OSPC - FAQS - Overview of Manitoba Pension Laws
Office of the Superintendent - Pension Commission
Life Income Fund (LIF)
The main objective of The Pension Benefits Act (the act) is to protect employees' rights to the benefits that are promised under private pension plans. The following are answers to frequently asked questions (FAQ) about Manitoba's pension laws. You should refer to the act for further information on Manitoba's pension laws. To find out the details of your particular pension plan (the terms of your plan may be more generous than required by the act), you should contact the plan administrator.
NOTE: Descriptions of the various pension plan options and terms discussed in these answers can be found at the bottom of the page.
What is a Life Income Fund?
A Life Income Fund (LIF) is an investment that provides retirement income. It must be at least the minimum amount stated in the federal Income Tax Act and the maximum amount stated in the regulations under the Manitoba act. The Office of the Superintendent - Pension Commission (the Superintendent) has a list of financial institutions permitted to offer LIFs.
How can I draw money from my LIF?
LIF funds governed by Manitoba's regulations may be withdrawn at any age to provide retirement income up to the maximum amount allowed by the LIF. The funds may not be withdrawn as a lump cash sum, at any age.
What is the minimum income I must get from my LIF?
In the first year of the LIF, you are not required to take a minimum amount. However, if you transfer funds from one LIF to another LIF in any year in which you have a LIF, you must take a minimum amount. The minimum withdrawal amount is based on the minimum formula for Registered Retirement Income Funds (RRIF) under the Income Tax Act.
What is the maximum I can get from my LIF?
The maximum income you can take from your LIF each year is the largest amount, based on one of these options:
Option 1 - the amount calculated by this formula
Maximum Amount = F x (B + T)
F = the Fixed or prescribed annuity based on a set interest rate (called the 'reference rate') and your age at the end of the previous year
B = is the Balance of your LIF at the beginning of the year
T = the Total of all amounts transferred to your LIF in the year (except money that was previously in another LIF or VB account)
Option 2 - the amount calculated by this formula
- growth in your LIF in the previous year and
- six per cent of any amounts transferred to your LIF in the current year (if that amount has never been in a LIF or VB account before)
For more information contact the Office of the Superintendent - Pension Commission at (204) 945-2740 in Winnipeg ;1-800-282-8069, extension 2740 toll free or go to www.gov.mb.ca/labour/pension to find out what the reference rate is for the year orBulletin #2 to find out how the reference rate is calculated.
Your financial institution can also offer additional information on LIF payment amounts.
Who can transfer money to a LIF?
You may transfer money that is locked-in in Manitoba to a LIF if you are:
- a member of a defined contribution pension plan and stop contributing to the plan on or after you reach the early retirement age stated in your pension plan. You may also transfer money if you have a Variable Benefit account under the plan (A Variable Benefit account pays a LIF type payment from a pensions plan) a member of a defined benefit pension plan and no longer contribute to the pension plan after you reach the early retirement age stated in the plan (if the plan allows it)
- the spouse or partner of a plan member/owner and your marriage or with the plan owner breaks down
- the spouse or common-law partner of a plan member/owner who has died
- the owner of another LIF or a Locked-in Retirement Account (LIRA)
What is the Superintendent's Register of Authorized Institutions?
The Superintendent, Office of the Superintendent ? Pension Commission, keeps a list (or register) of institutions authorized to issue LIFs. In Manitoba, if you have locked-in money, you can only transfer it to a LIF if the financial institution issuing the LIF has been registered and is on the Superintendent's Register of Authorized Institutions (Superintendent's Register).
For a copy of this list, contact the Office of the Superintendent - Pension Commission at (204) 945-2740 in Winnipeg; 1-800-282-8069, extension 2740 toll free; or go to http://www.gov.mb.ca/labour/pension/pdf/suptregister.pdf.
Can I transfer money from a LIF?
Money can only be transferred from a LIF to:
- another LIF or LIRA
- a pension plan (if the plan permits) or
- an insurance company to buy a life annuity
Who will get the balance of the LIF if I die?
If you are a plan member/owner and you die before retirement, your spouse or common-law partner will get the LIF account balance. If you don?t have a spouse or partner, the balance goes to the beneficiary. If there is no beneficiary, it goes to your estate.
If the funds were transferred to your LIF because your relationship broke down or your spouse or former spouse or partner died, the LIF account balance must be paid to your beneficiary or to your estate in a lump sum.
Your spouse or partner may, before or after your death, waive his/her rights (or potential rights) to the death benefit, after the plan administrator has given him/her prescribed information and he/she has signed a waiver and given it to the administrator.
As a LIF owner, you and your spouse or partner can revoke (cancel) the waiver by signing a joint letter or form and filing it with the financial institution that holds the LIF.
Is my spouse or common-law partner entitled to my LIF if our relationship breaks down?
If you are a plan member/owner and your marriage or common-law relationship breaks down, your spouse, former spouse or common-law partner will be entitled to receive money from the LIF.
The amount must be 50 percent of the pension benefit credit earned during the period of the relationship. Your spouse, former spouse or partner may transfer his/her share of the LIRA to his/her own LIRA or LIF, or to an insurance company to buy a life annuity or pension plan (if the plan permits).
Are there any exceptions to the locking in clause?
Under the regulation, you may be allowed to withdraw the locked-in balance of the LIRA in the following circumstances:
- (a) you are not a resident of Canada (under the federal Income Tax Act ) and you have had that status for at least two years
(b) the total of all your money locked-in in Manitoba LIRAs and LIFs, plus interest at 6% per year to the end of the year you turn 65, is less than 40 percent of the Year's Maximum Pensionable Earnings (YMPE) for the year you applied for the withdrawal
To see if your funds are below the small amount limit so you can receive them as a lump sum:
You must annually add 6% interest to the balance of your funds for each year from December 31 of the year in which you apply for the withdrawal,, to the year that you are age 65.
You must check to see if the balance of your locked-in funds is less than 40% of the YMPE for the year you apply for a withdrawal.
John is age 55 on December 3. The current balance of all of his LIRAs and LIFs is $5,000. Six percent interest is added annually to this balance from age 55 to age 65. The balance of his funds with interest is $8,954.25. For 2010, 40% of the YMPE is $18,800. Since the balance of John's lock-in funds (with interest of $8,954.25) is less than $18,800, his funds can be unlocked and paid to him as a lump sum.
- (c) you have a shortened life expectancy of less than two years
- (d ) if you are age 55 or older and make a one-time request for withdrawal of up to 50 percent of the balance in your LIF and pension plan (if the plans permit)
Is my LIF protected from creditors?
Your LIF cannot be assigned to another creditor or seized or attached by another creditor. Because of this rule, your LIF cannot be used as collateral for a loan or to pay off debts of any kind.
For general information on LIFs contact a financial institution on the Superintendent's Register.
For information on your LIF, contact your financial institution.
If you have more questions about the act or regulations, contact the Office of Superintendent - Pension Commission at (204) 945-2740 in Winnipeg; 1-800-282-8069, extension 2740 toll free; or go to www.gov.mb.ca/labour/pension.
Defined benefit pension plan is a plan in which you as a member earn a pension based on service and earnings. These plans can be contributory (employees must make contributions) or non- contributory (the company makes contributions).
Defined contribution pension plan is a plan in which you receive, at retirement, the pension that can be bought through your company, based on the value of the contributions you (if required by the plan) and your employer made, plus interest.
Joint pension or survivor pension pays a benefit to you for life and, after your death, to your spouse or partner for life.
Locked-in Retirement Account (LIRA) is an investment that allows your money (pension benefits) to continue to grow and accumulate interest while being held (or locked in) in the fund until you retire. LIRAs replace locked-in, Registered Retirement Savings Plans (RRSPs), although they operate in the same way. A LIRA is a RRSP that is governed by the provincial act and holds locked-in pension funds until they are used for retirement.
Life Income Fund is an investment that pays an adjustable amount of retirement income to the LIF owner, based on prescribed annuity factors. It must be at least the minimum amount stated in the federal Income Tax Act and the maximum amount stated in the provincial regulations under the Manitoba act.
"Plan member/owner" is a former member of a pension plan who transferred funds to a LIF.
Registered Retirement Income Fund (RRIF) is a personal retirement income fund that is governed by the federal Income Tax Act (Canada).
Registered Retirement Savings Plan (RRSP) is a personal retirement savings plan governed by the federal Income Tax Act (Canada).
Variable Benefit account is an account in a defined contribution plan that is used to pay LIF type payments.
Year's Maximum Pensionable Earnings is the term used to refer to employment earnings on which the Canada Pension Plan contributions and benefits are calculated.