraw all the money in their account.
Q: How do I make the application?
A: An owner who satisfies the requirements must sign an application form and submit it to the financial institution which holds their locked-in accounts. The application must be made on a form issued by the Superintendent of Financial Services, which will be available in January 2008. The form must be accompanied by a written determination from the Canada Revenue Agency (CRA) that the person is a non-resident for the purpose of the Income Tax Act and a consent from the owner’s spouse or a certification that the owner does not have a spouse.
Interested owners who might qualify can find further information on the criteria CRA uses for a determination that a person is a non-resident at NR73-Determination of Residency Status (Leaving Canada) and at CRA’s other information on residency status on the CRA website.
Q: I understand that as a non-resident of Canada, I can apply to withdraw all of my money in my locked-in account (LIRA, New LIF, Old LIF or LRIF) after living abroad for two years. Can I make this application at any age? If I have used the money in the locked-in account to purchase an annuity, can I still apply?
A: The ability for non-residents of Canada to unlock money in locked-in accounts that comes into effect on January 1, 2008, will apply to locked-in account owners of any age. These rules will only apply to money that is held in an Ontario locked-in account at the time the unlocking application is made. Individuals who have already purchased an annuity with their locked-in money will not be able to make this application for money related to that annuity.
Unlocking due to financial hardship, shortened life expectancy, small amounts at age 55 and excess federal Income Tax Act amounts
Q: Will these changes affect the requirements for the withdrawal of money from locked-in accounts for financial hardship or shortened life expectancy?
A: The rules for unlocking accounts due to financial hardship or shortened life expectancy will not change as a result of the changes made to locked-in accounts. However, there is one minor change affecting financial hardship unlocking. With the introduction of the Ontario Child Benefit in the 2007 Ontario Budget, the section of the Regulations under the Pension Benefit Act which exempts certain sources of income from the total income of an individual used to calculate eligibility for a low income financial hardship withdrawal will now also exempt the new benefit.
Q: If the owner of a New LIF applies for and withdraws 25% of the money transferred into the New LIF, can the owner still apply for unlocking due to financial hardship or any other unlocking criteria?
A: Yes, applications for unlocking due to financial hardship or other unlocking criteria can still be made.
Further information
Q: If I have any questions, who can I contact?
A: The contact centre of the Financial Services Commission of Ontario at 1-800-668-0128 or (416) 250-7250.
Financial Services Commission of Ontario