Page 98 - A Canuck's Guide to Financial Literacy 2020

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Locked-In Retirement Account

A Locked-In Retirement Account also known as a LIRA is a registered retirement savings
account in which you would transfer your locked-in work pension into. If you are
participating in a pension plan at your current company, either a Defined Benefit Plan or
a Defined Contribution Plan, and quit the company, you will have the option to transfer your
pension into a LIRA or LRSP. In most cases, the options are:

1. Leave the accumulated pension funds in the plan

2. Transfer the accumulated pension to a LIRA/LRSP
3. Transfer the accumulated pension to purchase an annuity

The LIRA is meant to help you continue to accumulate retirement income as if you were still
part of the pension. However, you’d have to make your own investment decisions or inquire
with an advisor.

LIRA vs LRSP

It’s important to distinguish the difference between an LIRA and a LRSP (Locked In
Registered Savings Plan). They’re essentially identical except the legislation of the pension,
either federal or provincial. LRSPs are offered at the federal level.

▪ Example: If you worked for a Canadian bank which are governed federally, then you
would have to open an Locked-In Retirement Savings Plan (LRSP). If you worked for
a construction company based in Ontario, then you would have to open a LIRA.
▪ TIP: Banks, Radio & Television, Crown Corporations, Transport sectors are subject to
federal pension legislation

It’s important to make this distinguishing factor when setting up the account so your transfer
can go smoothly.

Opening a LIRA

The process of opening a LIRA begins when your former employer provides you with your
pension package and options when you leave the firm. Once that is provided then you have
to decide what option you want to pursue. Keep in mind that if you opt of your pension plan,
you may give up other group benefits and coverage such as dental, health, life insurance,
etc. It’s important to be aware of this. To begin the process of opening a LIRA:

1. Determine what legislation your LIRA would fall under

2. Visit your local financial advisor to open an account
3. Open your LIRA/LRSP