The federal government has followed through on a commitment in the February budget to make it easier for people in financial difficulties to withdraw funds from life income funds, or LIFs.
LIFs hold money withdrawn from a federally regulated pension plan when an employee changes jobs. Anyone facing financial hardship for reasons such as a low income or medical bills will now be able to take out up to $22,450 a year from a LIF. This amount will increase with the average industrial wage. The same measure applies to federally regulated locked-in registered retirement savings plans, the Finance Department announced yesterday.
Typically, money withdrawn from a pension plan goes into a locked-in RRSP and then gets converted into LIF upon retirement.
Two additional measures relaxing the rules for LIFs were put into effect yesterday. People 55 or older with up to $22,450 in LIFs will be able to wind up their accounts or convert to an RRSP or registered retirement income fund. And, people 55 or older will have the opportunity for a one-time conversion of up to 50 per cent of LIF holdings into an RRSP or RRIF. The changes follow complaints about the lack of flexibility of LIFs.
© The Globe and Mail
