Information 

No. PE0196INF

 

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Purpose

This guidance replaces L200-418 (2019 Life Income Fund (LIF) and Locked-In Retirement Income Fund (LRIF) Maximum Annual Income Payment Amount Table) as of the effective date of this guidance.

Scope

This guidance affects providers of LIFs and LRIFs that hold Ontario regulated pension funds.

Rationale and Context

The rules for determining the maximum annual income payment for an Ontario life income fund (LIF) that is subject to Schedule 1 to Regulation 909 under the Pension Benefits Act (the Regulation), a LIF that is subject to Schedule 1.1 to the Regulation and an LRIF that is subject to Schedule 2 to the Regulation became harmonized on January 1, 2011.  This guidance describes how to calculate the 2020 maximum annual income payment for each.

For the purpose of this guidance, a LIF that is subject to Schedule 1 of the Regulation will be referred to as an ‘Old LIF’, and a LIF that is subject to Schedule 1.1 of the Regulation will be referred to as a ‘New LIF’.  An LRIF that is subject to Schedule 2 of the Regulation will continue to be referred to as an LRIF.

For additional information about specific rules that apply to the maximum annual income payments in certain circumstances, including under the federal Income Tax Act (Canada), please refer to FSCO pension policies L200-305 (Old LIFs) (FSRA guidance PE0151ORG), L200-303 (New LIFs) (FSRA guidance PE0150ORG) and L200-501 (LRIFs) (FSRA guidance PE0153ORG).

Information

Maximum annual income payments from an Old LIF or LRIF for 2020

After December 31, 2008, individuals could not purchase an Old LIF or LRIF and money could not be transferred to existing Old LIFs or LRIFs.  Section 6 of Schedules 1 and 2 of the Regulation provides that the maximum income amount that may be paid from an Old LIF or an LRIF for any fiscal year is the greater of the following amounts:

  1. The investment earnings, including any unrealized capital gains or losses, of the Old LIF or LRIF in the previous fiscal year; and
  2. The amount calculated using the formula,

                      C/F, in which

    ‘C’ is the value of the assets in the Old LIF or LRIF at the beginning of the fiscal year, and

    ‘F’ is the present value, at the beginning of the fiscal year, of an annuity of $1 payable annually in advance over the period commencing at the beginning of the fiscal year and ending on December 31 of the year in which the owner reaches 90 years of age.

Maximum annual income payment from a New LIF for 2020

Section 6 of Schedule 1.1 of the Regulation provides that the maximum income amount that may be paid from a New LIF for any fiscal year is the greatest of the following amounts:

  1. The investment earnings, including any unrealized capital gains or losses, of the New LIF in the previous fiscal year;
  2. The amount calculated using the formula,

                     C/F, in which

    ‘C’ is the value of the assets in the New LIF at the beginning of the fiscal year, and

    ‘F’ is the present value, at the beginning of the fiscal year, of an annuity of $1 payable annually in advance over the period commencing at the beginning of the fiscal year and ending on December 31 of the year in which the owner reaches 90 years of age.

    and
     
  3. If the money in a New LIF is derived from money transferred directly from an Old LIF, another New LIF or an LRIF, and if the income is being paid out of the receiving New LIF in the fiscal year following the fiscal year in which the receiving New LIF is established, the sum of:
     
    1. the investment earnings, including any unrealized capital gains or losses, of the transferring Old LIF,  New LIF or LRIF in the previous fiscal year, and
       
    2. the investment earnings, including any unrealized capital gains or losses, of the receiving New LIF in the previous fiscal year.

Maximum Annual Income Payment Table for 2020

The table at the end of this policy identifies the percentages for use in calculating the maximum income payment amount for 2020 under the formulas in point 2 in each of the sub-headings above.  For the table, the interest rate assumptions used in determining the value of ‘F’ in the formula are:

  1. 6.00%, which represents the greater of the CANSIM V122487 rate (the long-term Government of Canada bond rate) for November 2019  and 6.00%, for the first 15 years, and
     
  2. 6.00% for the sixteenth and each subsequent fiscal year.

Percentages shown in the table must be prorated for the initial fiscal year if less than twelve months. Part of a month is treated as a full month.

Effective Date and Future Review

This guidance is effective January 1, 2020. The next review of this guidance will be initiated no later than December 31, 2020.

About this Guidance

Information guidance describe FSRA’s views on certain topics without creating new compliance obligations. Visit FSRA’s Guidance Framework to learn more.

Appendices and Reference

Appendices

  • Appendix A: 2020 Maximum Annual Income Payment Amount Table for an Ontario Old LIF, New LIF or LRIF
  • Appendix B: 2020 Maximum Annual Income Payment Amount Table for an Ontario Old LIF, New LIF or LRIF

Appendix A:
2020 Maximum Annual Income Payment Amount Table for an Ontario Old LIF, New LIF or LRIF

(Using C/F formula in Section 6 of Schedules 1, 1.1 and 2 of the Regulation)

Age attained
during 2020

Number of years
to the end of year
in which
age 90 is attained

Maximum payment as a percentage of the Old LIF, New LIF or LRIF balance at start of fiscal year*

41

50

5.98531%

42

49

6.00600%

43

48

6.02808%

44

47

6.05167%

45

46

6.07687%

46

45

6.10382%

47

44

6.13265%

48

43

6.16350%

49

42

6.19655%

50

41

6.23197%

51

40

6.26996%

52

39

6.31073%

53

38

6.35454%

54

37

6.40164%

55

36

6.45234%

56

35

6.50697%

57

34

6.56589%

58

33

6.62952%

59

32

6.69833%

60

31

6.77285%

61

30

6.85367%

62

29

6.94147%

63

28

7.03703%

64

27

7.14124%

65

26

7.25513%

66

25

7.37988%

67

24

7.51689%

68

23

7.66778%

69

22

7.83449%

70

21

8.01930%

Appendix B:
2020 Maximum Annual Income Payment Amount Table for an Ontario Old LIF, New LIF or LRIF

(Using C/F formula in Section 6 of Schedules 1, 1.1 and 2 of the Regulation)

Age attained
during 2020

Number of years
to the end of year in which
age 90 is attained

Maximum payment as a percentage of the Old LIF, New LIF or LRIF balance
at start of fiscal year*

71

20

8.22496%

72

19

8.45480%

73

18

8.71288%

74

17

9.00423%

75

16

9.33511%

76

15

9.71347%

77

14

10.14952%

78

13

10.65661%

79

12

11.25255%

80

11

11.96160%

81

10

12.81773%

82

9

13.87002%

83

8

15.19207%

84

7

16.89953%

85

6

19.18515%

86

5

22.39589%

87

4

27.22561%

88

3

35.29338%

89

2

51.45631%

90

1

100.00000%

* The maximum annual income payment percentage is calculated on the basis of a twelve-month fiscal year to December 31, 2020, using the interest rate assumptions on page 3 of this policy.

Effective Date: January 1, 2020