Locked-in Retirement
Account (LIRA)
A LIRA is essentially an investment account to hold money
transferred out of a pension plan. The rules found in the Income Tax Act with
respect to an RRSP apply to your LIRA, except that you cannot withdraw funds from a LIRA.
A LIRA, therefore, may be better known as a locked-in RRSP.
Because it is an RRSP, you must purchase a life annuity or
transfer money to a RRIF by the end of the calendar year in which you reach age
71. You
also must follow the rules for investing an RRSP found in the Income Tax Act when
investing your LIRA.
Registered Retirement Income Fund (RRIF)
You must be eligible to commence your pension to transfer
money to a RRIF. If you are transferring money directly from a pension plan, the earliest
age at which your pension can commence is established by the rules of the plan. You may
transfer money from a LIRA at the earliest of age 55 or the early retirement age
established by the plan where the money originated. Your spouse must sign a consent form
for you to transfer money to a RRIF.
There is no limit on the amount of money that you may
withdraw from a RRIF.
A RRIF must meet the requirements of the Income Tax Act.
A RRIF permits you to receive taxable income while you retain control of investments and
investment earnings are tax sheltered. One of the most important rules for a RRIF is that
you must be paid income each year. The Income Tax Act sets the minimum amount of
income that must be withdrawn. The minimum increases with age.
A RRIF must also meet certain requirements of The
Pension Benefits Act. A spousal consent form must be signed before assets may be
transferred to a RRIF, and you must designate your spouse as beneficiary of your RRIF
unless your spouse signs a waiver of beneficiary status form. As well, your RRIF is
subject to division in the event of the breakdown of a spousal relationship and may be
attached for the purposes of enforcing an order for maintenance support.
Variable Benefits
A defined contribution plan may offer a
Variable Benefit to you at retirement which is similar in nature
to a RRIF. You must be eligible to retire under the terms of your
plan in order to establish a Variable Benefit Account. Your
spouse must sign a consent form and must waive entitlement to the
60% post-retirement benefit provided under the Act for you to
transfer money to a Variable Benefit Account.
There is no limit
on the amount of money that you may withdraw from a Variable
Benefit Account.
A Variable Benefit must meet the requirements
of the Income Tax Act. A Variable Benefit permits you to
receive taxable income while you retain control of investments and
investment earnings are tax sheltered. The Income Tax
Regulations set a minimum withdrawal schedule that must begin
at age 72. The minimum increases with age.
A Variable Benefit must also meet certain
requirements of The Pension Benefits Act. A spousal
consent form and a waiver of the post-retirement survivor benefit
form must be signed before assets may be transferred to a Variable
Benefit Account. You must designate your spouse as beneficiary of
your Variable Benefit Account unless your spouse signs a waiver of
beneficiary status form. As well, your Variable Benefit Account
is subject to division in the event of the breakdown of a spousal
relationship and may be attached for the purposes of enforcing an
order for maintenance support.
