Locked-In Retirement Account (LIRA)

Key takeaways
* A LIRA is a Canadian registered pension account that holds money transferred from an employer-sponsored pension plan and generally prevents cash withdrawals before retirement.
* Funds grow tax-deferred and cannot accept new contributions; they can only be funded by transfers from a pension plan.
* At retirement, LIRA assets must be converted to an income vehicle (for example, a life annuity, life income fund (LIF), or locked-in retirement income fund (LRIF)).
* Provincial pension laws govern LIRAs; federally regulated plans use a locked-in RRSP with similar rules.

What is a LIRA?

A Locked-In Retirement Account (LIRA) is a tax-deferred vehicle used to preserve pension benefits when money is moved out of an employer-sponsored pension plan. Unlike a regular RRSP, an LIRA cannot be cashed out at the account holder’s discretion. It is designed to ensure pension savings are used to provide retirement income.

How LIRAs are funded and restricted
* Funding: Only by transfers from an employer pension plan (e.g., when you leave an employer, after divorce settlements, or as an heir).
* No new contributions: You cannot add personal contributions to a LIRA.
* No routine withdrawals: Cash withdrawals are prohibited while funds are “locked in,” except under specific, limited circumstances set by provincial law.

Provincial rules and variations
LIRAs are subject to provincial pension legislation, so rules vary by province. Common variations include:
* Which reasons qualify for unlocking locked-in funds.
* Age and amount limits for partial unlocking (for example, some provinces allow a one-time 50% unlocking at age 55).
* Small-balance unlocking thresholds that permit full withdrawal when the balance is below a specified amount.

Common allowable reasons to unlock funds (may vary by province)
* Low income or severe financial hardship.
* Imminent foreclosure or eviction, or to pay first month’s rent and security deposit.
* High medical or disability-related costs.
* Shortened life expectancy.
* Permanent departure from Canada.
Consult a financial professional familiar with your province’s rules before attempting to unlock funds.

Tax treatment
Funds in a LIRA continue to grow tax-deferred. Tax is payable when amounts are withdrawn or when transferred into a taxable income stream at retirement.

Options at retirement
When you reach retirement, LIRA funds must be converted to an income vehicle that provides retirement payments, such as:
* Life annuity — an insurance contract that converts a lump sum into guaranteed lifetime income.
* Life Income Fund (LIF) or Locked-In Retirement Income Fund (LRIF) — income funds that provide periodic withdrawals subject to minimums and provincial maximums.
You can also transfer between compatible locked-in vehicles (e.g., move a LIF back to a LIRA in some cases to defer income).

Where to obtain LIFs, LRIFs, or annuities
Banks, credit unions, trust companies, and insurance companies offer these products. The institution receiving locked-in transfers must be approved under the province’s list of eligible financial institutions.

Practical tips
* Confirm whether your pension plan is provincially or federally regulated; federally regulated plans use a locked-in RRSP with similar rules.
* Review provincial rules carefully — unlocking conditions, age limits, and small-balance thresholds differ across provinces.
* If you need early access or are considering complex transfers, consult a financial advisor or pension specialist.

Bottom line
A LIRA preserves pension funds and protects them for retirement by restricting withdrawals until qualifying conditions are met or the account is converted into a retirement income product. Rules vary by jurisdiction, so understanding provincial legislation and seeking professional advice is essential when managing locked-in pension assets.