Feds Allow Access to Locked-In Retirement Plans

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Budget, Federal Government, Unlocking, Pension, Retirement, Locked-In, RRSP, RRIF


In its 2008 budget, the federal government became the most recent jurisdiction to introduce legislation to permit the “unlocking” of funds transferred from pension plans to locked-in retirement plans.

The funds are normally transferred on the termination or retirement of a pension plan member. Locked-in retirement plans limit the access of plan owners to the former pension funds in the plan, thereby preserving the funds to provide a future income stream over their anticipated lifetimes.

Over the past five years, most provinces have also amended their pension legislation. In doing so, both the federal and provincial governments have attempted to strike a balance between safeguarding future income needs of seniors with present economic realities.

Many of the baby boomers who want to retire still have mortgages to pay off. Others are short of money and may not be able to finance the activities of their near senior or “young” senior years even if they might eventually inherit from their more senior, but possibly more frugal, parents.

While all locked-in retirement plans share the common characteristic of holding funds derived from pension plans, they have different names and slightly different attributes depending on the particular jurisdiction. Locked-in retirement plans differ fundamentally, however, from non-locked-in plans such as registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in which the funds are normally derived from non-pension sources.