Unlocking or accessing pension funds

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.

Is there any way my locked-in funds can be withdrawn as a lump sum, such as financial hardship, shortened life expectancy or unlocking small pension balances?

Financial hardship is not a cause for providing locked-in funds in a lump sum. However, there are some circumstances in which you may be allowed to:

Shortened life expectancy

If your pension plan permits it, money that is locked into your pension or funds you have in a Locked-in Retirement Account (LIRA) or Life Income Fund (LIF) may be withdrawn in a lump sum. To do this, you need a medical doctor to certify, in writing, that you have a considerably shortened life expectancy (which cannot exceed two years).

Small amounts

You may be allowed to unlock and receive your pension in a lump sum if the amount meets the amount the act defines as "a small amount." Pensions may only be unlocked when you end your membership in the pension plan.

If you have a "small amount" held in a Locked-in Retirement Account (LIRA) or Locked-in Life Income Fund (LIF), it can be paid in a lump sum.

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.

For example:

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 2012, 40% of the YMPE is $20,040.  Since the balance of John's lock-in funds (with interest of $8,954.25) is less than $20,040, his funds can be unlocked and paid to him as a lump sum.

Non-residents of Canada

If you are no longer a Canadian resident, the act allows you, as a former plan member/owner, to withdraw a lump sum from a pension plan or a locked-in RRSP, LIRA or LIF.

Unlocking up to 50 percent of funds

You must be at least 55 years old to apply to unlock 50 percent of your pension funds. If you belong to a pension plan that allows you to do so, or if you have funds in a LIF, you may apply for a one-time transfer of up to 50 percent of your LIF or pension funds to a prescribed Registered Retirement Income Fund (RRIF).

A RRIF is a personal retirement income fund governed by the federal Income Tax Act. A prescribed RRIF is the same as a RRIF but is subject to certain rules under the province's pension act and regulations. Funds in a prescribed RRIF are not locked in. (See Bulletin #3 for information on unlocking 50 percent of your funds)

For more information, of if you have any questions about the act or regulations contact the Office of Superintendent - Pension Commission at (204) 945-2740 in Winnipeg; or 1-800-282-8069, extension 2740 toll free; or go to www.gov.mb.ca/labour/pension.

Definitions

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 holder, 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 Pension Benefits Act.

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.