September 5, 2007 Letter to Financial Institutions

September 5, 2007

To: All Financial Institutions Offering Locked-In Accounts and Their Associations

Re: Locked-In Account Changes Under The Pension Benefits Act

 

We wish to draw your attention to significant changes contained in Ontario Regulation 416/07 made under the Pension Benefits Act that will affect owners of locked-in accounts, especially those who own Life Income Funds (LIFs). 

 

The key changes are:

 

  1. Effective July 27, 2007, owners of existing LIFs (“Old LIFs”) are no longer required to purchase an annuity by the end of the year in which they reach 80 years of age.  Owners may still purchase an annuity at any age but are not required to do so.  Owners of Old LIFs will be able to continue their LIF after they reach 80 years of age. 
  2. Effective July 27, 2007, owners of Old LIFs and Locked-In Retirement Income Funds (“LRIFs”) can transfer the money in their accounts to Locked-In Retirement Accounts (“LIRA”) until the end of the year in which they reach the age of 71.
  3. Effective July 27, 2007, owners of LIRAs can keep the money in their LIRA until the end of the year in which they reach the age of 71 rather than the end of the year in which they reach the age of 69.
  4. Effective January 1, 2008, a new Life Income Fund (“New LIF”), which conforms to the requirements of Ontario Regulation 416/07 can be made available for sale by financial institutions. 
  5. A New LIF may be purchased by an owner of an Old LIF, an LRIF, or a LIRA.  In addition, a member of a registered pension plan who has terminated employment and is entitled to an immediate pension, or that member’s former spouse, may transfer their commuted value to a New LIF, subject to the terms of the pension plan.
  6. Effective January 1, 2008, spouses of deceased owners of Old LIFs, New LIFs, LRIFs and LIRAs will be able to transfer their survivor benefit directly to an RRSP or an RRIF where permitted by the federal Income Tax Act.
  7. Effective January 1, 2008, owners of Old LIFs, New LIFs, LRIFs and LIRAs who have assets in all their locked-in accounts whose total value is less than 40% of the Year’s Maximum Pensionable Earnings for that year and who are age 55 or over will have the option of transferring the money in their accounts directly to an RRSP or an RRIF.
  8. Effective January 1, 2008, owners of Old LIFs, New LIFs, LRIFs and LIRAs who have been non-residents of Canada, as determined by the Canada Revenue Agency for the purposes of the federal Income Tax Act may apply, at least two years after their date of departure from Canada, to withdraw the money in their account.
  9. Old LIFs and LRIFs will not be available for purchase after December 31, 2008.
  10. An owner of a New LIF will have a one-time opportunity to withdraw in cash or transfer to an RRSP or RRIF an amount up to 25% of the value of the assets transferred into the New LIF.

Detailed information regarding these changes can be found in Ontario Regulation 416/07 at http://www.e-laws.gov.on.ca/html/source/regs/english/2007/elaws_src_regs_r07416_e.htm [New Window]

 

These changes will have the effect of amending the terms of existing LIF contracts. As set out in clause 14(2) of Schedule 1 of Regulation 909 under the Pension Benefits Act, financial institutions are required to notify all clients who own a LIF and may be affected by these changes within 90 days.  In addition, it would be appropriate to notify those clients who own an LRIF or a LIRA of these changes.

 

Further information about these changes and other changes that may affect locked-in accounts will be made available in due course.  Please continue to monitor the FSCO website at www.fsco.gov.on.ca/english/pensions on a regular basis for updates and information.

 

Please direct any questions to the contact centre at the Financial Services Commission of Ontario at 1-800-668-0128 or (416) 250-7250.

 

Yours very truly,

 

K. David Gordon
Deputy Superintendent, Pensions

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