Locked-in accounts are tax-deferred accounts that hold funds transferred from a pension plan. There are two basic types of Locked-in accounts: Locked-in Retirement Accounts (LIRA) and Locked-in Retirement Savings Plans (LRSP).
For instance, let’s say you are thinking about quitting your current job or retiring before you are eligible to receive your pension. What happens then to your accumulated pension benefits? The flow of registered plan funds can move in three directions:
- Move to another employer's Registered Pension Plan.
- Remain in the old employers Registered Pension Plan (if permitted), or
- Transfer out of the old employer's Registered Pension Plan into any of six options:
- a Locked-In Retirement Savings Plan (LRSP)
- a Locked-In Retirement Account (LIRA)/a Life Income Fund (LIF)
- a Locked-In Retirement Income Fund (LRIF)
- a Restricted Life Income Fund (RLIF), or
- a Life Annuity
LRSP and LIRA accounts are referred to as Locked-In savings accounts, whereby you cannot withdraw funds from them. LIF, LRIF and RLIF accounts, on the other hand, are referred to as Locked-In income accounts, whereby you can make withdrawals from them. (For further information on these accounts, see our section on Life Income Funds (LIF).
Note: The rules that govern these options are varied, and your transfer options will be dictated by the pension legislation (federal or provincial) that governs your employer’s pension plan.