In general, money transferred from a registered pension plan into a locked-in account, such as a locked-in retirement account (LIRA), life income fund (LIF) or locked-in retirement income fund (LRIF), can only be used to provide income after retirement.
There are five financial non-hardship categories that may be considered when making an application:
- Your life expectancy has been shortened to two years or less by an illness or physical disability
- You are at least 55 years old and the total value of the funds in all of your locked-in accounts is less than 40% of the Year's Maximum Pensionable Earnings (YMPE)
- The amount of money transferred to your locked-in account exceeds federal Income Tax Act limits
- You are a non-resident of Canada and 24 months have passed since your departure from Canada
- You transferred money into an Ontario life income fund that is governed by the requirements of Schedule 1.1 and, within 60 days of this transfer, you want to withdraw or transfer up to 50% of the total money that was transferred to the Schedule 1.1 LIF
How to apply
All financial non-hardship unlocking applications must be made on FSRA forms. Download and complete the form that corresponds to your application category, and forward it to your financial institution.
Categories 1 – 4:
Review and approval
Review of your application will be handled by the financial institution that holds and administers your locked-in accounts. They will determine if your application meets the legal requirements set out under the category for which you are applying, and forward the appropriate payment, if approved.
What happens when an application is approved?
If your application is approved, there are a number of points to keep in mind:
Once approved, money is paid in a lump sum only and cannot be transferred to a tax-deferred account, such as an RRSP or RRIF.
- Withholding tax
The amount you are approved for is subject to a withholding tax payable to the CRA (Canada Revenue Agency), variable to the amount you withdraw.
- Administration fees
Your financial institution may charge administration fees, which will be deducted from your payment.
- The amount you withdraw is considered income, and may affect your eligibility for other government assistance programs
- Money withdrawn from a locked-in account will no longer be considered protected from creditors, and may be seized