LIRA and LRSP Basics

If you’ve ever left a job where you contributed to an employer-sponsored pension plan, you would have had to transfer those pension assets to a locked-in retirement account (LIRA) or locked-in retirement savings plan (LRSP).

These locked-in accounts must eventually be transferred to an annuity or life income fund (LIF) to convert those assets to income in your retirement years. 

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What is a LIRA?

A LIRA is a registered, tax-deferred financial product, similar to a registered retirement savings plan (RRSP), but with some restrictions. When you leave a job where you contributed to an employer-sponsored pension plan, those assets must be transferred into a LIRA, which are locked in until retirement age. The investments in your LIRA continue to grow tax-free until retirement. At retirement age, you can transfer cash and investments from a LIRA to an annuity or life income fund (LIF). 

What is a LRSP?

An LRSP is the same type of account as a LIRA, with the same rules and restrictions. The only difference is that an LRSP applies to pension funds that are federally regulated rather than provincially regulated

What are the benefits of a LIRA or LRSP account?

 

LIRAs and LRSPs are a simple way to manage pension assets from your previous employer(s) because of the independence and flexibility they allow. 

  • You can manage the same tax-sheltered investments in your LIRA that you do in your regular RRSP, including stocks, ETFs, bonds, mutual funds, GICs, and cash.
  • LRSPs and LIRAs lock in your money without restricting your investment options.

What can I invest in within a LIRA/LRSP?

Just like RRSPs and registered retirement income funds (RRIFs), you can also choose the investments that make up your LIRA.

  • You can buy and sell stocks, bonds, GICs, mutual funds, and exchange-traded funds (ETFs) in your LIRA.
  • There are some rules that apply, however, regarding the exact nature of the investments held in a registered account.

Your assets must be invested in what the Canadian Government calls “qualified investments” or there could be tax implications and penalties. 

Withdrawing from a LIRA/LRSP

When can I withdraw from my LIRA/LRSP?

Normally, you cannot withdraw from your LIRA/LRSP (it is locked in) until you reach at least early retirement age (usually at least age 55) as specified in the applicable pension legislation.

However, LIRAs/LRSPs mature in the year you turn 71 and must be closed by the end of that year. You can:

  • transfer your LIRA/LRSP funds to an annuity
  • transfer your LIRA/LRSP to a LIF 

Can I unlock my LIRA and take the money out early?

Your LIRA or LRSP are regulated by the jurisdiction (provincial or federal) that regulates your pension.

In some cases, depending on your age and circumstances, your pension jurisdiction may allow early withdrawal of part or all of your locked-in account on the basis of:

  • Financial hardship
  • Lowered life expectancy
  • Non-residency
  • Small account balance

Please refer to your pension jurisdiction or read more at the Office of the Superintendent of Financial Institutions (OSFI) website.

What is a self-directed LIRA?

 

If you are knowledgeable about markets and their various assets—and if you have had a self-directed RRSP in the past—a self-directed LIRA could make sense. 

  • It gives you full freedom (within the Canadian Government’s rules) to control your LIRA portfolio and manage the assets within it.
  • It allows you the flexibility to switch your investments at any time. It also permits you to respond quickly to any movements in the markets or changes to your personal needs.

Does Qtrade offer LIRAs and LRSPs?

Yes, Qtrade Direct Investing® offers LIRA and LRSP accounts for self-directed investors. If you leave a job where you contributed to a pension plan, you can transfer those assets to a Qtrade LIRA or LRSP. You can also transfer assets from another provider to Qtrade. 

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  • The only difference between a LIRA and an LRSP is the pension jurisdiction. A LIRA is regulated by a provincial regulator, while an LRSP is regulated federally.

  • A LIRA is similar to an RRSP in that it is designed to help you save for your retirement. The difference is the source of funds. A LIRA/LRSP is opened with pension assets you transfer from a previous job. In contrast, an RRSP is an account to which you make tax-deductible contributions.

    In addition, unlike an RRSP, you are not able to make withdrawals from a LIRA or LRSP. At retirement age, you can transfer your LIRA/LRSP to an annuity or LIF to begin to draw retirement income. 

  • Yes, you can transfer your LIRA or LRSP from one financial services provider to another. 

  • No. The only funds that can be deposited into a locked-in are those transferred from a pension. However, you can transfer your LIRA or LRSP account from one financial institution to another. 

Aviso Wealth Inc. (“Aviso Wealth”) is the parent company of Credential Qtrade Securities Inc. Aviso Wealth is a wholly-owned subsidiary of Aviso Wealth Limited Partnership, which in turn is owned 50% by Desjardins Financial Holdings Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and the CUMIS Group Limited.

Online brokerage services are offered through Qtrade Investor, a division of Credential Qtrade Securities Inc., a wholly owned subsidiary of Aviso Wealth Inc. and Member of the Canadian Investor Protection Fund.

Northwest & Ethical Investments L.P (“NEI” or “NEI Investments”) is a subsidiary of Aviso Wealth; and NEI Funds are related issuers of Credential Qtrade Securities Inc.

This material is for informational purposes only. While this material has been compiled from sources believed to be reliable, Qtrade Investor does not guarantee the accuracy, completeness, timeliness or reliability of this information. Information, figures and charts are summarized for illustrative purposes only and are subject to change without notice. All investments are subject to risk, including the possible loss of principal.