Locked-in retirement income fund (LRIF), Restricted life income fund (RLIF) and Life income fund (LIF)

Income and tax-sheltered growth

If you left a job where you had a pension plan, you may have transferred your pension entitlement to a locked-in retirement account (LIRA) or locked-in RRSP, where it has been invested according to your directions. Typically, that money cannot be withdrawn until you start retirement.

After a minimum age (set by your province) you can start to receive income from this pension money by converting it into a LIF or LRIF/RLIF or buying a life annuity. (Depending on your province, you may have a choice between the 2 types of accounts. As well, there may be different rules affecting these accounts.)

In many ways a LIF/LRIF/RLIF works like a LIRA or locked-in RRSP in reverse: Instead of putting money in, you take an income out. While there are rules governing minimum and maximum withdrawals every year, a LIF/LRIF/RLIF keeps you in control of how your money is invested, letting you choose from:

• Insurance GICs
• Mutual funds
• Segregated fund contracts
• Other options that reflect your risk tolerance and your overall financial plan

How a LIF/LRIF/RLIF can fit into your financial plan:

• You control your investments. Your money can be invested in many ways, so it keeps growing and working for you.
• You have some control over your income. While there is a variety of income payment options available, there is also a minimum income you're required to take out of the plan every year and a maximum you're allowed to take. The maximums for LIFs are a bit different than for LRIFs/RLIFs.
• You maximize the tax deferral. Since income is taxed only when it's taken out of the plan, the tax deferral you enjoyed with your LIRA or locked-in RRSP continues.
• You can use money remaining in a LIF to purchase a secure guaranteed income in a life annuity. Depending on the pension rules in your province, you may be required to do this at a certain age.
• You can name a beneficiary to receive your money after you die.
• LRIFs, RLIFs and PRIFs are only available in some provinces.
• If your LIF is locked-in under the rules of one of these provinces – Newfoundland and Labrador, Nova Scotia or Quebec – you may qualify for temporary income.