In Ontario, locked-in retirement savings accounts are subject to the federal Income Tax Act and Ontario’s Pension Benefits Act (PBA) and regulations. Normally, you must wait until you turn 55 before you can start receiving payments from your locked-in account, and there are limits set on the minimum and maximum payments you can receive in any one year.
In certain situations, however, it is possible to gain special access to your account. If you have a locked-in account, this brochure will help you determine if you are eligible to apply for special access to that account under Ontario law, and how to go about it.
What is a locked-in retirement savings account?
If you were entitled to a deferred pension at the time you terminated your membership in a registered pension plan, one of your options was to transfer the value of your pension benefit into a locked-in retirement savings account. This type of account is exclusively for money earned in a registered pension plan, and generally speaking, any money transferred into it must remain "locked in". This means that the money payable to you from this account can be used only to provide retirement income, which normally means that you must wait until you reach age 55. Also, while your money is locked in, it cannot be seized by creditors.
In Ontario, there are three types of locked-in accounts:
- Locked-in Retirement Account (LIRA),
- Life Income Fund (LIF), and
- Locked-in Retirement Income Fund (LRIF).
Important points to consider before you apply
Before you apply for special access to your LIRA, LIF, or LRIF, please make sure that it is subject to Ontario law, and not to federal legislation or the law of another province or territory (another jurisdiction). For example:
- If you worked for a federally regulated industry such as banking, telecommunications, or airline transportation, your locked-in account is likely subject to federal law.
- If your pension was earned as a result of employment in another province, the money in your locked-in account is governed by the pension law of that province. It does not matter if the pension plan was registered in Ontario – what matters is where the pension was earned.
If your locked-in account is subject to the law of another jurisdiction, you will not be able to withdraw the money under Ontario law. Instead, you will have to seek information from that jurisdiction to see if it provides for special access. If you’re not sure which law applies, check with your former pension plan or the financial institution that administers your locked-in account.
- Once your money is withdrawn from a locked-in account, it can be seized by creditors.
- Money withdrawn from your locked-in account is taxable, and income tax will be deducted at the time the withdrawal is made.
- Withdrawing money from your locked-in account may affect your eligibility for certain government benefits, such as social assistance.
- If you have a spouse, in most cases your application will require your spouse’s signed consent to withdraw money from a LIRA, LIF, or LRIF.
- Your application must be received within 60 days of the date it is signed. Otherwise, it cannot be accepted. This applies to all applications for special access to locked-in accounts, whether they are made to the Financial Services Commission of Ontario (FSCO) or to your financial institution.
Under what circumstances can you apply for special access?
You may be able to gain special access to your Ontario locked-in account(s) if:
- You have an illness or physical disability that is likely to shorten your life expectancy to less than two years.
- You are at least 55 years old and the total value of the funds in your Ontario locked-in account(s) is less than a specified amount ($18, 880 in 2010).
- Your locked-in assets exceed federal Income Tax Act limits.
- You are facing specific types of financial hardship.
Shortened life expectancy
You can apply to withdraw some or all of the money in your LIRA, LIF, or LRIF if you have an illness or physical disability that is likely to shorten your life expectancy to less than two years. Your application must include a signed statement attesting to your condition from a medical doctor who is licensed to practise in Canada.
Some pension plans allow members to withdraw money in these circumstances on more generous terms than under the legislation. You might want to check if the terms of your former pension plan include this type of provision. If so, contact the financial institution which administers your LIRA, LIF, or LRIF to take advantage of those provisions.
The financial institution that administers your locked-in account will provide you with the appropriate application form and information. The form is also available from FSCO (Form 5), but you must apply to your financial institution, not to FSCO.
Age 55 and a minimal amount of money in your LIRA, LIF, or LRIF
If you are age 55 or older and the total value of the funds in all of your Ontario-regulated locked-in account(s) is less than a specified amount ($18,880 in 2010), you can choose to withdraw all of the money and close the account(s).
The specified amount changes each year and cannot be more than 40% of the Year’s Maximum Pensionable Earnings (YMPE), a term used in the Canada Pension Plan. The YMPE is determined each year according to a formula based on average wage levels, and is published annually by the Bank of Canada.
The financial institution that administers your locked-in account will provide you with the appropriate application form and information. The form is also available from FSCO (Form 5), but you must apply to your financial institution, not to FSCO.
An amount that exceeds federal Income Tax Act limits
A locked-in account containing assets that exceeded the maximum transfer amount allowed under federal tax law is subject to a penalty payment each year. If you are in this situation, you can apply to withdraw the excess assets, and any investment income earned on those assets, in order to avoid paying a penalty in the future.
Your application must document the precise value of the excess amount of assets that were transferred from your former pension plan into your LIRA, LIF, or LRIF. You will need a letter that provides this information from either the administrator of your former pension plan or the Canada Revenue Agency.
The financial institution that administers your locked-in account will provide you with the appropriate application form and information. The form is also available from FSCO (
Form 5), but you must apply to your financial institution, not to FSCO.
Financial hardship
Under Ontario’s pension law, you may qualify for special access to your LIRA, LIF, or LRIF if you are facing financial hardship under the specific categories listed below. If you want to apply for special access to more than one locked-in account, a separate application is required for each account. Please note, however, that you cannot apply to withdraw money from any of your locked-in accounts under a category of financial hardship for which you have already successfully applied within the last 12 months. Applications based on financial hardship must be made to FSCO (see below – Where do you apply?).
If you find yourself in any of the following situations, you may be eligible to gain access to your locked-in account:
- Low income – Your expected total personal income from all sources, before taxes, for the next 12 months must be less than a specified amount ($33,400.00 in 2012). This amount changes every year. For up-to-date figures, contact FSCO or visit our website at www.fsco.gov.on.ca.
- Risk of eviction from your home – You or your spouse are at risk of eviction due to unpaid payments on a debt (such as a mortgage) secured against your home. You have received a written demand for payment from the creditor and you need the money to avoid eviction.
- Risk of eviction from your rented residence – You or your spouse are at risk of eviction due to unpaid rent for your residence. You have received a written demand for payment from your landlord and you need the money to avoid eviction.
- Rent deposit – You need the money to pay the first and last months’ rent in order to rent a place to live.
- Medical expenses – You need the money to pay for certain medical or dental expenses (e.g., prescription drugs, medical devices) to deal with an illness or physical disability for you, your spouse, or a dependant of either of you. These expenses cannot be covered by a provincial health plan, your private health insurance, or any other source. You may claim for expenses already paid or those you will incur in the future, as long as they meet these criteria. You must provide a doctor’s (or a dentist’s) letter stating that the treatment is necessary.
- Residential renovations, alterations, or construction to accommodate an illness or physical disability – The illness or disability must affect you, your spouse, or a dependant of either of you. The renovations or alterations can be made to your home or the dependant’s home. The money can also be applied to the cost of including features in the construction of a new home that accommodate an illness or disability. You must provide a doctor’s letter stating that the renovations, alterations, or construction are necessary to accommodate the illness or disability.
Where do you apply?
If you are applying for special access under the category of financial hardship, you must apply to FSCO for the consent of the Superintendent of Financial Services at FSCO. To obtain an application form (Form 6 or 6.1) or further information, or for free help in filling out this form, please visit FSCO’s website at
www.fsco.gov.on.ca or contact us at:
Superintendent of Financial Services
Financial Hardship Unlocking Section
5160 Yonge Street, Box 85
Toronto ON M2N 6L9
General inquiry:
(416) 250-7250![]( "Call: (416) 250-7250")
Fax:
(416) 226-7880![]( "Call: (416) 226-7880")
Toll-free:
1-800-668-0128![]( "Call: 1-800-668-0128")
TTY toll-free:
1-800-387-0584![]( "Call: 1-800-387-0584")
Applications under all other categories (shortened life expectancy, age 55 and minimal amount, or amount exceeding federal tax limits) must be made directly to the bank, insurance company, or other financial institution that administers your LIRA, LIF, or LRIF. Your financial institution will provide you with the appropriate application form and information. This form (
Form 5) is also available from FSCO and can be downloaded on FSCO's website, but you must deal with your financial institution, not FSCO, in making this application.
If you are applying to FSCO based on financial hardship
FSCO will give prompt and careful attention to applications based on financial hardship, but FSCO cannot consent to the withdrawal of money unless your situation meets the strict rules set out in Regulation 909 under the Pension Benefits Act. Therefore, before you apply, please make sure that your financial hardship situation falls into one of the qualifying categories described above. If it doesn’t, your application cannot be approved.
You may be expected to use some of your assets to deal with your financial hardship situation. The law requires that the value of your assets be deducted from the amount of money you are applying to withdraw from your LIRA, LIF, or LRIF. However, there are many types of assets that you are not expected to use in this situation. These include:
- your principal residence,
- a personally operated business or farm (to a limit of $50,000),
- motor vehicles,
- essential tools of trade necessary to employment, and
- personal items (e.g., clothing, jewellery).
The law requires that you qualify to withdraw at least $500, after deducting the value of the relevant assets. Your application cannot be approved if, after review, you are only eligible to withdraw an amount that is less than $500. The same rules apply to any assets owned by your spouse, and to the dependant’s assets if you are applying to help a financially dependent person.
Therefore, before you apply, it’s a good idea to make a detailed list of your assets, and any assets belonging to your spouse (if you are living together). If you are making an application in order to help a family member who is financially dependent on either you or your spouse, you should also make a list of any assets belonging to that person.
Administration fee: The Government of Ontario has waived fees for applications received on or after April 1, 2009.
Glossary of terms
The application form for special access to an Ontario LIRA, LIF, or LRIF contains some terms that, for the purposes of the application, are defined as follows:
Spouse
You have a spouse if you and another person, at the time the application is signed, are:
- married to each other; or
- not married to each other and are living together in a conjugal relationship
- continuously for a period of at least three years, or
- of some permanence and you and the other person are the natural or adoptive parents of a child, both as defined under the Family Law Act.
Dependent family members
The dependant must be a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece, or nephew of you or your spouse. The dependant must rely on you or your spouse for support during the calendar year that you make your application, or during the previous calendar year.