Refunding
LIRAs and
LIFs
Note
that...
- To obtain a cash payment (refund), an application must be made to the financial institution.
- All refunds are taxable. However, income tax can be deferred if the amounts can be transferred directly to an
RRSP or a registered retirement income fund (RRIF).
Refunds for holders age 65 or over
The entire amount in a locked-in retirement account (LIRA) or life income fund (LIF) can be withdrawn provided the
LIRA or
LIF holder meets the following two requirements:
- He or she is age 65 or over at the end of the year preceding the one in which he or she applies.
- The total
locked-in amounts accumulated in the retirement savings instruments mentioned are not more than 40% of the maximum pensionable earnings under the Québec Pension Plan for the year of application, that is, $26 640 in
2023.
An
LIRA or
LIF can be refunded at any time, regardless of the date on which the investments mature. Before that date, however, fees could be levied.
To obtain a refund, the
LIRA or
LIF holder must complete
Schedule 0.2 of the
Regulation respecting supplemental pension plans and send it to the financial institution.
Savings instruments affected:
-
LIRAs
-
LIFs
- Defined contribution pension plans or the defined contribution component of a defined benefits pension plan
- Simplified pension plans (SIPPs)
- Locked-in
RRSPs
- Voluntary retirement savings plans (VRSPs)
A helpful example...
Patricia is 66 years old on 31 December 2022. On 15 January 2023, she applies for and draws a life income of $2044 from her
LIF account, which has a total value of $28 000.
Since the balance of Patricia's
LIF is now $25 956 and she does not have any other savings vehicles from the list above, she can immediately withdraw the balance of her account, which is now less than $26 640, that is, 40% of the
MPE for
2023 (40% x $66 600).
Refunding the balance for non-residents
A non-resident can request that the balance of his or her
LIRA or
LIF be refunded in a single payment at any age, if:
- he or she has not lived in Canada for at least two years
- and
- the investments have matured.
Worth
knowing about...
- Unless it is stipulated in the contract, an
LIRA or
LIF cannot be refunded until the investments have matured. In such a case, fees may be levied.
- It is the financial institution's responsibility (not ours) to ensure that the
LIF or
LIRA holder has not been living in Canada for at least two years. In order to do so, the financial institution must obtain proof that it deems satisfactory.
Refunds in the event of disability
LIRA holders
An
LIRA holder can be refunded in full or in part if he or she has a physical or mental disability due to a medical condition that reduces his or her life expectancy.
The refund can be made as a lump sum or several payments. It can be made regardless of the maturity date of the investments. Before that date, however, fees could be levied.
To obtain a refund, the
LIRA holder must provide the financial institution with a
medical certificate stating that he or she has a physical or mental disability due to a medical condition that reduces his or her life expectancy.
Financial institutions can neither tighten nor loosen those restrictions.
The disability must reduce life expectancy
- Reduced life expectancy does not necessarily mean that the reduction must be significant.
- If the
LIRA holder's health problems do not affect his or her ability to work, he or she cannot be deemed disabled.
- The requirements for being disabled are different from those under the Québec Pension Plan.
The medical certificate
The medical certificate must be issued by a physician who is a member of the
Collège des médecins du Québec
or, if the physician is outside Québec, he or she must be a member of an equivalent body.
The medical certificate does not have to mention the diagnosis or the actual life expectancy. It merely has to state that the
LIRA holder has a physical or mental disability due to a medical condition that reduces his or her life expectancy. The certificate can be a letter signed by his or her physician. An example follows.
2 January 2023
Mr. Charlie Bailey
7878 Street Avenue
Quebec City, Quebec
G1J 9N9
Subject: Medical certificate
Dear Mr. Bailey,
I hereby confirm that your physical disability due to a medical condition reduces your life expectancy.
Signature :
Dr. Smith, M. D.
Your Medical Clinic
9696 Your Street
Quebec City, Quebec
G1H 2J3
LIF holders
If a
LIF holder is disabled, he or she cannot obtain a refund directly from his or her
LIF. To obtain a refund, he or she must transfer his or her
LIF to an
LIRA before the end of the year in which he or she turns 71, and meet the requirements entitling him or her to a refund due to a disabling condition.
Refunds due to death
When a
LIF or
LIRA holder dies, the balance is paid to his or her spouse, or if there is no spouse or the spouse has renounced it, to the heirs.
An
LIRA or
LIF can be refunded at any time, regardless of the date on which the investments mature. Before that date, however, fees could be levied.
The amounts withdrawn are subject to income tax, unless exemptions under taxation rules apply. For details, consult the
Canada Revenue Agency
.
Beware of fraudulent withdrawals
We urge the LIF or LIRA holder to be wary of classified ads that propose various tax-free ways to withdraw money from an LIRA or LIF, such as by purchasing stock shares or taking out a loan. Those methods are fraudulent. They can have significant tax effects, and the LIF or LIRA holder could lose his or her money. To find out more, please consult the Fraud in classified ads
section on the Autorité des marchés financiers du Québec's website.
To find out more...