Many people leave a job in which they had a pension plan. In these cases, they can choose to transfer the money into a locked-in retirement account (LIRA). After a certain age, they can transfer their funds into a life income fund (LIFs) or a locked-in retirement income fund (LRIFs). LIFs and LRIFs pay income within a certain range per year in order to ensure that funds are spread out through retirement.
Locked-in Retirement Plans
Locked-in Retirement Account (LIRA): A type of retirement account that allows you to transfer your pension money if you leave your job. The LIRA allows you to have personal control over your investments in your account. You may have access to some of the money prior to retirement under certain conditions. Funds are eventually used to purchase life income funds (LIFs) or locked-in retirement income funds (LRIFs).
Life Income Fund (LIF) and Locked-in Retirement Income Fund (LRIF): Retirement accounts that pays out your locked-in RRSP (LRSP) or locked-in retirement account (LIRA). Payments are based on a formula determined by the regulators.
A differentiating factor between segregated funds and mutual funds is that segregated funds are only sold by insurance companies.
Other differences include:
- Segregated funds have a maturity date, upon which you are guaranteed 75% to 100% of your deposit.
- A guaranteed amount is also paid to your beneficiary if you die tax-free.
- Segregated funds provide under certain conditions creditor protection for individuals and businesses.
- Direct Beneficiary Payments avoid probate fees on death, which can be as high as 6% or your investment.