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:
-
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.
-
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.
-
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. However, financial
institutions made need some time to update their systems in order to offer
these new options. At least one of the major banks indicated
that the new federal LIF unlocking provisions would not be available until
January 1, 2009.
Note that the unlocking of these funds will lose the
protection from creditors provided to locked-in funds.
See also - links to all information on TaxTips.ca related to persons
with disabilities.
Tax Tip: Contact the
regulator of your pension plan to determine what you can do
with your LIRA - don't rely solely on information from your
financial institution.
Revised: July 14, 2010
