Application for Low Expected Income

Introduction and overview

What you need to apply for financial hardship unlocking for low expected income

When your application is approved

Filling out the Form FHU 4 – Low Expected Income

Introduction and overview

This User Guide helps you apply to unlock and take out money from your Ontario locked-in accounts (locked-in retirement account (LIRA), life income fund (LIF), or locked-in retirement income fund (LRIF)) based on financial hardship for low expected income.

This User Guide is only a guideline. If this guideline conflicts with the rules in the Financial Services Regulatory Authority of Ontario Act, (FSRA Act), the Pension Benefits Act, or the regulations made under either of them, the FSRA Act, Pension Benefits Act or regulations govern.

There are four types of financial hardship unlocking allowed for Ontario locked-in accounts:

  1. for medical expenses;
  2. for arrears of rent or default of secured debt secured on a main home (such as a mortgage);
  3. for payment of first and last months’ rent to obtain a main home; and
  4. for low expected income.

This User Guide is for unlocking because of low expected income. If you want to apply for another type of financial hardship unlocking, you must apply separately using a different form. You can find User Guides for the different types of financial hardship unlocking and applications on the Financial Services Regulatory Authority (FSRA) website.

You must apply to the financial institution that holds and administers your locked-in account. Your financial institution could be one of the following institutions:

  • a bank
  • a life insurance company
  • a credit union
  • a caisse populaire
  • a trust company

If you have invested the money in your locked-in account through a financial advisor, you should ask your advisor if you should make your application:

  • through them; or
  • directly to the financial institution that holds your locked-in account.

You cannot make your application to FSRA.

Your financial institution is responsible for answering questions about your locked-in account and your unlocking application.

What you need to apply for financial hardship unlocking for low expected income

You must have money in an Ontario locked-in account that you own

There are three different types of locked-in accounts:

  1. LIRAs
  2. LIFs
  3. LRIFs

Your money must be in one of these accounts. If your money is still in your pension plan, you cannot take it out due to financial hardship.

You must be the owner of the locked-in account to apply for financial hardship unlocking. The locked-in account must be in your name, not in your spouse’s name. If you are not sure, ask your financial institution or financial advisor.

Your money must be subject to the Ontario Pension Benefits Act

The money in your locked-in account must be subject to the Ontario Pension Benefits Act. It cannot be subject to federal pension law or the pension law of another province. If the money is not subject to the Ontario Pension Benefits Act, your application will be refused. Ask your financial institution whether your locked-in account is subject to the Ontario Pension Benefits Act.

Use Form FHU 4 Application for Low Expected Income

You must apply to your financial institution using the application form approved by FSRA. The application for low expected income must use the Form FHU 4 for the year you apply. If you apply in 2023, use the 2023 form. You cannot use a previous year’s form.

Please contact your financial institution for an application form. Forms and other information about financial hardship unlocking can also be found on FSRA’s website.

One application per year, per type of unlocking, per account

You can only make one application from your Ontario locked-in account each calendar year under the low expected income category.

Deadlines for the application

There are a number of important deadlines to be aware of:

  • 60 day time limit for submitting the application: Once you sign the application (and your spouse signs the consent, if applicable), you have 60 days to submit it to your financial institution. If you submit it after 60 days from the date you signed it, you will have to fill out another application.
  • 30 day time limit for payment by financial institutions: Your financial institution must review your application to see if it meets the requirements for financial hardship unlocking for low expected income. If the requirements are met, your financial institution must:
    • approve the application; and
    • make payment to you within 30 days from the day it received the completed application.

Minimum and maximum amounts you may apply for

For all applications, the minimum amount you must apply for is $500.00. If you apply for less than $500.00, your financial institution will refuse your application.

The maximum amount you can apply to unlock for low expected income is described later on in this User Guide. You cannot apply for an amount greater than the maximum amount. If you do apply for an amount greater than the maximum, your financial institution should advise you to revise your application.

Your financial institution is not permitted to pay you an amount greater than the maximum amount allowed.

Please see Question 3 in Part 2 of this User Guide for more information about the maximum amount you may apply to unlock for low expected income.

When your application is approved

Payment

The money must be paid to you in one lump sum. It cannot be paid monthly or in any other manner. It cannot be transferred to another tax-deferred account, such as

  • an RRSP
  • an RRIF

Withholding tax and other deductions

The amount you are approved to unlock will be reduced by income tax. This is required by the Canada Revenue Agency (CRA).

Your financial institution may also charge an administrative fee for your application, which will be deducted from the amount paid to you.

For example, you apply and are approved to unlock $20,000.00. Your financial institution must deduct 30 percent ($6,000.00) for income tax and pay it to the CRA. If your financial institution charges you a $50.00 fee, that amount will also be deducted. Therefore, you will end up receiving $13,950.00.

To receive a greater amount in cash than what you would have received after deductions, apply to take out a greater amount. But you cannot apply to take an amount greater than:

  • the maximum amount allowed; or
  • the amount in your account.

Eligibility for other government benefits

When you take out money from your locked-in account, that money could be considered as income. This could affect your eligibility for benefits under a government program, such as social assistance. Contact the government agency or department that administers the program or provides these benefits if you have questions about the impact on your benefits.

Loss of creditor protection

Money in your locked-in account cannot be seized by your creditors. If you take out money from your locked-in account, that money is no longer protected and may be seized by your creditors.

Privacy

Your financial institution must tell you the purpose for collecting, using or disclosing any of your personal information.

Filling out Form FHU 4 – Application for Low Expected Income

General Information about Form FHU 4

To unlock money for low expected income, you may make one application during a calendar year. If you have already applied for financial hardship unlocking for low expected income, you cannot apply again until the next calendar year. An application is considered to be made in the year in which the financial institution receives the completed application.

You may apply to unlock and take out money from the same locked-in account for different types of financial hardship. You can do this in the same year, but you must use different unlocking forms.

Part 1 – Information about the Owner of the Ontario Locked-in Account

Question 1: Fill in the information about yourself in each box.

Question 2: Fill in the name of the financial institution that holds your locked-in account. This may be a bank, insurance company, or credit union. Fill in the number of the account. This is the number of the account that you want to take money out of.

Information about your spouse

Question 3: Fill in the information about your spouse (if applicable) in each box.

A “spouse” is defined in the Pension Benefits Act as either of two persons who:

  • are married to each other, or
  • are not married to each other and are living together in a conjugal relationship, 
    • continuously for a period of not less than three years, or
    • in a relationship of some permanence, if they are the parents of a child as set out in section 4 of the Children’s Law Reform Act.

If you have a spouse and you are living separate and apart from your spouse due to a breakdown in your spousal relationship, then:

  • your spouse is not required to consent to your unlocking application; but
  • you must still fill in information about your spouse in question 3.

Spouses living in different residences may still be spouses for the purpose of this application. If your spouse is living elsewhere because of:

  • their work;
  • they are looking after a relative or friend;
  • for health reasons; or
  • for other reasons that are not related to their spousal relationship,

that does not mean you are living separate and apart due to a breakdown in your spousal relationship.

It is possible that you may have “more than one spouse”. That is, you could be separated from your spouse while still married. At the same time, you could be living common law with another person who meets the definition of spouse. If that is your situation, you should fill in the information about the spouse you are living with when you apply. In this example, this is your common law spouse. The money can only be unlocked and taken out if that person provides their consent to your application (see Part 4).

Part 2 – Expected income

Question 1: Other than this Application, have you applied during 2023 to take out money from this locked-in account for low expected income?

If you answered yes, you cannot apply again under this category this year.

Question 2: What is your expected total income before taxes for the 12 months following the date you sign this Application? This must include income from all sources.

This is an estimate of how much you expect to receive for the next 12 months, before taxes, starting on the date you sign the application. It is not based on the amount you have received in the past 12 months. If you do not expect to receive any income, you should enter zero.

The following amounts should be included in determining your expected total income for the next 12 months:

  • wages, salaries, casual earnings and amounts paid under a training program (gross amount, before taxes);
  • income from self-employment (excluding expenses but before taxes);
  • rental income (excluding expenses but before taxes);
  • payments received under an annuity, pension plan, registered retirement savings plan, registered retirement income fund, superannuation scheme, or earnings replacement program;
  • insurance benefits;
  • spousal support payments;
  • capital gains arising from the sale or disposition of an asset;
  • cash payments received under a government program (except for those excluded below), such as Canada Pension Plan, Old Age Security, or Ontario Works;
  • interest and dividend income on any investment; and
  • income from any other source.

All amounts entered into the form are before taxes are taken. Do not include any income your spouse expects to receive.

Do not include the amount you expect to take for low expected income if your application is approved.

In addition, the following payments should not be included in your estimate:

  • a refund or repayment of taxes;
  • a refundable tax credit;
  • a refund of tax paid under the Ontario Child Care Supplement for Working Families program (under section 8.5 of the Income Tax Act);
  • the payment to you of an Ontario child benefit (under section 8.6.2 of the Income Tax Act or under section 104 of the Taxation Act, 2007);
  • a payment received by a foster parent under the Child, Youth and Family Services Act, 2017; or
  • child support payments received under a court order or an agreement.

Enter the total amount of expected income in box 2.

In 2023, if the amount you enter in box 2 is greater than $44,400.00, your application must be refused.

Question 3: What is the maximum amount you can take out?

Your maximum is calculated by subtracting the amount in box 3b from the amount in box 3a.

The amount in box 3a for 2023 is $33,300.

In box 3b, fill in 75 percent of your expected total income for the next 12 months. This is 75 percent of the amount you entered in box 2.

If your expected total income for the next 12 months is zero, fill in zero in box 3b.

Subtract the amount in box 3b from the amount in box 3a and fill that amount in box 3c. This is the maximum amount that you may apply to take out for low expected income.

Examples:

Lee expects their income over the next 12 months to be $30,000.00 before taxes. In box 2, Lee enters 30,000.00. In box 3b, Lee enters 75 percent of the amount they entered in box 2, which is 22,500.00. Box 3a (33,300.00) minus box 3b (22,500.00) equals 10,800.00. Lee enters this in box 3c. That is the maximum amount Lee can take out in 2023, based on Lee’s estimated expected income.

Sam is unemployed and does not expect to receive any income over the next 12 months. Sam has applied for government assistance. Sam estimates that they will receive $10,000.00 in government assistance, so they enter 10,000.00 in box 2. 75 percent of that amount is 7,500.00. This is the amount they enter in box 3b. Box 3a (33,300.00) minus box 3b (7,500.00) equals 25,800. Sam should enter this in box 3c as their maximum.

Eddie has lost their job but expects to receive $45,000.00 from rental income, investments, government assistance, and spousal support. They enter $45,000.00 in box 2. That amount is greater than $44,400.00 (2/3 of the Year’s Maximum Pensionable Earnings for 2023). Eddie’s application must be refused.

Question 4: How much money are you applying to take out from your locked-in account?

You do not have to apply for the maximum amount you are entitled to.

In the examples above, Lee can decide to take the maximum. They enter 10,800.00 in box 4. Sam decides they do not need the entire amount they are entitled to. They enter 12,000.00 in box 4.

You cannot apply for an amount that is:

  • greater than the amount in your locked-in account as of the date you apply;
  • greater than the maximum amount you are allowed to take out (box 3c); or
  • less than $500.00.

Remember that the amount you apply for will be reduced by withholding tax. It may be reduced further by an administrative fee.

Part 3 – Certification by the Owner of the Locked-in Account

You must sign and date the Certification in Part 3. There is no requirement for a witness to your signature.

Once you sign the application, you have 60 days to give it to your financial institution.

Certifications regarding your spousal status:

You must certify your spousal status on the date you sign the application. In Part 3 of the application form, you must check only one of four boxes:

  1. You have a spouse and your spouse consents to taking out money from your locked-in account.
    (If you select this option, you will need your spouse to complete Part 4.)
  2. You have a spouse, but you and your spouse are living separate and apart due to a breakdown in your spousal relationship.
    (If you select this option, your spouse is NOT required to complete Part 4.)
  3. You have a spouse, but none of the money in your locked-in account is derived, directly or indirectly, from a pension benefit provided in respect of your past or current employment. This applies if all the money in your locked-in account did not come from your own pension plan, but came from the pension plan of your former spouse.
    (If you select this option, your spouse is NOT required to complete Part 4.)

    For example, Jordan is a member of a pension plan and divorces Chris. As part of the divorce, Jordan pays a portion of Jordan’s pension benefits to Chris. Chris gets an Ontario locked-in account to hold that pension money. Chris later marries Avery. Chris then applies to unlock and take out money from Chris’s locked-in account for financial hardship.

    Since the money came from Jordan’s pension plan, Chris’s current spouse Avery is not required to consent to Chris’s application. In Part 3 of the application form, Chris should check the box that says “I have a spouse, but none of the money in my locked-in account is derived, directly or indirectly, from a pension benefit related to my past or current employment”.
     
  4. You do not have a spouse.

Other certifications:

By signing the application, you also certify that:

  • all the information in the application and any accompanying documents is accurate and complete;
  • you have not previously applied in 2023 to take out money from this locked in account for low expected income; and
  • the amount of your expected total income for the 12 months following the date you sign the application is accurate.

Part 4 – Consent of the Owner’s Spouse to the Application

Your spouse must complete this part.

If you have a spouse on the day you sign the Certification in Part 3 of the application, you may only take money from your locked-in account if your spouse consents to the application, unless :

  • you and your spouse are living separate and apart due to a breakdown in your spousal relationship; or
  • all the money in your locked-in account came from the pension plan of your former spouse (see explanation in Part 3 above).

If your spouse consents, your spouse must fill in Part 4 of the application and sign and date it. There is no requirement for a witness to your spouse’s signature.

If your spouse is not sure about the legal consequences of signing the consent, they should seek legal advice. Your spouse does not have to sign. But if spousal consent is required and your spouse does not consent, the financial institution must refuse your application.

Your spouse must indicate that they understand that:

  • you (the owner of the locked-in account) are making an application to unlock and take out money from the account;
  • if the circumstances require spousal consent, you cannot take out the money from the locked-in account without your spouse’s consent;
  • as long as this money is kept in the locked-in account, your spouse may have a right to a share of this money (this would happen if there is a breakdown in your spousal relationship or if you die); and
  • if any money is taken out from the locked-in account, your spouse may lose any right that they have to a share of the money taken out.

If the financial institution is not satisfied that your spouse understands what they are signing, it may refuse the application. The financial institution may request proof of your spouse’s identity and spousal status.