What Are LIRAs and How Do They Impact Your Retirement?
When you have a job transition, you may transfer your pension plan savings to a locked-in-retirement account (LIRA).
LIRA’s are similar to Retirement Savings Plans (RSP’s) but with more restrictions. Adding another investment account will also add extra administration to managing your retirement savings.
Alberta pension legislation allows people age 50 or older to transfer LIRA’s worth less than $21,440 to an RSP at any time. The actual “un-locking” requires a few steps which is summarized in a single letter of direction to your financial institution. It is important to state that you are under 65 years of age and that you do not own any other LIRA’s at other financial institutions.
In the first step, indicate your intention to open a Life Income Fund (LIF). This allows you to initiate the one-time “un-lock” of 50% of the LIRA’s value. Instruct them to move 50% to your RSP. Your spouse must sign a pension-partner-spousal-waiver allowing the pension savings to be un-locked. Include this with the letter of direction.
The Alberta Treasury Board and Finance publication titled, “Accessing Pension Funds” states that if after the one-time un-locking, the remaining LIRA balance is less than the “small account limit” of $10,720 you may unlock the rest of the account. Thus, the letter of direction should instruct the financial institution to move the remaining “small amount” balance to your RSP. This can all be done without actually opening a LIF. For those 65 and older the “small account limit” is $21,440. Each province has its own pension legislation and the company’s head office location typically determines which rules apply.
If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.
Thanks to Chris Turnbull of The Index House for providing this article.
The Index House is a division of Polaris Financial Inc.