What is a Locked-In Retirement Account (LIRA)?

If you are in a registered pension plan with your employer and leave that company, or if you are laid off, your pension will be transferred into a Locked-In Retirement Account (LIRA). Locked-In Retirement Accounts are sometimes referred to as the more appropriate name of Locked-In Retirement Savings Plans (LRSP).

It’s important to understand that that a locked-in plan is like an RRSP, but it it has specific restrictions. You will need to understand the restrictions associated with a LIRA if you want to avoid running afoul of regulation, and if you want to make the best possible decisions with your retirement account.

How a LIRA Works

LIRAs are similar to an RRSP, but as the name suggests, are locked-in until retirement. Once the plan is converted to a Locked-In Retirement Account, you cannot make further contributions to it. You are not allowed to make withdrawals from the account. Unlike the “regular” RRSP, which allows for withdrawals, you cannot take money out of a locked-in account. Instead, you are required to convert your LIRA into another type off account that can provide you with the income you need in retirement.

Once you reach retirement or turn 71 you are required to convert your LIRA to either a life annuity, Life Income Fund (LIF), Locked-In Retirement Income Fund (LRIF) or a Prescribed Registered Retirement Income Fund (PRRIF). Here is a quick look at these options:

  • Life annuity: You purchase a life annuity from an insurance company, and, in return, you receive regular periodic payments for life. The payment your receive depends on your current age, how much you use to purchase the annuity, current interest rates, and other factors. You don’t have control over the investments involved, but you are guaranteed a specific payment on a regular basis.
  • LIF: You can control the investments in your account, but your withdrawals are subject to minimum and maximum annual amounts.
  • LRIF: Like the LIF, you can decide how to invest your money. This fund is also subject to annual minimum and maximum withdrawal amounts each year.
  • PRRIF: There are no minimum or maximum withdrawal requirements with this option. It is the most flexible of choices when it comes to your locked-in retirement account. However, realize that you don’t get a pension tax credit for the income in a PRRIF until you are 65. So, if you retire early, you don’t get that advantage.

There are some exceptions that might allow you to access the money in your Locked-In Retirement Account before retirement. While the rules can vary from province to province, generally they include reduced life expectancy, unemployment or low income, balances below a certain amount, and those that will become a non-resident of Canada. Make sure you understand the requirements associated with a LIRA, and consider which conversion option is likely to work best in your particular circumstances.

While a Locked-In Retirement Account has many restrictions, it could help to protect the pensions of those who change careers a few times throughout their life. It’s one way to ensure you get the money you are entitled to.

If you are in a registered pension plan with your employer and leave that company, your pension is transferred into a Locked-In Retirement Account (LIRA).

Written by Tom Drake

Tom Drake is the owner and head writer of Canadian Finance Blog. While you’re here, consider signing up for the RSS feed or email subscription. Both deliver the latest articles directly to you! You can also follow me on Twitter for all the latest posts or to send me any comments or questions!

31 Responses to What is a Locked-In Retirement Account (LIRA)?

  1. I’m looking at leaving my current employer where I have been paying into a pension. As a result, to transfer my pension away from the corporate pension I must convert to a locked in RRSP or LIRA or pay tax on bringing the money out. The bad thing about converting to a LIRA is that you are not eligible to use those funds to participate in the Home Buyers Plan. What a shame!

  2. I have a locked in retirement account, I need to access the funds. I am not and have never been a Canadian citizen. I used to be employed in Canada which is my only ties to this country. I am only 32yrs old, I am in the worst financial state I have ever experienced. Can someone out there help me?

  3. I am about to put my pension in a LIRA. My plan is to have a financial analyst to manage part of it, and myself to manage the rest. Question is can I split the LIRA into multiple LIRA accounts under different management ? Thanks.

  4. rira is one big rip. MY money has been in the hands of 3 different investors in 16 years .all have done nothing but take out fees and watch it shrink .started at 54,000. now down to 39,000.retirement fund ??? right.. for the investment managers , certainly not for me. Still they say hang in there for the long haul. what a joke..

  5. Bob,

    Why don’t you open a LIRA account with one of the banks or discount traders? Buy shares of a blue chip company, or index funds with low MERS (you don’t want greedy fund managers who wine and dine, and play golf, or investment advisors with their hands in your wallet).

    Take charge!

    I recently did this and within a month I my picks are up 10%. Had I stayed with the stupid funds I wound have been down 20%. Take charge of your own!

    Blue chip companies to look at (Cdn Banks, Telecom, Timmies etc. look at the financials before investing. This is not meant to be a recommendation of any sort). Talk to a professional you trust – before you invest.

  6. I presently have a portion of my pension in a Lira. At retirement will I be able to access all of it or is it a fund that pays out interest monthly to live on? If the latter is that case then when I pass is the balance available to my spouse or children.
    – Peter

  7. I have a husband and wife that have been living and working in the USA fo the last seven years. They will become US citizens in a few months. They both have LIRA and RRSP accounts in Canada (the result of a company that went out of business) that are held at Edward Jones Canada. They would like to bring the funds to the USA and merge into their USA Traditional IRA accounts here. How can we accomplish this? They are 54 and 53 years old.

  8. Good day Tom,
    Please help me with my question about the LIRA, I found this add on a news paper and its related about the locked in retirement pension account. I have to fax all my papers to him and 60% will be mine in cash within 3 months. can you please check this number 1- 888-993-8841, before i send my document for my locked in retirement account.. Oh, by the way I invested it to Mutual fund from TD bank.
    Please check it for me, if this guy is legit, his from toronto.
    Your help is very much appreciated.
    Thank’s,
    ROCK

  9. I called the 1 888 993 8841 number, and the guy straight up told me that it was not allowed in Canada to borrow from your pension. They told me they had to be discreet, for that reason, and that’s why they don’t have a proper business number or a website.

    This is a scam. I have a paper from a few months back, with the exact same ad, and a different number.

  10. Yo! Kevyn,

    Thanks man! I got this document from those guys! Just in time from your comment here! Yeah! This is a SCAM???? Bigtime???? I wanted you guys to see what’s in it! I wanted ALL to see the word they use, it’s a no brainer!

  11. I can leave the pension with my last emplyer and they have defined what the payment at 65 would be. Alternativly I can transfer to one of these accounts and take the risk with the markets. There are pros and cons to each. The company is a blue chip and the pensin value is high.
    Any thoughts??

  12. I am currently enroll with company pension plan. It is Defined Contributipn Pension Plan. I called my plan provided and said, if you are chaning the company then you can transfer your money to LIRA or CASH out or transfer it to RRSP account?

    Is it true?

    Based on your infomraiton, it looks like i cannot transfer it to RRSP?

    If i have above options to transfer money, what should i have to choose? LIRA or RRSP???

    Thank You!

  13. If the value of a LIRA is less than 40K, it can be unlocked and transferred into an RRSP. I’ve just done it.

  14. You made certain good points there. I did a search on the topic
    and found a good number of folks will have the same opinion with your blog.

  15. Sweet blog! I found it while surfing around on Yahoo News.
    Do you have any tips on how to get listed in Yahoo News?
    I’ve been trying for a while but I never seem to get there!

    Many thanks

  16. My brother in-law has been out of Canada for many years now (+-10years), after working there for 6 years. Obviously the only way to move and withdraw his Registered Pension Plan is via a LIRA and only under special circumstances, which he fulfils.
    But the the bank branch says the only way to open a LIRA account is if one is a Canadian Citizen or permanent resident may open a LIRA or any other type of Retirement account.

    Is this true. If so how can he open a LIRA account?

    Stan

  17. I have had a LIRA with Royal Bank for 25 years. It is a self-directed trading account which has been satisfactory. Now I am 65 I would like to unlock it. It thought this would be straight forward. Someone from the Bank told me I can’t unlock it until I am 71. I fear I might not live that long and would like to use some of it now. The amount is about $45,000. I would be happy with a LIF and just withdrawing some of it on a yearly basis. The bank seems to think I can’t do this unless I prove special need or get a doctor to say I have a lowered life expectancy. I am pretty sure any doctor would say I have a lowered life expectancy as I have many serious health problems and had to retire 10 years ago due to health problems. I haven’t gone the route of claiming lowered life expectancy because I thought I could just access it at 65 and was willing to wait until then.

    I feel very confused about it all. How long am I supposed to live? Is this based on some statistic? I really don’t think anyone knows how long we will live once we reach old age. I know many people younger than myself who just dropped dead without warning. Well I feel I have no time to lose at 65, and am not confident of reaching 71. Most of the questions I read online are about people wanting to unlock their money before they are 65, and it seems there is no instruction about how to do it after 65. Is the Bank just been stupid? I know they have reduced their workforce and I have the horrible feeling that perhaps no one there knows about this.

  18. None of these questions are challenging for a decent advisor. Yes, LIRA and LIF accounts can sometimes be unlocked. No, they don’t need to be in place until 71. That’s actually the LATEST you can start taking payments, not the minimum.

    Kelly, send me an email and I’ll help you out, gratis. This should be as basic as a withdrawal for your advisor. If they can’t handle this FIRE THEM. You are allowed to move your money to someone who knows what they’re doing and cares about you. Stop paying (around 2-3% per year) your money if they’re not doing your job!

  19. Hello. Iam looking to move my pension out of a group pension to be able to access the amount of 27400 for hardship I have no expected income for the next 12 months I have been told I have to move it into a lira Will I be able to access this later on before 65 and May I also be able to manage it myself. Since I am not sure how this works I would appreciate some info regarding. Iam only 53. Thank you very much for any info you could provide Robert Knight

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