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Unlocking Your Locked-in Pension Accounts

Is your pension plan federally or provincially legislated?  This information must be provided to your financial institution if you are transferring funds from a pension plan to a locked-in plan at your financial institution.  The rules for maximum annual withdrawals and for unlocking differ depending on whether your plan is federal or provincial and if it is provincial it depends on the province.  If your plan is federally-regulated it will be listed on the website of the Office of the Superintendent of Financial Institutions (OSFI).  See Federal Federally Regulated Pension Plans Unlocking below.

Some provinces allow the "unlocking" of all or a portion of a locked-in plan under certain circumstances.  Some of the circumstances include:

Some provinces allow the "unlocking" of all or a portion of  a locked-in account without the above restrictions.  For information by province, follow the links to your pension plan regulator, in the table of RPP regulators, or the following links:

Federally Regulated Pension Plans Unlocking

Federally regulated pension plans are administered by the Office of the Superintendent of Financial Institutions (OSFI).

The list of federally regulated pension plans can be found on the OSFI website.  You can type a name in to search for the plan, or you can leave the search box blank, press search, and get a list of all plans.

Under some circumstances, when your employment with the pension plan provider ends, it may be possible to have your plan paid out instead of being transferred to a locked-in account, if the value in the plan is low, or if you have a shortened life expectancy.  Check with your plan administrator.

If your federally-regulated pension plans has been transferred to a:

then the following unlocking provisions are available:

Small Balance Unlocking

Individuals 55 or over with a total value of all assets in all of their locked-in RRSPs, Restricted locked-in RRSPs, LIFs, and RLIFs totalling less than 50% of the Yearly Maximum Pensionable Earnings (YMPE, 50% = $32,450 in 2022) 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.

See Pension Unlocking on the OSFI website and "expand all" to see the list of questions.  Under #2 Unlocking Options, see Age 55 and over - Small account balance unlocking.

One-Time 50% Unlocking

Individuals 55 or older will be entitled to a one-time conversion of up to 50% of holdings value into a tax-deferred savings vehicle with no maximum withdrawal limits. If the funds are transferred to the locked-in funds owner's own RRSP or RRIF, this does not require contribution room, and the owner is not taxed until the funds are later withdrawn from the RRSP or RRIF.

On the website of the Office of Superintendent of Financial Institutions (OSFI), it is stated that the unlocked funds can be transferred to any RRSP or RRIF, not necessarily one belonging to the holder of the locked-in funds.  This statement just confuses the issue, because a transfer to someone else is the same as a taxable withdrawal and subsequent gift.

Let's say Jane is unlocking $100,000 of her locked-in funds, and she has transferred the funds to her own RRSP or RRIF.  If she wants to transfer all or a portion of the funds instead to one or more others, this is the same as withdrawing the funds and then gifting them to someone else.  She will be taxed on the amount withdrawn.

If the recipient (spouse or other) wishes to deposit the gift to their RRSP, they would have to have sufficient contribution room.

If Jane wishes to make a contribution to a spousal RRSP, she would have to have sufficient contribution room.

The only time that a direct transfer to a spouse's registered plan is necessary is to fulfill the requirements of a divorce or separation agreement.  In this case no contribution room is necessary and the transfer does not generate taxable income.

See Pension Unlocking on the OSFI website and "expand all" to see the list of questions.  Under #2 Unlocking Options, see Age 55 and over - One-time 50% unlocking.

Financial Hardship Unlocking

Generally, withdrawals for financial hardship can only be done once per year, unless you have more than one locked-in account.  However, if there is only one locked-in account and the maximum permitted amount was not withdrawn, another application for withdrawal can be made if done within 30 days of the 1st withdrawal.  If you have more than one account and wish to make a subsequent withdrawal, the application for the 2nd withdrawal also must be made within 30 days of the of the 1st withdrawal. The total dollar amount of all withdrawals must be within the permitted maximum for the year.

The amount that can be unlocked is:

1. Low income - the amount is based on the expected income (line 236 on your tax return) for the year, and varies from a withdrawal of 50% of the YMPE (50% = $32,450 in 2022) for $0 in expected income, to no withdrawal allowed when expected income is 75% of the YMPE (75% = $48,675 for 2022)
2. High medical or disability related costs - the amount of medical expenses can be unlocked, up to a maximum of 50% of the YMPE, as long as medical expenses exceed 20% of the YMPE (20% = $12,980 for 2022).  The medical expenses can include expenses of the plan holder or others, including a spouse or dependant.

See Pension Unlocking on the OSFI website and "expand all" to see the list of questions.  Under #2 Unlocking Options, see Financial hardship.

Non-Resident Unlocking

If you are no longer employed by the employer from which the pension funds originated, and you have been a non-resident of Canada for at least 2 consecutive years, then you can unlock the total value of your plan funds.

See Pension Unlocking on the OSFI website and "expand all" to see the list of questions.  Under #2 Unlocking Options, see Non-residency.

Shortened Life Expectancy Unlocking

If a physician has certified that you have a shortened life expectancy due to a physical or mental disability, then the total value of your plan funds can be unlocked.

Note that the unlocking of these funds will lose the protection from creditors provided to locked-in funds.

See Pension Unlocking on the OSFI website and "expand all" to see the list of questions.  Under #2 Unlocking Options, see Shortened life expectancy.

OSFI Resouces

The Office of the Superintendent of Financial Institutions Canada (OSFI) information on Pension Unlocking provides more information on federally-regulated pension plans.

Yearly Maximum Pensionable Earnings

The yearly maximum pensionable earnings (YMPE), is the maximum amount on which contributions to the Canada Pension Plan (CPP) are based.  Thresholds which are based on the YMPE will change each year as the YMPE changes.  See the CPP/EI page for the YMPE for the current year.

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: October 26, 2023