A Locked-In Retirement Account (LIRA), and the virtually identical Locked-in Retirement Savings Plan (LRSP), are Canadian investment accounts designed specifically to hold locked-in pension fund

Pension fund

A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...

s for former plan members, former spouses or common-law partners

Common-law marriage

Common-law marriage, sometimes called sui juris marriage, informal marriage or marriage by habit and repute, is a form of interpersonal status that is legally recognized in limited jurisdictions as a marriage even though no legally recognized marriage ceremony is performed or civil marriage...

, or surviving spouses or partners. Funds held inside LIRAs/LRSPs will normally only become available (or "unlocked") to holders upon retirement.

Meaning of Locked-In

The distinction between a LIRA/LRSP and an RRSP is that, where RRSPs can be cashed in at any time, a LIRA/LRSP cannot. Instead, the investment held in the locked-in account is "locked-in" and cannot be removed until either retirement or a specified age outlined in the applicable pension legislation (though certain exceptions exist). Another important distinction between regular RRSPs and LIRAs/LRSPs is that once funds have been transferred from a company pension plan to a LIRA/LRSP, further contributions cannot be made into said LIRA/LRSP. Any monetary amounts earned in the LIRA/LRSP through investment are also considered to be locked-in.

Provisions for holding a LIRA/LRSP

Employees who have Registered Pension Plans (RPP) and who remain with their company until retirement age will receive income for life at time of retirement. However, at the time of termination of membership in a company pension plan preceding retirement, death before retirement (whereby funds become property of surviving spouse or partner), or the breakup of marriage or common-law relationship, holders must transfer their funds into a LIRA/LRSP and hold them there until retirement.

Converting to LIF/LRIF/PRIF or Life Annuities

At retirement, holders must convert their LIRAs/LRSPs into Life Income Funds (LIF) or Locked-In Retirement Income Funds (LRIF) which will provide pension income during retirement. Instead of converting to a LIF or LRIF, holders may opt to use the proceeds of their LIRA/LRSP to purchase a life annuity

Life annuity

A life annuity is a financial contract in the form of an insurance product according to which a seller — typically a financial institution such as a life insurance company — makes a series of future payments to a buyer in exchange for the immediate payment of a lump sum or a series...

 from an insurance company.

Under Saskatchewan legislation, LIRAs/LRIFs are instead called Prescribed Retirement Income Funds (PRIF).

Pension Legislation

LIRAs/LRSPs are registered either federally or provincially at the time of transfer from the company pension plan to the LIRA/LRSP. Though some accounts are registered federally, the bulk of locked-in accounts are registered under the legislation of a specific province. The primary differences which exist from province to province involve the minimum age required for withdrawal (i.e. when conversion to LIFs and LRIFs is possible) and the special provisions by which locked-in funds may be unlocked early.

Difference between LIRAs and LRSPs

LIRAs and LRSPs are essentially identical in structure. What determines one over another is the pension legislation of an individual's locked-in funds.

LRSPs are used for funds legislated in:

• British Columbia
• Nova Scotia
• Prince Edward Island
• Yukon
• Northwest Territories
• Federally (regardless of province)

LIRAs are used for funds legislated in:

• Alberta
• Saskatchewan
• Manitoba
• Ontario
• Quebec
• New Brunswick
• Newfoundland