Accessing Locked-in Pension Funds Information for Albertans

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ACCESSING 

PENSION FUNDS

 

 

 

 

Updated: January 2017 

 

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Alberta Locked-in Accounts 

 

If you work for an industry that is not federally regulated*, and you work in 

Alberta on your last day of employment under the pension plan, then the funds 

from that plan are subject to the Employment Pension Plans Act (the Act). 

 

Alberta public sector plans (the Public Service, Teachers, Management 

Employees, Local Authorities, Special Forces, Provincial Court Judges and MLA 

Pension Plans) are not subject to the Act, but once the money is transferred out, 

it must be locked-in under the rules of the Act. 

 

*Federally regulated industries include banking, telecommunications, airlines, 

shipping, and inter-provincial forms of transportation.  In addition, federal civil 

servants, the military, the RCMP, and employment in the Territories are under 

the federal regulation. Contact the Government of Canada for information.   

  

If you worked in another province on your last day of work then your pension is 

regulated under that province and you must contact them for information. 

 

What Happens When I Leave my Employer? 

 

When you leave employment, you may be given the option to 

transfer your funds from the pension plan into a Locked-in 

Retirement Account (LIRA).  The LIRA is a locked-in RRSP at a 

financial institution.   

 

The transfer of the money from the pension plan to a LIRA does not change the 

fact that the pension plan was set up to provide you with income for your life 

after retirement.  Therefore, all money transferred to a LIRA is to be used to 

provide you with retirement income.  

 

If you have a LIRA and are at least 50 years old, you can start receiving  

pension income.  To do so, you must buy a life annuity or transfer to a Life 

Income Fund (LIF). 

 

Life Annuities 

 

Only insurance companies offer life annuities.  These annuities provide you with 

a guaranteed income for life, which you buy with the money in your LIRA.  

Payments from a life annuity are like receiving a monthly pension that is paid 

directly from a pension plan fund.  Once you have started to receive an annuity, 

the insurance company is unlikely to allow you to change it. 

 

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The details of the annuity, as well as the amounts paid out, depend on the terms 

of the contract that you sign with the insurance company.  However, the Act 

requires that any annuity purchased using locked-in funds must pay you  income 

for as long as you live. If you have a 

pension partner

 at the time you start your 

pension, the standard form of payment to you is a 60% joint and survivor 

annuity. This pays an amount for both of your lives and continues payments 

after the first death to the survivor of 60% of the payment when you were both 

alive.  You may choose a different amount only if your pension partner agrees to 

give up the guarantee by signing the waiver shown on page 8. No waiver is 

needed if you choose an annuity that pays more than 60% to the survivor. 

 

 

 

 

Life Income Fund (LIF) 

 

Many financial institutions, including insurance companies, banks, trust 

companies and credit unions, offer LIFs.  A  LIF gives you more control over the 

investment of the money but does not guaranteed a specific amount of income. 

 

The LIF must pay a minimum yearly amount because of the rules of the Income 

Tax Act. The maximum amount that may be paid out is based on a factor that is 

calculated every year. Your financial institution can explain LIF amounts. 

 

You cannot transfer to a LIF unless your pension partner agrees to give up his 

or her right to the 60 percent joint and survivor pension by signing waiver 

Form 

10

. When you die, your pension partner will receive the remainder of the LIF 

account.  Payment can be into their Registered Retirement Income Fund (RRIF) 

or RRSP if your pension partner is under age 71.  Or they can take the payment 

as cash, but taxes will be deducted as required by the Income Tax Act (ITA.) 

 

If you have no pension partner when you die, the money goes to the person you 

name as your beneficiary, or to your estate if you do not name a beneficiary.   

 

If you have a pension partner, but wish to name a beneficiary who is not your 

pension partner, and your pension partner is in agreement, they sign 

Form 16

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Who is my Pension Partner? 

 

Your pension partner is: 

 the person to whom you are married, and are not 

living separate and apart for 3 years, or if there is no 

one then 

 the person with whom you have been living in a 

marriage-like relationship for  at least 3 years, or 

sooner if there is a child resulting from the 

relationship either by birth or adoption. 

 

 

 

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If you are living common-law, it ends on the date that you begin to live separate 

and apart. Please note that a pension partner can be a same sex person. 

 

However, if you got the locked-in account as a death benefit from your 

deceased pension partner, or as matrimonial property, then you do not have a 

pension partner for the purposes of the Act. 

 

 

Accessing Locked-in Funds 

 

If you have a locked-in account, there are five specific times that you may be 

allowed to unlock funds. These are: shortened life, non-residency, small 

amount, 50% unlocking on transfer to a LIF, and financial hardship. 

 

If you take the unlocked money as cash, income tax will be deducted. If you 

transfer the money into an RRSP or a RRIF there is no tax deducted. Be aware 

that taking the money out of a locked-in account means that your creditors may 

have access to the money. 

 

 

1. Access due to Considerably Shortened Life  

 

If you have a terminal illness or a disability that will shorten 

your life, you may be able to unlock your pension, LIRA, 

LITB, or LIF. Your pension partner would have to give up his 

or her right to a joint and survivor pension by signing the 

form listed on page 8. Your doctor must write a letter that 

states you are expected to have a considerably shortened 

life. The letter does not need to state the type of illness or 

disability nor how long you will live. You give the waiver and 

doctor’s letter to the pension plan or financial institution that has your money. 

 

 

2. Access by Becoming a Non-resident of Canada  

 

If the Canada Revenue Agency (CRA) determines that you are 

a non-resident of Canada for tax purposes, and confirms this in 

writing, then you may unlock your LIRA or LIF.  You can apply 

for non-residency status by completing the federal form 

NR-73 

E(12).  

This form is available on the CRA website. Follow their 

instructions. If you qualify, CRA will send you a letter confirming 

that you are a non-resident of Canada for purposes of the ITA.  

 

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To unlock your money, you must  give your pension plan or financial institution a 

copy of the CRA letter and the form shown on page 8 signed by your pension 

partner. 

 

Please call  the CRA at 1-800-267-5177 if you have questions about non-

residency . 

 

3. Access to Small Amounts 

 

Sometimes the money in a LIRA, LIF or a pension plan at termination, is too small 

to provide a useful pension. A small amount may be unlocked.  Please note that 

the age 65 unlocking does not apply to money in a pension plan. 

 

For 2017, if you are under age 65 and  the amount in any single locked-in account 

is less than $11,060 on the day you ask for the withdrawal, the account can be 

unlocked.  If you are age 65 or older and the amount in any single locked-in 

account is less than $22,120 on the day you ask for the withdrawal, the account 

can be unlocked. There is no pension partner waiver as the amount is too small to 

provide a pension. 

 

The money is unlocked by the pension plan 

or financial institution that has your money. 

 

The small amounts are based on 20% and 

40% of the Year’s Maximum Pensionable 

Earnings (YMPE).  The YMPE is set each 

year by the Government of Canada  for the 

Canada Pension Plan. 

 

What if my account balance is just 

above the small amounts limit? 

 

If the amount is over the limit, even by a dollar, then you cannot have your funds 

unlocked under the small amount rule.   

 

You cannot split accounts to make them small enough to be unlocked.  

 

 

 

4. Access by 50% Unlocking 

 

If you are aged 50 or older and have terminated from a pension plan or have 

money in a LIRA, you may unlock up to 50% of the money when you start a LIF or 

LITB. Your pension partner would have to give up his or her right to a joint and 

survivor pension by signing 

Form 7

 (from a pension plan) or 

Form 14

 (from a 

LIRA.)  

 

 

 

 

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Can I unlock less than 50% of the account balance? 

 

This is a one time only choice. You may unlock less than 50% of the account, 

but if you unlock less than 50%, you are not allowed to unlock again later.  For 

example, if you unlock only 30% of your money, you cannot later unlock another 

20%.   

 

The money is unlocked because you have chosen to start to receive an income. 

You cannot transfer the money back to a LIRA after starting a LIF or LITB. The 

money is unlocked by the pension plan or financial institution that has your 

money. 

 

When is unlocking not allowed?

 

 

Unlocking is not allowed if you are receiving a pension from the plan, or if your 

pension plan does not allow you to transfer money out of the plan because you 

have reached early retirement age.   

 

What if I unlock 50% and the money left in the account is less than the 

small amount?

 

 

After unlocking the 50%, if the money left is less than 

the small amount (see page 5), you may unlock the rest 

of the account.  Because you are able to unlock all the 

account, the money doesn’t have to be transferred to a 

LIF or LITB because it only creates extra paper work for 

everyone. 

 

5. 

Financial Hardship Unlocking (FHU) 

 

If you have one of these 5 reasons of financial hardships, you may be able to 

unlock money in your LIRA or LIF. You apply to the financial institution that has 

your account to unlock the money. The application form is available at: 

finance.alberta.ca/publications/pensions/information-for-individuals.html

. 

 

You may apply for each of these reasons only once per account in a calendar 

year. 

 

1. Low Income – Your income for the next twelve months will be less than 

$36,867. You may be eligible to unlock up to $27,650 in 2017. 

2. Foreclosure - You or your pension partner have received a letter 

threatening foreclosure on a debt secured against your main home. The 

most you can unlock is the overdue amount owing including legal fees. 

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3. Eviction for Rent Arrears - Your or your pension partner are being 

evicted from your main home because you owe 

rent. The most you can unlock is the amount of 

unpaid rent. 

4. First Month’s Rent & Security Deposit – You or 

your pension partner need the first month’s rent 

and security deposit on a new home you will be 

moving into. 

5. Medical Costs & Renovation - You, your pension partner or 

dependants have medical expenses not covered by a medical plan or 

any other source in the past and/or next 12 months.  You, your pension 

partner or dependants have made alterations in the past 12 months and/

or need alterations to your main home due to illness or disability. The 

most you can unlock is the expense you have paid or will pay in the past 

or next 12 months. 

 

You have to include certain documents for each reason.  These are: 

 

1.  Complete the formula on page 4 of the application.  

 

2.  A copy of the foreclosure notice and documents showing the amount of 

arrears.  

 

3.  A copy of the notice of eviction and documents showing the amount of rent 

arrears.  

 

4.  A copy of the lease agreement showing the monthly rent and the security 

deposit of the new home you will be moving into.  

 

5.  A copy of the invoice or estimate for medical treatment or medicine and a  

     doctor or dentist’s written opinion that the treatment is needed. A copy of the     

cost estimate or paid invoice to alter the primary residence; a copy of a 

physician’s opinion that the you, your pension partner or dependant has a  

disability.                                    

 

What can I do with the money I unlock? 

 

You can take the money in cash or transfer it to your bank account and taxes 

would be deducted from the money unlocked.  You can transfer the money into 

your own RRSP or RRIF, so no tax is deducted.  You may choose a 

combination of these options. Contact CRA or your pension plan or financial 

institution if you have questions about tax. 

 

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Summary of Unlocking Provisions and Procedures

 

 

Reason 

Process 

Required Forms 

Considerably  

Shortened 

Life  

 

All forms are given to the pen-

sion plan or financial institution 

that has your money. 

 

Form 6 or 13 are not required if 

there is no pension partner or if 

the  account owner received the 

account through death or mar-

riage breakdown. 

Form 6

 Pension Partner Waiver to Permit 

Unlocking from a Pension Plan Due to 

Shortened Life Expectancy or Non-

residency  

OR 

Form 13

 Pension Partner Waiver to Permit 

Unlocking from a Locked-in Product  

Due to Shortened Life  Expectancy or Non-

residency  

 

Doctor’s letter that says you will  have a 

considerably shortened life. 

Non-resident 

of Canada  

All forms are given to the  

pension plan or financial institu-

tion that has your money. 

 

Form 6 or 13 are not required if 

there is no pension partner or if 

the  account owner received the 

account through death or mar-

riage breakdown. 

Form 6

 Pension Partner Waiver to Permit 

Unlocking from a Pension Plan Due to 

Shortened Life Expectancy or Non-

residency  

OR 

Form 13

 Pension Partner Waiver to Permit 

Unlocking from a Locked-in Product  

Due to Shortened Life  Expectancy or Non-

residency  

 

Letter from Canada Revenue 

Agency that says you are a non-resident of 

Canada under the Income Tax Act. 

Small 

Amount 

All forms are given to the  

pension plan or financial institu-

tion that has your money. 

 

None 

50%  

Unlocking 

All forms are given to the  

pension plan or financial institu-

tion that has your money. 

 

Form 7 or 14 are not required if 

there is no pension partner or if 

the  account owner received the 

account through death or mar-

riage breakdown. 

Form 7

 Pension Partner Waiver to Permit 

Up to 50% Unlocking From a Pension Plan 

on Establishment of a Life Income Type 

Benefit Account or Life Income Fund 

  

Form 14

 Pension Partner Waiver to Permit 

Up to 50% Unlocking from a LIRA on Estab-

lishment of a Life Income Fund or Transfer 

to a Life Income Type  Benefit Fund 

Financial  

Hardship 

 

 

 

 

 

All forms are given to the  

financial institution that has 

your LIRA or LIF. 

 

 

 

 

Form 23

 Application to Unlock Alberta 

Funds due to Financial Hardship 

 

Supporting documents as shown in the ap-

plication form and page 7 of this booklet. 

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Document Outline

• Accessing Pension Funds - Updated January 2017 - Cover Page 
• Alberta Locked-in Accounts
• Accessing Locked-in Funds
  • 1. Access due to Considerably Shortened Life 
  • 2. Access by Becoming a Non-resident of Canada 
  • 3. Access to Small Amounts 
  • 4. Access by 50% Unlocking
  • 5. Financial Hardship Unlocking 
• What can I do with the money I unlock?
• Summary of Unlocking Provisions and Procedures