Minimum Mandatory Withdrawals When Withdrawing from a LIF
When withdrawing from a LIF, keep in mind the minimum and maximum withdrawal percentage. The percentages vary from province to province. Funds withdrawn from a LIF will generate a T4-RIF tax slip and you would have to declare them on your income. Tax would be paid at your marginal tax rate.
Depending on the province, you may use your spouse’s age to calculate the minimum withdrawal. This applies under all provinces except for New Brunswick. Note that for Quebec and Nova Scotia, the spouse has to be younger than you and this decision cannot be reversed.
Minimum Withdrawal Rate
| Age At Start Of Year | LIF minimum withdrawal percentage |
|---|---|
| 65 | 4.00% |
| 66 | 4.17% |
| 67 | 4.35% |
| 68 | 4.55% |
| 69 | 4.76% |
| 70 | 5.00% |
| 71 | 5.28% |
| 72 | 5.40% |
| 73 | 5.53% |
| 74 | 5.67% |
| 75 | 5.82% |
| 76 | 5.98% |
| 77 | 6.17% |
| 78 | 6.36% |
| 79 | 6.58% |
| 80 | 6.82% |
| 81 | 7.08% |
| 82 | 7.38% |
| 83 | 7.71% |
| 84 | 8.08% |
| 85 | 8.51% |
| 86 | 8.99% |
| 87 | 9.55% |
| 88 | 10.21% |
| 89 | 10.99% |
| 90 | 11.92% |
| 91 | 13.06% |
| 92 | 14.49% |
| 93 | 16.34% |
| 94 | 18.79% |
| 95 and older | 20.00% |
The formula used to calculate the minimum withdrawal percentage is 1 ÷ (90 – Your Current Age)
Maximum Withdrawal Rate
The maximum withdrawal rate various across provinces and is based on your age and the CANSIM rate, also known as an interest rate factor. You may not use the spouse’s age for the maximum withdrawal. CANSIM stands for Canadian Socio-Economic Information Management. According to Government of Canada, the CANSIM rate is set monthly and is based on that month’s average rate for long term Government of Canada bonds. To determine your maximum withdrawal rate, it’s advisable to contact your financial institution.
Withdrawing Above the Maximum Amount
If you’re thinking about withdrawing from a LIF, keep in mind the minimums and maximum. If you’re looking to withdraw above the maximum amount of your LIF, you may have to complete applicable forms and meet certain requirements that vary province by province. As each province differs in terms of criteria, we’ve listed below common themes that you may withdraw above the maximum for. Depending on the jurisdiction that the LIF is registered in, funds can be access via
- Financial Hardship
- Non-Financial Hardship.
Manitoba and Saskatchewan have Prescribed Registered Retirement Income Fund (PRIF) which don’t limit the amount that may be withdrawn.
| Financial Hardship | Jurisdictions |
| Withdrawing from a LIF due to Low Expected Income Individuals can complete one unlocking application per year for low expected income. Spousal consent would be needed. | Federal Ontario British Columbia Alberta Nova Scotia |
| Rent/Mortgage in Arrears Individuals behind on their mortgage payments could request to access their locked in funds. | Ontario British Columbia Alberta Nova Scotia |
| First and Last Month’s Rent & Security Deposit If you’re looking to secure a place to live, you may access your locked in funds by completing applicable forms. | Ontario Alberta British Columbia |
| Medical & Disability Costs The account holder may request a one time unlocking in order to cover medical costs. A doctor’s note must accompany the unlocking documents. | Federal Alberta Ontario Nova Scotia |
| Non-Financial Hardship | Jurisdictions |
| Small Balance Unlocking (Restricted by Age & Amount in Certain Provinces) Small Balance refers to accounts whose total value is less than a certain percentage of the YMPE. For example, in Ontario, you must be at least 55 years old and the value of the account must be less than 40% of the YMPE. | Federal Alberta British Columbia Ontario Manitoba Saskatchewan Nova Scotia Quebec |
| 50% Unlocking (Restricted by Age in Certain Provinces) You may unlock 50% of the value of your LIF/RLIF by completing the applicable provincial/federal forms. Once unlocked, you may transfer these funds into an RRSP or a RRIF, depending on the province. | Federal Ontario Alberta Manitoba |
| Withdrawing from a LIF due to Shortened Life Expectancy You may unlock your funds if your life expectancy has been shortened due to a terminal illness. For example, in Ontario, you may withdraw from your account if your life expectancy has been shortened to 2 years or less. You would need a doctors note and spousal consent. | Federal Alberta British Columbia Ontario Quebec Manitoba Saskatchewan Nova Scotia New Brunswick |
| Withdrawing from a LIF due to Non-Residency If you’re a non-resident of Canada and have been so for more than 2 years, you may unlock your funds pending that you’ve received a confirmation letter from the CRA. | Federal Alberta British Columbia Ontario Quebec Manitoba Saskatchewan Nova Scotia |
Keep in mind when withdrawing from a LIF, that certain categories allow you to unlock your locked-in accounts once per year. However, if you qualify under different categories, you are allowed to unlock more than once a year, pending it’s a different category.
If you’re thinking about accessing your funds in your LIF, contact your financial advisor for help to determine what jurisdiction your LIF falls under and what are your options are.
Tax Implications When Withdrawing from a LIF
Keep in mind that income from LIF withdrawals is taxable and added to your annual income. If you’re planning on withdrawing from a LIF an amount that is more than the minimum, depending on the province, withholding tax would apply. The minimum withdrawal is not subject to withholding tax.
| Withdrawal Amount | Up to $5,000 | Between $5,000 and up to $15,000 | Over $15,000 |
| Tax Rate withheld for Canadian residents | 10% | 20% | 30% |
| Tax Rate withheld for the province of Quebec | 5% | 10% | 15% |
Frequency of LIF Payments
One of the decisions individuals have to make is how frequent they wish to have the minimum LIF payment sent to them. The options are:
- Monthly
- Quarterly
- Semi-Annually
- Annually
Each individuals circumstances are unique and you would choose a frequency that would meet your needs.
Tax Issues at Death
One of the most important things you could do is naming a qualifying beneficiary on your LIF. A qualifying beneficiary would be
- spouse/common law partner
- financially dependent child
- financially dependent child with mental or physical disability
By naming a qualifying beneficiary, upon your death, the funds in the plan can be transferred into a locked-in plan, a registered plan or may be used to purchase an annuity on a tax deferred basis.
If the beneficiary is listed as estate or a non-qualifying beneficiary, then the funds accumulated in the locked-in plan would be taxable on your final return.
Each provincial jurisdiction is different but upon your death, depending on the province, funds can stay locked-in and be transferred to your spouse. When the beneficiary is someone other than your spouse, the funds would become unlocked. Each province deals differently with their locked-in account legislation which is why it’s important to visit your provincial pension regulators’ website.
Provincial Pension Regulators
Federal – Office of the Superintendent of Financial Institutions
Alberta – Alberta Finance Pensions
British Columbia – BC Financial Services Authority
Manitoba – Manitoba Pension Commission
Ontario – Financial Services Commission of Ontario
Quebec – Retraite Quebec
New Brunswick – Financial and Consumer Services Commission
Newfoundland & Labrador – Service NL
Prince Edward Island – No Provincial Legislation
Saskatchewan – Financial and Consumer Affairs Authority
Northwest Territories – Office of the Superintendent of Financial Institutions
Yukon – Office of the Superintendent of Financial Institutions
Nunavut – Office of the Superintendent of Financial Institutions
