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Self-Directed Locked-In Retirement Account (LIRA)†
A LIRA (also known as Locked-in Retirement Savings Plan (LRSP) in some provinces) is a type of retirement savings account designed to hold pension funds from previous employers. These funds grow tax-deferred within the LIRA/LRSP until you begin withdrawing them. A LIRA/LRSP is locked-in, meaning you cannot access the funds except in specific circumstances. Self-Directed LIRAs/LRPS offer wide investment choices, allowing you to choose how your pension funds are invested, giving you flexibility and control.
Things to consider when opening a LIRA/LRSP
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55 years of age |
No withdrawals are permitted until you reach 55 years of age. Exceptions apply. |
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71 years |
Must close your LIRA/LRSP by Dec 31 of the year you turn 71. |
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Pension legislation |
LIRA/LRSP withdrawals are guided by provincial and federal pension legislation that regulates how much you can withdraw and when. |
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Taxed withheld on withdrawal |
Eligible withdrawals from LIRA/LRSP will be subject to withholding tax. |
Comparing LIRA/LRSP to RRSP at TD Direct Investing
Both LIRA/LRSP and RRSP are designed to support you during retirement but there are some key differences between the two.
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LIRA/LRSP |
RRSP |
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|---|---|---|
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Primary purpose
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Retirement and certain eligible withdrawals
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Generally, for retirement, eligible Home Buyers Plan(HBP) or eligible Lifelong Learning Plan (LLP) withdrawals
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Source of funds
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Employer registered pension fund
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18% of previous year’s earned income (maximum limits apply), less pension adjustments + unused RRSP contribution room
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Is there an annual contribution limit
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Not applicable, only transfers permitted
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Yes
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Tax impact on contributions
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Not applicable, only transfers permitted
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Generally, tax-deductible
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Growth
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Tax-deferred
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Tax-deferred
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Withdrawals
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Eligible withdrawals are subjected to withholding tax.
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Eligible withdrawals are subjected to withholding tax.
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More investment choices
Got questions? We have answers.
You need to close your LIRA/LRSP accounts by December 31 of the year in which you turn 71. When you do, you must choose one of the following options for your LIRA/LRSP:
- Transfer the funds to a LIF/LRIF. This won't trigger any tax event, but you’ll need to start taking minimum payments (that'll be taxable), starting in the year after you open the LIF/LRIF account.
- Use the funds to purchase an annuity with an insurance company.
Generally, funds from a LIRA/LRIF cannot directly be transferred to a regular RRIF.
Upon reaching the age of 71, you must generally convert your LIRA/LRSP to a LRIFLIF, or a Life Annuity. However, there are certain exceptions under relevant provincial pension legislations.
Unlocking funds from LIRA/LRSP are guided by pension legislation to determine how much you can unlock and when. Depending on your province, up to 50% of your LIRA/LRSP could be unlocked at the age of 55. However, there are certain exceptions, which may apply if you meet certain conditions. For more information, please visit Government of Canada site here.
Provincial and federal pension legislation restrict the cash-out of pension benefits to ensure that members of a pension plan have an income for life. However, there are special considerations that can allow withdrawals to be made prior to age 55 depending on the pension legislation.
You can hold a variety of investments similar to those allowed in other self-directed registered accounts. These include eligible:
- Stocks
- Mutual funds
- Exchange-traded funds (ETFs)
- Guaranteed Investment Certificates (GICs)
- Bonds
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