Archived - Questions and Answers
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When do these changes take effect?
The changes take effect immediately. However, financial intermediaries may need some time to update their systems in order to offer these new options.
Anyone with an existing locked-in RRSP or LIF will have to purchase a new contract to take full advantage of this new flexibility. Some of these changes can be accessed through amendments to existing contracts.
Those who do not wish to use this new flexibility are under no obligation to purchase a new contract or amend their existing contracts.
A six-month transition period will ensure an orderly transition to the new regime.
Who can unlock funds?
- Anyone 55 and older; or
- Anyone facing financial hardship from two sources:
1) Low income
2) High medical costs or disability-related costs relative to income
When can I unlock my funds?
With the coming into force of these regulations, those with existing contracts will be able to unlock their funds as soon as their financial intermediary can make the necessary amendments.
To unlock the funds, the application must be made to the financial institutions where the funds are held.
How much can I unlock?
In the year they turn 55, or afterward, people will be allowed to transfer 50 per cent of their funds into a tax-deferred vehicle, from which they can withdraw cash.
In addition, people whose total locked-in holdings are below the minimum threshold-$22,450 in 2008-or who face financial hardship will also be able to unlock funds.
Where can I obtain the forms required to unlock the funds in my Life Income Fund?
These forms will become available from financial intermediaries that offer LIFs and locked-in RRSPs.
If you currently have a LIF or locked-in RRSP, the necessary forms can be obtained from the financial intermediary that holds your LIF or locked-in RRSP contract.
Financial intermediaries and other interested parties can also obtain copies of the necessary forms, which are included as Annexes to the Pension Benefit Standards Regulations, 1985 in Schedule V, Forms 1, 2, and 3.
Any other forms required as part of contractual arrangements would be supplied by the financial intermediary.
Why can't I take advantage of these changes without purchasing a new locked-in fund or amending my existing contract?
The terms and conditions for the unlocking of funds held in federally regulated locked-in RRSPs and LIFs are set down in contracts between the offering institutions and the individuals that hold them.
The federal government's role is to provide certain standard rules governing the withdrawal of funds.
The new rules require that all new contracts contain new flexibility options to unlock the funds under certain conditions.
However, the federal government will not intervene to change existing contracts signed before the new rules took effect.
Therefore, people with LIFs or locked-in RRSP contracts who wish to unlock them should contact their financial intermediary - either to purchase a new, more flexible contract or amend their old contract.
Those who do not wish to use this new flexibility are under no obligation to purchase a new contract or amend their old contract.
Will these changes affect provincially regulated pensions?
These changes will only affect those funds that are regulated federally.
Will these changes affect the pensions of those who were or are employed by the Government of Canada?
These measures only affect those individuals who have transferred their pension credits out of their pension plan.
However, the Treasury Board Secretariat is responsible for matters relating to pensions for federal government employees. Therefore, questions about the application of these amendments to federal government employees should be directed to the Treasury Board Secretariat.
Do funds become taxable if they are unlocked?
Yes, but only if they are withdrawn.
Withdrawals from all tax-deferred vehicles are taxable under the Income Tax Act or other legislation. People should seek professional advice about their tax implications before making such withdrawals.
Direct transfers of funds from one tax-deferred vehicle to another are not taxable under the Income Tax Act.
An example of this would be unlocking funds from an RLIF and placing the proceeds into an RRSP.
Does unlocking funds affect the protection these funds receive from creditors?
Yes, regardless of whether they are withdrawn or not.
Funds that are unlocked-even if they are only transferred to an unlocked tax-deferred vehicle such as an RRSP or RRIF-will lose the protection from creditors provided to locked-in funds.
Has anything been done to protect the interests of the spouses or common-law partners of individuals?
Those who wish to unlock funds will be required to provide an attestation of assent to this transfer from a spouse or common-law partner.
If they do not have a spouse or common-law partner, they must provide an attestation to this effect.
Can I take my pension credits out of my pension, put them in an RLIF, and unlock half the value?
The new rules do not affect a plan member's ability to transfer pension benefit credits out of the plan. The right to do so under certain circumstances is set out in federal pension legislation and may also be permitted by the terms of the pension plan. Where a member has the ability to transfer a pension benefit credit out of the plan, the new rules do permit the pension benefit credit to be transferred into an RLIF, from which half of the value can be unlocked.
What is YMPE? How do I find it out in the future?
The YMPE (Yearly Maximum Pensionable Earnings) is the maximum amount of earnings on which contributions to the Canada Pension Plan (CPP) are based.
You can get information on the CPP pensionable earnings ceiling from the Canada Revenue Agency website:
Can I combine both a 50 per cent unlocking with a small balance extraordinary withdrawal?
I have two LIFs. Can I unlock them separately?
Yes, provided all other legislative and regulatory requirements are met.
Can financial intermediaries charge penalties for unlocking early?
Institutions may, at their own discretion, charge transfer fees for LIFs and other such products. Individuals should consult the financial institution that holds their Life Income Fund or locked-in RRSP contract.