This page provides frequently asked questions that relate to new LIFs.
General Information on New LIFs
Q: Who may purchase a New LIF?
A: You may purchase a New LIF in the following three situations:
- If you are the owner of an Old LIF, LRIF or LIRA, you may transfer the funds from this account into a New LIF.
- If your employment ended and either your plan allows you to move the funds from your pension plan into a locked-in account, or the PBA permits you to move the funds from your pension plan into a locked-in account in certain circumstances (such as a plan wind up).
- If you are the former spouse of a pension plan member who is entitled to transfer these funds, you may transfer the commuted value of the pension funds into a New LIF. - 05/10
Q: What are the most significant features of the New LIF?
1) The ability to keep the New LIF past age 80. If you choose to receive the maximum income payment each year, the money in your New LIF will be used up by age 90. However, if any money remains in the New LIF at age 90, you may keep it and continue to withdraw income from it in the future.
2) A higher income payment. The maximum annual income payment will be the greater of the amount you could be paid under the LIF formula and the New LIF’s investment earnings from the previous year.
3) The ability to withdraw or transfer money from the New LIF. As of January 1, 2010, you can withdraw or transfer to an RRSP or RRIF up to 50 per cent of any amount that you transferred into the New LIF after December 31, 2009, if you apply to do so within 60 days of the transfer. (Before January 1, 2010, the maximum amount that could be withdrawn or transferred was 25 per cent of the amount that you transferred into the New LIF, if you applied to do so within 60 days of the transfer.)
4) The ability to withdraw or transfer an additional 25 per cent before December 31, 2010. You may apply to withdraw or transfer an additional 25 per cent of the total amount of money that was transferred into your New LIF before January 1, 2010. To qualify for this withdrawal, you must submit your application before December 31, 2010. - 05/10
Q: If I purchase a New LIF with money from a locked-in account (Old LIF, LRIF or LIRA), does my spouse need to consent to the purchase, if he/she already provided consent when the original locked-in account was purchased?
A: Yes, you must get your spouse’s consent. This rule applies any time you move money from one type of locked-in account (e.g., Old LIF, LRIF or LIRA) to another (e.g., New LIF). The only exception is if you move your money into the same type of locked-in account (e.g., you use money from a New LIF to purchase another New LIF). - 05/10
Q: How is the maximum annual income payment calculated in the first year of a New LIF, taking into account the ability to withdraw or transfer up to 50 per cent of the funds?
A: The maximum annual income payment for the first year is based on the amount of money you have in the New LIF at the start of the New LIF’s fiscal year, regardless of any subsequent withdrawals.
Example: a New LIF was purchased with $100,000 that was transferred from a LIRA on the date of purchase. Fifty days later, the owner withdraws 50 per cent of the funds, which leaves $50,000 in the New LIF. Based on this example, the maximum annual income payment would be based on $100,000, as the fiscal year begins on the date money was transferred into the New LIF. However, it is important to note that if the money to purchase the New LIF came from an Old LIF, LRIF or another New LIF, the maximum annual income payment amount for the New LIF for that fiscal year would be zero. - 05/10
Q: Does the New LIF allow me to carry forward any unused portion of the maximum annual income payment for future years (similar to what has been allowed under the LRIF)?
A: No, the New LIF does not have a carry forward feature. -07/07
Q: What are my options if I want to transfer money out of my New LIF?
A: You may transfer money to another New LIF or use the money to purchase an annuity. Note that you cannot transfer money from a New LIF to a LIRA. -07/07
Q: My retirement savings are currently in a locked-in account in the form of non-redeemable GICs that will not mature for a few years. Can I transfer this money to a New LIF in its GIC form?
A: Under Ontario’s pension laws, you are entitled to transfer money out of your locked-in account to another locked-in account (including a New LIF) without having to cash it in. However, you can only make this transfer if an "in-kind" transfer is allowed under the terms of your contract with your financial institution. You should check with your financial institution to find out what issues might arise. -07/07
Q: What is the date that my New LIF is established? Is it the date I signed the application, the date the financial institution deposits the money, or some other date?
A: The New LIF is established on the date the financial institution accepts the application, as determined by the financial institution. This could be the same date that you signed the application, and it could precede the date on which money is actually transferred into the New LIF. -07/07
Q: Can an Old LIF simply be converted into a New LIF?
A: No. The New LIF is a completely different type of locked-in account than an Old LIF, in the same way that an LRIF is a different type of locked-in account than a LIF. If an owner of an Old LIF wants a New LIF, he/she must purchase a New LIF by transferring money from the Old LIF into a New LIF. The Old LIF cannot simply be converted into a New LIF.
However, on January 1, 2011, the rules for Old LIFs, LRIFs and New LIFs will become harmonized. All three funds are essentially similar, except that owners of Old LIFs and LRIFs will have a one-time opportunity to withdraw or transfer up to 50 per cent of the money in their account. The rules for determining the maximum annual income payment from Old LIFs, LRIFs and New LIFs will be identical. The maximum income payment for all three funds will be the greater of the amount calculated under the LIF formula, or the fund’s investment earnings from the previous year. - 09/10
Q: I want to transfer money from a New LIF to another New LIF. When must the financial institution transfer the money?
A: The financial institution that administers a New LIF must agree to transfer money to another New LIF within 30 days of the date you made the application. Note that this does not apply to a transfer of assets that are held as securities and whose term of investment extends beyond the 30 day period. In that situation, you should discuss the transfer with your financial institution. -07/07
Q: What happens if I own a New LIF when I die?
A: If you own a New LIF when you die, your surviving spouse is entitled to the full amount of money that is in your New LIF. This money may be paid out as an unlocked lump sum after your death, or may be transferred to your spouse’s own RRSP or RRIF, where it is permitted by the federal Income Tax Act. If you do not have a surviving spouse, or if your spouse has waived his/her entitlement to the death benefit payment on the date of your death, your named beneficiary or estate (if there is no named beneficiary) is entitled to receive the amount in your New LIF. - 05/10
Q: Will FSCO continue to publish a table that sets out the maximum annual income payment schedule?
A: Yes. FSCO publishes a table of the maximum annual income payment percentages for different ages in December of each year. The maximum annual income amount that may be paid from a New LIF is the greater of the amount earned under the LIF formula and the New LIF’s investment earnings from the previous year. The LIF formula takes into account the amount in your account as of the start of the New LIF’s fiscal year, multiplied by a percentage that changes each year based on your age. - 05/10
FAQs on Rules for Ontario Locked-In Accounts