Ontario has changed the rules governing life income funds ("LIFs") and other locked-in accounts. Some of the changes are effective immediately and other changes will be effective January 1, 2008. The new rules provide for partial unlocking and remove the requirement on owners of LIFs to purchase an annuity on reaching age 80.

The following are some key changes:

  1. Effective immediately, the owner of a LIF is no longer required to purchase an annuity by the end of the year in which he/she reaches age 80.

  2. The owner of a locked-in retirement account ("LIRA") can keep monies in his/her LIRA until the end of the year in which he/she reaches age 71. The owner of a LIF or a locked-in retirement income fund ("LRIF") can transfer the monies in his/her account to a LIRA prior to the end of the year in which he/she turns age 71. These parallel the changes to the Income Tax Act (Canada) extending that date by which pension benefits must be paid from 69 to 71.

  3. A new life income fund is introduced, effective January 1, 2008. The old LIFs and LRIFs will not be available for purchase after December 31, 2008.

  4. The Owner of a new LIF has a one-time option of withdrawing or transferring to a registered retirement savings plan ("RRSP") or a registered retirement income fund ("RRIF") an amount of up to 25% of the total market value of the assets transferred from an old LIF, a LRIF, a LIRA or a registered pension plan, within 60 days from the date of transfer, on application to the financial institution.

  5. There is more flexibility in respect of transfers or withdrawals of monies from locked-in accounts generally.
  • Direct transfers to RRSPs and RRIFs (in addition to lump sum payments) are available to the surviving spouse of a deceased owner and to an owner over age 55 if he/she has less than 40% of the YMPE in all of his/her locked-in accounts.
  • The owner of a locked-in account who has become a non-resident of Canada may apply to the financial institution for withdrawal of money from his/her account 24 months after date of departure from Canada.

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