Unlocking a locked-in Pension (RRSP)

[Explorer]

All of the Provinces as well as the Federal Government have their own Rules and Regulations concerning Locked-in RRSPs. Probably only you people that have one would know what I mean.
There are only two Provinces that allow you to unlock these RRSPs (Sask. being one). Manitoba allows you to unlock 50% (once). Ontario allows ex MPPs to unlock theirs, but nobody else. The Federal Government is the most restrictive. Since we are ALL Canadians we should ALL be treated the same. Isn't that what we have a Constitution for? The new Federal Finance Minister is an ex MPP from Ontario, so can unlock his. This should be standardized across the country. Banks and other institutions don't know what rules to follow. Hundreds in Ontario lost money recently in a scheme to extract money that was locked-in. Are there any of you in this situation?

 

[Kreskin]

It is rather confusing. Most provinces offer some form of early redemption based on small balances or low income conditions.

Before anyone ever moves pension funds to a bank they also need to find out precisely what restrictions the bank works with. I know for a fact there are differences among the big 5. Don't assume they're all the same. Do your homework on this before investing it.

But even if they can't be unlocked that doesn't mean you have to lose money. That all depends on the investment options.

 

[Explorer]

Not most, but some do allow that. Ontario does, however if you lose your job and can't make the house payments they say NO, you have assets, a house. Even if you don't have the money to fix it up to sell it.
Some think they could move to Saskatchewan so they can unlock it. Sorry that Company you worked for comes under a different Provinces Rules.
I should have been taking money out of mine for 15 years, as now I find I can only take out 6% or so, even though making in excess of 30% for the past 4 years, at least.

 

[Kreskin]

Conditions for unlocking an Ontario LIF/LIRA/LRIF

Shortened life expectancy pay out

The LIF owner must complete an application to a Financial Institution to Withdraw Money From an Ontario LIRA, LIF or LRIF. The Physician's Statement section of the form must be completed by a physician or a separate written certificate must be provided, signed by the physician. It must state that the physician is licensed to practice medicine in Canada and that the LIF owner has an illness or physical disability that is likely to shorten his/her life expectancy to less than two years. If a spouse exists, a spousal waiver is also required.

Financial hardship pay out

The LIF owner must apply directly to the Financial Services Commission of Ontario (FSCO) using the appropriate one of the two following forms: - Application to the Superintendent Of Financial Services For Consent to Withdraw Money from an Ontario LIRA, LIF, or LRIF Based on Financial Hardship - Application to the Superintendent Of Financial Services For Consent to Withdraw Money from an Ontario LIRA, LIF, or LRIF Based on Low Income Financial Hardship. To qualify for this withdrawal, the LIF owner’s expected total income from all sources before taxes, for the twelve-month period following the date the application is signed, must be less than two-thirds of the Year’s Maximum Pensionable Earnings (YMPE) for the year (two-thirds of $42100 as of 2006). In addition, one who has previously redeemed locked-in funds due to low income is not eligible for further withdrawals of this nature for a twelve-month period following the date the last successful application was signed. A fee of 2% of the requested withdrawal amount is imposed by the FSCO for each separate successful application, with a minimum fee of $200 and a maximum of $600.

Marriage / relationship breakdown transfer

Up to 50% of the fund value may be transferred to a locked-in account for the former spouse or same-sex partner. A court order or domestic contract along with the completed Form T2220 - Transfer from an RRSP or a RRIF to another RRSP or RRIF on Breakdown of Marriage or Common-law Partnership is required to support the transfer.


Survivor's benefit transfer

Fund value may be transferred to the surviving spouse or same-sex partner - locking-in not required. If there is no surviving spouse or same-sex partner, funds are paid out in a lump sum to the designated beneficiary or estate. A spouse living separate and apart from the LIF owner at date of death is not entitled to receive the value of the property in the LIF.


Small balance pay out

For a LIF owner age 55 or older, whose total value of all locked-in monies regulated by the Ontario Pension Benefits Act, is less than 40% of the YMPE in effect for the year of application (presently $42100 x .4 = $16840), the funds can be paid out or transferred to a RRIF or RRSP. The LIF owner must complete an application to a Financial Institution to Withdraw Money From a LIRA, LIF or LRIF. The consent section must also be completed if the LIF owner attests that his/her spouse or same-sex partner consents to the withdrawal of funds.

 

[Explorer]

Thanks for that Kreskin,

It is accurate on the Ontario Regulations, although misses the part about MPPs being allowed to unlock their Plans. I am not, however, covered by Ontario, and don't even get those allowances.

Why is it that there are different rules when we are all Canadians?

 

[Explorer]

If you are in this situation and want to do something about it then you should join the Yahoo Group:

ca.groups.yahoo.com/group/Locked-in_RRSP

It doesn't matter which category you fall in let's see what we can do to improve it.

 

[Semperfi_dani]

RE: Unlocking a locked-in

Well i work in an investment firm, but i mostly deal with Alberta's LIRA requirements.

I can't think off the top of my head, but i beleive for Alberta, there are the standards, (low income, low value, hardship, death etc).

However, there are two things you can do.

One, at the very first opportunity, transfer your pension to your own locked in account. Rather than have your company manage it, you can manage your own, do your own trades etc. This isn't always an option...but if you can, do it.

The other thing is that say you retire/quit from your company. There is part of your company run pension that must remain locked in, so thus requires a transfer if you are under 65. But usually there is a portion in which you can get paid out directly or transfer to your non-locked in registered account.

 

[Semperfi_dani]

RE: Unlocking a locked-in

Although, I forgot to add that I do agree..you should be able to acess your locked in pension at anytime. I understand why the government is forcing you to save, but you alone should be the one to determine your retirement future.

I know if you know you are dying you can access it, but at the same time, alot of people don't make it to 65 or what not. So you save and save for a future you won't have so you freeloading kids can enjoy your wealth???

At the very least, lower the age in which you can collect tax free.

 

[Explorer]

You are right on many points. I have been earning more than 30% per year for over 4 years. It's not like I don't know how to handle money. I would sure like to have a say in how the future returns will be. It can be set up so my young kids and grandkids are well looked after. I have no say the way it is. It is MY money. I would NOT want to see it squandered right away. :-(
At 69 it MUST be turned into an Annuity (at 3 or 4%). Give me a break.

 

[Kreskin]

Right now you're in a LIRA? Why can't you convert it to a self-directed LIF at 69?

 

[Explorer]

Not sure if I can. See, that is one of the problems. What can we do??????
Some say that if you do do not have any growth in the previous year you are not allowed to take money out the next. :-(
Who the H**l knows what is allowed and what is not. Part of the problem. :-(
Damn. Earn 30+% for 4 years, -% in one year and not allowed to take out money. Go figure.

 

[Kreskin]

I'm assuming you have a federal regulated locked-in RSP. Generally, if converted to a self-directed LIF you still are limited to the amount you can withdraw. Withdrawal limits are based on the plan balance as of January 1 each year, your age, and the federal CANSUM rate. There is a sliding age scale where the maximum % withdrawal increases every year. While there is still a maximum to what you can take out you can still be in control of the investment options. So, while the LIF gives you investment control you still end up limited to the amount you can take out.

 

[Kreskin]

Explorer, if you are living in the Phillipines you might also have securities trading issues with a self-directed plan. In other words, you might have to be in Canada to place your purchase orders (funds or stock). If you give me a basic rundown on your situation I'll check it out.

 

[Explorer]

RE: Unlocking a locked-in

I have had no problems with buying and selling securities. As a non-resident I want to unlock everything and this is allowed by several Provinces. I still believe all of the Rules, etc. should be the same across the country. It would make it much easier on the Institutions and the holders to understand. The Federal Government should be a leader not a follower, as it is in this case. Some people have transfered from one Institution to another until they find one that mistakenly does what the person wants.

 

[Semperfi_dani]

RE: Unlocking a locked-in

Explorer..if you move out of the country permanantly (that is out of Canada), you can access your LIRA.

HOWEVER....you will be dinged not only with the applicable regular taxes that everyone is required to pay...You will also be dinged BIG TIME with a Non-Resident Tax.

But I am almost 99% sure that if you leave the country, you can w/d from your locked in accounts.

 

[Explorer]

RE: Unlocking a locked-in

Kreskin,
Only a couple of the Provinces allow it if you are a non-resident. Most don't and the Federal doesn't either.

Under the Canadian Charter of Rights and Freedoms;
(laws.justice.gc.ca/en/charter/index.html)

"Legal Rights
Life, liberty and security of person
7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice."

Is it a 'principal of fundamental justice' that we are not allowed to access our money?????

"Treatment or punishment
12. Everyone has the right not to be subjected to any cruel and unusual treatment or punishment."

Is it not cruel and unusual that we can't access our money????

"Equality Rights
Equality before and under law and equal protection and benefit of law
15. (1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability."

Are we not being discriminated against because we don't come under Sask. law, Manitoba law, or we were not an MPP in Ontario?????

 

[Explorer]

This Province seems to lead in a few areas (where the Federal Government follows). Look at Medicare and Automobile Insurance. And recently a big one:

Saskatchewan changes the rules

Saskatchewan is granting its retirees a little more freedom. The Department of Justice announced changes to the province's pension regulations in October that effectively remove current withdrawal limits on life income funds (LIF) and locked-in retirement income funds (LRIF).

"Anyone with a locked-in
retirement account will have
the option of moving monies to a
RRIF at retirement. Anyone who
already has a LIF or an LRIF
in Saskatchewan will have that money
in a RRIF immediately. "
David Wild,
superintendent of pensions,
Saskatchewan

"There'll be no restrictions on the amount of withdrawal that can come out," says David Wild, superintendent of pensions. "Anyone with a locked-in retirement account will have the option of moving monies to a RRIF [registered retirement income fund] at retirement. Anyone who already has a LIF or an LRIF in Saskatchewan will have that money in a RRIF immediately. So the LIF and LRIF will no longer exist."

According to Wild, retirees, financial planners and financial institutions had become "frustrated" with LIF and LRIF rules in the last four years. On a technical basis, he says, they couldn't plan ahead because maximum withdrawals from LIFs and LRIFs change according to market conditions. Also, many found the formulas for calculating maximums complicated. On a philosophical level, Wild says regulators "received complaints, such as 'I'm a responsible adult. Who is the government to tell me how much money I can withdraw from my own LIF or LRIF?'"

Are people in Saskatchewan MORE Canadian than you or I, or just NOT being discriminated against?

 

[bluealberta]

I think you should be able to access at least the amount of growth since your original LIRA was issued.

On another note, I know of some people who have transferred their LIRA's from financial institution to financial institution, and at some point, somebody messes up and does not designate this as locked in. Not kosher, but it does happen. Depending on the amount, you may want to try this method. No guarantee it will work, though, and can involve a lot of paperwork. I have a LIRA, but have not tried this myself.

 

[Explorer]

I think you should be able to access at least the amount of growth since your original LIRA was issued.

On another note, I know of some people who have transferred their LIRA's from financial institution to financial institution, and at some point, somebody messes up and does not designate this as locked in. Not kosher, but it does happen. Depending on the amount, you may want to try this method. No guarantee it will work, though, and can involve a lot of paperwork. I have a LIRA, but have not tried this myself.

Sorry, no cigar. Although that depends on which Province you are in. I don't believe Alberta allows it. If one Province allows it I can't understand why they (and Federal) don't all allow it.

Yes, I have heard of that. Some have been 'lucky' in that the law was misinterpreted. In my case it all goes to my spouse still locked-in. Although maybe not as she is not Canadian and has never been to Canada, but WHO KNOWS? A friend left the company right after me (15 years ago) but died soon after at 51. His locked-in pension went to his wife and was unlocked (mistakenly). Maybe I should have died 15 years ago when people were more unaware than they are now (if that is possible). :-(

 

[Explorer]

There should be a Petition set up to the Federal Government and all the Provinces to gives ALL Canadians Equal Rights:

This one is Ontario only, but a good start.

"I have started a petition on line To Premier Dalton McGuinty asking to have locked in pensions unlocked. Any body that wishes to help and lives in Ontario Please go sign. Any body can sign that is over 18 and lives in Ontario.

Here is the site

http://www.PetitionOnline.com/WRC101/petition.html

Thanks Oldman "