I have a locked-in retirement account. How do I go about getting funds from it, or transferring it into an RRSP?
A locked-in retirement account, or LIRA, is intended to do exactly what it says on the tin: lock your money away for retirement. If you’re hoping to easily withdraw money, you’re most likely out of luck, and in most cases you can’t directly transfer from a LIRA to an RRSP.
For the sake of (relative) simplicity, I’m going to limit this discussion to pensions under provincial jurisdictions, which are complex enough on their own.
If your employer gives you a pension and you leave your job before you retire, you can transfer funds (the present value of your future pension) into a LIRA. Unlike an RRSP, you can’t make additional contributions, but like an RRSP, your LIRA will enjoy tax-deferred growth.
What happens next depends on the jurisdiction that governed your pension plan, which may have different rules from where you currently live.
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Regulatory websites are your best guide to the latest specifics, but for New Brunswick and Quebec plans, there is no minimum age to convert your LIRA into a life income fund, or LIF. You will have to wait until 50 for B.C. and Alberta, and elsewhere you may have to wait until 55.
An earlier conversion isn’t necessarily better. Funds in your LIF will be subject to annual minimum withdrawals (which mirror registered retirement income fund, or RRIF, minimum withdrawals), and any withdrawals will be taxed as regular income. It may not make a lot of sense for you to tap your LIF early if you’re drawing a salary.
Most provinces also have an annual maximum amount you can withdraw from your LIF, usually calculated based on your age and an interest-rate factor.
Whatever your retirement age, you’ll need to convert or transfer funds out of your LIRA by the end of the calendar year you turn 71.
In some provinces, such as Ontario, you can use a one-time unlocking of funds to transfer up to 50 per cent of your LIF to an RRSP or RRIF. After converting your LIRA to a LIF in Ontario, you just need to submit an application to your financial institution within 60 days to make the transfer to an unlocked registered account.
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The good news is this transfer won’t impact your RRSP contribution room. The bad news is it’s not possible in all jurisdictions.
If none of these work for you, and if you still want to get your hands on your LIRA funds before you retire, there are a few last-ditch options.
You can apply for an exception to withdrawal rules under special circumstances, such as if you’re facing shortened life expectancy, if you can prove financial hardship, if you are no longer a Canadian resident, or if your LIRA is very small.
The rules around pensions, LIRAs and related accounts are complex and vary from jurisdiction to jurisdiction. Some provinces may require a spouse or common-law partner’s consent to issue a LIF, while others don’t; New Brunswick allows one-time partial unlocking of a LIF in specific situations with limits set by a formula, but you can’t do it at all in British Columbia. In Manitoba and Saskatchewan, you might find that a prescribed retirement income fund, or PRIF, suits your needs better than a LIF.
Given this complexity, it’s worth talking to a trusted financial planner or adviser to understand what’s actually possible given your pension jurisdiction and what options work best for you.
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I have been buying two different Pfizer CDRs: PFE and ZPFE. There are days when the price of one goes up while the other goes down. Why is this happening?
Because of the way they’re structured, you can pretty much expect Canadian depositary receipts, or CDRs – Canadian-dollar instruments that let investors trade global companies on Canadian exchanges – to deviate slightly from the day-to-day moves of their underlying shares.
That’s because when you buy Pfizer CDRs, you’re not directly buying Pfizer shares, but a currency-hedged financial instrument. Each Pfizer CDR represents a changing number of Pfizer shares based on a ratio that’s adjusted to account for moves in the loonie and the U.S. dollar.
You hold two different instruments – PFE-T, issued by CIBC Capital Markets, and ZPFE, issued by BMO Global Asset Management. Each issuer will have its own currency hedging strategy, so while over time you can expect the CDRs to track each other pretty closely, they’re unlikely to move in lockstep day to day.
E-mail your questions to agalbraith@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.