Since 2008 changes to Ontario pension laws have influenced the retirement income options available to retirees. This has included the creation of a New LIF, with different features from the original “Old” LIF and LRIF programs. Effective January 1, 2011 the goal is to have annuitants in the Old LIF, the New LIF and the LRIF all under the same rules. In order to do this, members who had assets in an Old LIF or LRIF were provided with a one-time option to “unlock” up to 50% of their Old LIF or RIF assets, between January 1, 2011 and April 30, 2012. This website was designed to assist members in evaluating their options.
NOTE: The window to “unlock” assets from an Old LIF or LRIF has now closed.
Members who are still in the pension plan will have the ability to transfer pension assets to a New LIF at retirement. The New LIF has an option to unlock up to 50% of the assets within 60 days of the locked-in funds being deposited to the New LIF account.
Pros and Cons of "Unlocking" funds
The decision to unlock some of your locked-in funds is a personal one. Below is a chart summarizing some aspects for you to consider.
|PROS of having more “Unlocked” funds||CONS of having more “Unlocked” funds|
- Unlocked funds give you more flexibility to access your funds
- Unlocked funds have no “maximum” payment
- As retirement assets decline over time, it is possible that drawing at the “maximum” may not achieve your desired income. Having non-locked in funds to draw upon can help meet your income needs.
- This is a one-time option to unlock funds. There is no indication that the government will provide for this type of unlocking again in the future. If you don’t unlock now, there may not be a ‘second chance’.
- Unlocked funds can provide for additional estate planning flexibility.
- Unlocked funds may be less protected from creditors than locked-in funds in the event of bankruptcy
- You have increased responsibility for exercising self-discipline in your level of withdrawal (while the money is locked-in it is subject to a ‘maximum’ or limit on how much you can access each year)
- Accessing (withdrawing) more of your pension money earlier will inevitably leave less for you to draw upon in the future.
- SPOUSE: unlocking may reduce the survivor benefit and may impact your right to share in the money in the event of marriage breakdown.
- Taxes - All funds are taxed as income in the year they are withdrawn from the fund
- Investments - options for investing your RRIF and Old LIF/New LIF/LRIF money is the same
- Minimum Required Payment - All registered savings are subject to a “minimum” required withdrawal each year, regardless of whether the funds are locked in (in an Old LIF, New LIF or LRIF) or unlocked (in a RRIF).