Transfers and Locked-in Accounts
When looking at federally regulated Locked-In Retirement Savings Plans (LRSP) there are two basic categories of transfers:
- transfers into an LRSP, and
- transfers out of an LRSP
Transfers into an LRSP
Transfers into an LRSP is fairly simple and straightforward, and are restricted to three types:
- the direct transfer of funds from an employer’s pension plan
- the direct transfer of funds from a Locked-In Income Fund (LIF), provided that you are 71 years of age or younger
- the direct transfer from another LRSP that is governed by Federal Pension Legislation
For all three types of transfers, the financial institution that will receive your transferred pension benefits will assist you with opening of the receiving LRSP account and the accompanying documents.
For transfers directly from an employer’s pension plan, the employer’s human resources department will provide you with all of the necessary details of your pension benefits and information about your transfer options. They will also supply you with the necessary forms to request the transfer of your pension benefits.
For transfers into another LRSP, you may have two or more federal LRSP accounts that you would like to consolidate into a single LRSP. Consolidating LRSP accounts into a single account is permitted.
Transfers out of an LRSP
For transfers out of an LRSP, there are four basic types of transfers:
- the transfer to a Life Income Fund
- the transfer to purchase an annuity
- the transfer to a registered pension plan, if the registered pension plan permits such a transfer
- the transfer to a Restricted Life Income Fund (RLIF)
Transfers into a Life Income Fund are permitted at anytime prior to December 31st of the year that you reach 71 years of age. The financial institution administering your LRSP can provide you with the necessary account opening forms, Spousal Consent Waivers, and Federal Pension Act addendum.
For transfers from an LRSP to purchase a deferred or immediate annuity, your insurance company or life agent can provide you with all of the documentation and guide you through the process.
To transfer your LRSP into another registered pension plan, the pension plan must first be administered according to federal pension legislation and, secondly, the plan must permit outside transfers from an LRSP. Check with your employer to see if a transfer of your LRSP is possible. If so, their human resources department can help with the necessary documentation.
For those wishing to unlock a portion of their LRSP under the 50%-unlocking option, you must first transfer the LRSP into a Restricted Life Income Fund (RLIF). Then from the RLIF you can transfer up to 50% of the fund’s value into an RRSP or RRIF.
The remaining 50% of your LRSP assets will be held inside a RLIF, which will then make regular payments to you according to the guidelines set by federal pension legislation.
If at a future date you no longer need regular withdrawals from your RLIF and you are 71 years of age or younger, you are permitted to transfer your RLIF into a Restricted Locked-in Savings Plan (RLSP).