Two types of income are possible

A life annuity...for as long as you live!

A life income is the retirement income a holder can draw every year from his or her life income fund (LIF) until death.

As with RRIFs (registered retirement income funds), the holder must withdraw the minimum prescribed This link will open in a new window. under taxation rules (the minimum is 0 the year in which the LIF is opened).

However, since the amount in an LIF must be sufficient to provide an income until the holder's death, it is not possible to withdraw more than the maximum authorized for each year. The maximum is calculated on the basis of age, the balance in the LIF and reference rate set each year for LIFs.

Reference rate for LIFs

The reference rate for calculating the maximum withdrawal from a life income fund is 6% in 2012. It varies each year:

2012 : 6,0%
2011 : 6,0%
2010 : 6,0%
2009 : 6,0%
2008 : 6,0%
2007 : 6,0%
2006 : 6,0%
2005 : 6,0%
2004 : 6,0%
2003 : 6,0%
2002 : 6,5%
2001 : 6,0%
2000 : 6,5%
1999 : 6,0%
1998 : 6,5%

At the beginning of each year, the financial institution calculates the minimum and maximum amounts that can be withdrawn from the LIF during the year. The maximum is obtained by multiplying the factor provided in Schedule 0.6 This link will open in a new window. , according to age and reference rate, by the balance of the LIF at the beginning of the year or at the time the account was opened. If a temporary income is requested, the maximum is calculated differently.

The holder then receives the amount that he or she wishes to withdraw according to the number of payments provided for in the contract with the financial institution.

A temporary income: an additional amount

Since 1 January 1998, it has been possible to withdraw an additional amount from an LIF, called a temporary income. However, the LIF contract must offer the option of a temporary income and the holder must file an application with his or her financial institution.

When the financial institution receives the application for a temporary income, it calculates the amount that the holder can withdraw (if entitled to do so) and has the holder fill out the required declarations.

Note that...

A temporary income cannot be greater than 40% of the Maximum Pensionable Earnings (MPE) for the year of the request, that is, 20 040$ in 2012.

Practical corner

Did you know that?

A life income fund (LIF) is a special registered retirement income fund (RRIF) into which you can transfer amounts from your supplemental pension plan.