Ten rules to know about locked-in retirement accounts GlobeInvestor
The locked-in RRSP has a different name if it is governed by provincial, as opposed to federal, pension legislation. Most provinces call it the aforementioned LIRA. Territories that do not have pension legislation use the federal legislation. Prince Edward Island is the only province that does not have active pension legislation and does not simply use the federal legislation. For the purpose of this article I will use the federal term “locked-in RRSP.
Locked-in RRSPs are regulated by the Income Tax Act as either federal or provincial pension legislation. This is mainly determined by the pension legislation that was applied to the company pension where the funds were derived. Once you turn 71, your federally regulated locked-in RRSP must be transferred into a LIF or a restricted life income fund . For provinces that have LIRAs, the maturity option is to move the plan into a LIF. There is a mandatory minimum amount you have to withdraw each year and it is taxable as income similar to a retirement retirement income fund . There is also a restriction on the maximum annual amount you can take out.
You can name a spouse as the beneficiary/successor annuitant to your locked-in RRSP, thereby avoiding the probate cost and income tax. If you name a beneficiary who is not your spouse the plan will still be subject to income tax, but can pass on without probate.
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