Ontario’s new unlocking policy

As far as we know, this is the first academic study on LIFs.

The Ontario Coalition of Independent LIF-Holders

CARP is partnering with the Ontario Coalition of Independent LIF-Holders in the campaign to unlock Ontario LIFs 100%. One of the Coalition’s spokespersons, Bill Nafziger, has communicated our views to the Liberal caucus and some MPPs have suggested support for our proposal. Mr. Nafziger has also suggested that the Liberals segue the 25% unlocking as the first step in a four year program in which LIFs would be unlocked 25% each year.

During the Ontario provincial election, the Progressive Conservative Party adopted CARP’s position.

Federally Regulated LIFs

CARP has not forgotten federally regulated LIFs in which LIFs can be currently unlocked 100% at age 90 or by the spousal heir of a deceased LIF holder if a LIF-holder lives outside of Canada for 1 year.

Briefs and personal representations on unlocking LIFs 100% before age 90 and for those who remain in Canada have been made within the last month or so to the federal Minister of Finance and his senior officials and the House of Commons Finance Committee.

These presentations include the need to reform the taxation of cash that cannot be rolled into a LIF by allowing all of the commuted pension to be rolled into a LRIF, which we understand has no contributory limitation. Or, at the very least, the tax rate should be prorated n recognition that the cash usually represents years of accumulation rather than one year’s income which is the basis for the current rate of taxation.

Other Provincial Policies On LIFs

Nor has CARP ignored those provinces which have not yet unlocked any percentage of a LIF which is registered in their jurisdiction, such as British Columbia, Newfoundland and Labrador, Quebec and Nova Scotia. However they all do allow access to principal under certain conditions, including shortened life expectancy, financial distress, living out of Canada for a specified period and a low amount of principal. In Quebec, a LIF-holder can also withdraw “an additional amount from your LIF, called a temporary income. However, your LIF contract must offer the option of a temporary income and you must apply each year to your financial institution.

When your financial institution receives your application for a temporary income, it calculates the amount that you can withdraw (if you are entitled to do so) and has you complete the required declarations. A temporary income cannot be greater than 40% of the maximum pensionable earnings for the year in which the application is made, that is, 17, 480 $ in 2007.” (Régié des Rentes Quebec website)

Alberta and Manitoba allow 50% unlocking; Saskatchewan permits 100%; and, New Brunswick 25%.

PEI has no regulations regarding LIFs since it does not have a Pension Benefits Act.

Conclusion: Do Your Part to Unlock Your LIFs

According to Professor Mintz, an estimated 1 million Canadians have LIFs. (J. Mintz, “Unlock LIRAS,” The National Post, March 27, 2007, p. FP15)

A lot of work still has to be done for all of them.