Page 91 - A Canuck's Guide to Financial Literacy 2020

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Life Income Fund

A Life Income Fund is a locked-in investment savings account that is designed to provide
retirement income. LIFs are considered an extension of Locked In Retirement Accounts as
the periodic payments that are generally paid out came to be from locked-in pension funds.
LIFs can be either provincial or federal depending on where the locked-in pension funds
originated from. Pension funds can be registered either federally or provincially. Federally
registered pension funds typically originate from chartered banks, radio, television,
transportation and crown corporations Employees from these sectors would have to open a
Federal LIF.

Example: Joe was employed by CIBC for 20 years. At 40 years old, Joe left CIBC to work
with another company. The pension that Joe accumulated at CIBC had to first be moved
into a Locked In Retirement Account (LIRA), Federal jurisdiction. Currently Joe is 65 and
looking to retire, he wants to access the funds in his LIRA and decided to convert his LIRA
to a LIF in order to generate income. Joe will open a federal LIF. Keep in mind that the age
to convert your LIRA to a LIF vary province by province.

Opening a LIF

LIFs can be federal or provincial. They’re not available in all provinces of Canada and rules
and regulations vary from province to province.

You may open a LIF in Alberta, British Columbia, New Brunswick, Nova Scotia,
Newfoundland & Labrador, Ontario, Quebec. There is no LIF offered in PEI or Northwest
Territories. Newfoundland also offers a Locked-In Retirement Income Fund (LRIF)

In Saskatchewan and Manitoba, you may open a Prescribed Registered Retirement Income
Fund (PRIF) also known as a variable benefit account. These don’t limit the amount that
you may withdraw.

In terms of Federal legislation, you may open a LIF or a Restricted Life Income Fund (RLIF)
which would allow you to do a one-time 50% unlocking and move the funds into an RRSP
or a RRIF.

In certain provinces, you may be required to convert your LIF into an annuity at age 80. You
may either be opening a LIF for the purpose of generating an income stream or for the
purpose of unlocking 50% of your locked-in pension.