Locked-in retirement accounts (LIRAs) and locked-in registered retirement savings plans (RRSPs) are types of savings accounts established under a written contract between an individual and an authorized financial institution. These plans are designed to hold and grow lump sums drawn from a registered pension plan (RPP) until they are converted into a life income fund (LIF) or life annuity or transferred to another RPP.

Note: This section includes information on LIRAs under Quebec and locked-in RRSP under federal jurisdiction.

For the purposes of the locked-in plan rules, the definition of spouse differs depending on the legislation.

Under Quebec’s Supplemental Pension Plans Act, which regulates LIRAs, a spouse means the person who is married to or in a civil union with the holder or who is living in a conjugal relationship with an unmarried holder of the opposite or same sex for a period of at least three years, or one year if:

• a child is born, or to be born, of their union
• they have jointly adopted at least one child during their conjugal relationship 
• one of them has adopted at least one child of the other during this period 
   

Under Canada’s Pension Benefits Standards Act, 1985, which governs locked-in RRSPs, a spouse means the individual who is married to the holder or who is living in a conjugal relationship with an unmarried holder, of the opposite or same sex, for a period of at least one year.

Unless otherwise indicated, in this section, the term "spouse" includes legally married partners and common-law partners.

How it works
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How it works

A LIRA is a particular type of RRSP into which sums from a supplemental pension plan or a LIF under Quebec jurisdiction can be transferred (when the holder is 71 years of age or younger).

A locked-in RRSP is a particular type of RRSP into which sums from a pension plan or a LIF under federal jurisdiction can be transferred when the holder is 71 years of age or younger.

Unlike sums invested in a RRSP, the sums held in a LIRA or a locked-in RRSP are 'locked in', because they must be used for retirement income. It is not possible to make withdrawals except as indicated hereafter.

Withdrawals from a LIRA or a locked-in RRSP 

• The holder of a LIRA, locked-in RRSP, or RLSP can withdraw the sums held in their LIRA (in whole or in part) or their locked-in RRSP or RLSP (in a lump sum, if provided under the plan) if a physician certifies that their life expectancy has been reduced due to a physical or mental disability.
   
• When the holder of a LIRA, locked-in RRSP, or RLSP has not resided in Canada for at least 2 years, they may withdraw the sums held in their locked-in RRSP or RLSP in whole or in part, and the sums held in their LIRA in a lump sum.
   
• For LIRAs only, when the holder is aged 65 or over at the end of the preceding year and the overall balance of their Defined Contribution Pension Plans, locked-in RRSPs, LIRAs and LIFs is less than 40% of the RRQ’s MPE (2010: $18,880), they may withdraw the entire balance of the LIRAin a lump sum. To do this, they must complete Schedule 0.2 of the Regulation Respecting Supplemental Pension Plans.
   
• Since May, 8 2008:
   
  • Regardless of age, all individuals facing financial hardship because of a disability, health condition, or low income are entitled to make one or more withdrawals during the year. Withdrawals from a federal LIF, RLIF and/or locked-in RRSP are called “Financial Hardship Unlocking” and are subject to a maximum amount (from all the above plans combined) based on the situation, without exceeding 50% of the MPE in total ($23,600 in 2010). All withdrawals must be made within a 30-day period. To do this, individuals must produce Form 1 from Schedule V of the Pension Benefits Standards Regulation, 1985. The following rules are used to determine whether an individual is facing financial hardship:
     
    • Individuals are considered to be experiencing financial hardship as a result of their disability or medical condition or the disability or medical condition of their spouse or eligible dependant if they expect to make expenditures of more than 20% of their net income in that year for medical treatments, assistive technology or any other purpose related to their disability or condition that has been attested to by a licensed Canadian physician. These individuals must also sign an attestation to this effect. As needed, they may withdraw the total amount of their expected expenditures for the year, up to 50% of the MPE, i.e., $23,600 in 2010.
       
    • Individuals are considered to be facing financial hardship due to low income if they expect that their net income for the year will be less than 75% of the MPE, i.e., $35,400 in 2010. These individuals must sign an attestation to this effect. The amount they may withdraw, as needed, is calculated as follows:
       
      • 50% of the MPE, i.e., $23,600 in 2010, less 2/3 of their net income for the year
         
         
  • For RLSPs only, as of the year an individual turns 55, they may withdraw the total balance of their RLSP, when the balance of all of their federal LIFs, RLIFs, locked-in RRSPs, and RLSPs is less than or equal to 50% of the MPE, i.e., $23,600 in 2010. This withdrawal is called “Small Balance Unlocking.” To do this, they must produce Form 3 from Schedule V of the Pension Benefits Standards Regulation, 1985.
     
  • In order for individuals to use either of these two options, their spouse, where applicable, must assent to the unlocking. If an individual does not have a spouse, they must provide an attestation to this effect. To do this, they must use Form 2 from Schedule V of the Pension Benefits Standards Regulation, 1985.
     
  • Both options may be used during the same year.
     
     
• In all cases where withdrawals are allowed, holders may chose to transfer the holdings from their LIRAs, locked-in RRSPs, or RLSPs to a RRIF or a RRSP with no tax consequences.
   

Main differences between a LIRA and a locked-in RRSP 
Aside from the jurisdictions under which they are regulated, the main differences between a LIRA and a locked-in RRSP are:
 

• On the death of the holder, a LIRA may be paid to the surviving spouse or transferred to the surviving spouse’s RRSP, whereas a federal locked-in RRSP remains a locked-in RRSP or a federal LIF for the surviving spouse.
   
• Since 1998, a holder who was over the age of 65 at the end of the previous year may, under certain conditions, withdraw sums from a LIRA with a low balance, whereas this type of withdrawal is not permitted for locked-in RRSPs (but is for RLSPs under certain conditions).
   
• In the event of financial difficulties, it is possible to unlock sums held in a locked-in RRSP provided all conditions are met, while this is not possible with LIRAs.  
   

Federal or Quebec jurisdiction?
Quebec’s Supplemental Pension Plans Act only applies to private employer pension plans in which employees in Quebec participate.

However, pension plans for which the government is the employer, such as the Government and Public Employees Retirement Plan, the Teachers Pension Plan (TPP) and the Civil Service Superannuation Plan (CSSP) are governed by their own legislation. Since 1996 and according to rules similar to those that apply to private employer pension plans, this legislation has allowed sums accumulated to be transferred in a LIRA upon cessation of employment, provided the participant has contributed to the plan for at least two years.

Certain pension plans cannot be registered under provincial law and must be registered under federal law (1985 Pension Benefits Standards Act) because of the specific nature of the company's activities. The main activity sectors concerned are:

• Chartered banks
• Radio, television or other communications fields
• Interprovincial transport
• Federal crown corporations
   

Thus, employees from these sectors under federal jurisdiction do not have access to a Quebec LIRA or LIF. Instead, they must set up a federal locked-in RRSP or LIF.

Pension plans under Quebec jurisdiction include plans registered with the Régie des rentes du Québec (RRQ) and those registered under the laws of another province taking into account the place of work of the participants at the time they ceased to participate. Thus, regardless of the province where the plan is registered, the Quebec legislation only applies to Quebec employees who participate in this plan.

Legislative changes
The LIRA was created under Quebec’s Supplemental Pension Plans Act. It is similar to the locked-in RRSP, which is governed by Canada’s Pension Benefit Standards Act.

Quebec was the first province to offer a LIF, but since 1990, the other Canadian provinces’ pension plan legislation has generally been harmonized with Quebec’s and also provides for the establishment of a LIF.

The rules governing locked-in RRSPs were harmonized with those governing LIRAs in 1995. It is therefore now not only possible to convert a locked-in RRSP into a LIF, but also into a life annuity.

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Desjardins Financial Security: Registered plans