Two types of income are possible
A life income...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 LIF holder must withdraw the minimum prescribed 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 the reference rate set each year for LIFs.
Reference rate for LIFs
The reference rate for calculating the maximum withdrawal from a
6% in 2019. It varies each year:
- 2019 : 6,0%
- 2018 : 6,0%
- 2017 : 6,0%
- 2016 : 6,0%
- 2015 : 6,0%
- 2014 : 6,0%
- 2013 : 6,0%
- 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At the beginning of each year, the financial institution calculates the minimum and maximum amounts that can be withdrawn from the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 of the Regulation respecting supplemental pension plans , according to the 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 yearly 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.
Worth knowing about...
A temporary income cannot exceed 40% of the Maximum Pensionable Earnings (MPE) for the year of the application, that is, $22 960 in 2019.
Even though payment of a temporary income reduces the life income amount, the maximum income drawn from the LIF (temporary income plus adjusted life income) may in fact be higher.