Life Income Fund (LIF)

Locked-In registered plans including LIRA, LRIF, PRIF, and LIF accounts are commonly available through the same institutions that provide RRSPs, such as banks, trust companies, credit unions, caisses populaires, and investment dealers. They are all considered “registered” plans, and so they are registered with Canada Revenue Agency, and funds in the plan accumulate income on a tax-deferred basis.

A Life Income Fund (LIF) account also accepts funds from a commuted plan. LIFs are available in all provinces except Saskatchewan. In Manitoba, New Brunswick, and Quebec a LIF can be opened at any age; in Alberta the plan owner must be 50; in B.C., 55; and in Ontario within 10 years of normal retirement, typically age 55.

There are both maximum and minimum amounts that may be withdrawn from the account each year. The maximum withdrawal limit ensures pension income will last until age 90, and is set by provincial legislation. Newfoundland requires that a life annuity be purchased with the funds in a LIF by the end of the year that the plan holder turns 80.

Recently, Ontario introduced new rules for LIFs and LRIFs (see below) that were intended to loosen the purse-strings insofar as withdrawal limits were concerned and allow people some access to money which is, after all, theirs. Especially appealing about New LIFs is the ability to withdraw up to 25% of the money transferred into the plan if the withdrawal is made within 60 days of transfer. New LIFs also allow the account to continue past age 90 if it has not been exhausted by that time due to withdrawals.

Investors have the ability to invest in a variety of investments and achieve tax-free growth in LIFs.  These investments include Guaranteed Investment Certificates (GICs), mutual funds, segregated funds, Exchange-Traded Funds (ETFs), and stocks and bonds that are listed on an exchange.

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