Life income funds (LIFs) and Locked in retirement income funds (LRIFs)
When you leave a job where you had a pension plan, you’ll have a choice between leaving your money in the pension plan or transferring it to a locked-in retirement account (LIRA) or locked-in RRSP. You will control your investments until it’s time to retire. The money may be locked-in until your retire.
After a minimum age (set by your province) you can start to receive income from this pension money by converting it into a LIF. (Difference provinces may have different types of accounts and governing rule.)
The LIF or LRIF pays you an income
LIF or LRIF have a maximum you can withdraw each year. This is intended to ensure that your money will last through your retirement.
- You can hold many types of investments in LIFs and LRIFs, such as GICs, mutual funds, or segregated funds. You decide where to invest and can perform transactions within the plan.
- You have some control over how much tax is withheld from the payments.
- You can name a beneficiary to receive your money after you die.
- There’s a minimum income you’re required to take out of the plan every year and a maximum you’re allowed to take from your plan. The maximums for LIFs are a bit different than for LRIFs.
- You can use money remaining in a LIF to purchase a secure guaranteed income in a life annuity. Depending on the pension rules in your province, you may be required to do this at a certain age.
- LIFs are available across the country. LRIFs are available in some provinces.
How LIF and LRIF can fit into a financial plan
People who have locked-in pension money invested in a LIRA or a locked-in RSP and want to start to receive an income from it must roll the money into one of:
- a LIF, or
- an LRIF, or
- buy a life annuity.
The money received as income from any of these plans should be considered when planning income.