Unlocking from restricted life income funds
Is the amount that can be unlocked using the one-time 50% unlocking option any amount up to 50%, or must it be exactly 50%?
The Pension Benefits Standards Regulations, 1985 allow the unlocking of up to 50% of the RLIF. They do not require the unlocked amount to be equal to exactly 50% of the funds in a LIF. Please note that this option is a one-time option and there is no "carry forward" of unused withdrawal room. If you choose to unlock less than 50% of your RLIF, you will not be able to unlock any more funds under this option at a later date.
What is the date on which the one-time 50% unlocking limit is determined?
The 50% withdrawal limit from the restricted life income fund (RLIF) is calculated as 50% of the funds in the RLIF on the date the actual withdrawal occurs. No more than 50% of the value of the RLIF on that date may be withdrawn.
If funds are transferred from a life income fund (LIF) to a restricted life income fund (RLIF), can funds be withdrawn from the RLIF beginning in the year that the funds were transferred?
Yes. If funds that were held in a LIF are transferred to an RLIF, you may withdraw a new maximum amount from the RLIF, calculated in accordance with paragraph 20.3(1)(f) of the Pension Benefits Standards Regulations, 1985, pro-rated for the number of months from the transfer date to the end of the year.
What happens if the holder of a life income fund (LIF) was receiving their annual maximum withdrawal on a monthly basis before transferring to a restricted life income fund (RLIF)?
Upon transferring to the RLIF, any payments from the previous LIF cease. A new maximum annual withdrawal amount would be established for the RLIF, based on the amount in the RLIF on the date it is established.
Questions about the minimum annual withdrawal from locked-in retirement savings plans should be directed to the Canada Revenue Agency at 1-800-267-3100.
Can funds be unlocked under the one-time 50% unlocking option from more than one account?
Yes. The fund holder can transfer funds from a number of accounts either into a single restricted life income fund (RLIF) or into a number of different RLIFs.
The one-time 50% unlocking option has to occur within 60 days of the establishment of the RLIF from which the funds are withdrawn. The RLIF is considered established on the date the funds are initially deposited into the RLIF. Holders with funds in more than one account may, therefore, wish to transfer funds into more than one RLIF if it is expected that some of the funds will not be transferred within 60 days of the establishment of the RLIF.
If 50% of an RLIF is unlocked and transferred into a regular RRSP, does this affect the yearly maximum contribution for registered retirement savings plans (RRSPs)?
Funds unlocked from a locked-in vehicle are subject to the Income Tax Act. Generally speaking, under the income tax rules, a direct transfer of funds from a locked-in vehicle to an unlocked registered retirement vehicle such as an RRSP or registered retirement income fund (RRIF) does not require or use up contribution room. The transfer is not considered a new contribution but rather a transfer from one tax deferred vehicle to another. Withdrawals from a registered retirement vehicle may, of course, have income tax implications. Please see the Canada Revenue Agency's website for more information on transferring amounts between registered vehicles.
For the one-time 50% unlocking option, can the funds be transferred to a spousal registered retirement savings plan (RRSP)?
The Pension Benefits Standards Regulations, 1985 (PBSR) require that any amount withdrawn from a restricted life income fund (RLIF) be transferred to a registered retirement savings plan (RRSP) or registered retirement income fund (RRIF). They do not require that the transfer be to an RRSP owned by the holder of the RLIF. A transfer to a spousal RRSP is therefore permitted under the PBSR. However, there may be restrictions and tax implications under the federal Income Tax Act for a transfer to a spousal RRSP. Questions about the tax implications of any such transfer should be directed to the Canada Revenue Agency at 1-800-959-8281.
Can funds be transferred directly from a locked-in registered retirement savings plan (RRSP) to a restricted locked-in savings plan (RLSP)?
Funds cannot be transferred from a locked-in RRSP directly into a RLSP. The only way to transfer funds into a RLSP is from a restricted life income fund (RLIF).
There is no advantage to transferring funds directly into a RLSP, as the funds would then be "restricted" and the 50% unlocking option could not be exercised. Funds can be moved from a locked-in RRSP to a RLIF and then to a RLSP.