The pension jurisdiction of a locked-in account determines the options available, such as retirement income choices, beneficiary designations, and access rules. Jurisdiction is based on where the pension plan is registered or where the individual last worked. Jurisdiction affects when accounts can be transferred, income options like annuities or funds, and whether accounts can be unlocked in certain situations. Knowing an account's jurisdiction is important for understanding how it can be used and managed.

1. Comprehensive
Personal Article
Locked-in accounts – Why pension jurisdiction is important
Prepared by The Investors Group Advanced Financial Planning Team
The pension jurisdiction of an indi- suggest that you speak with your Why is pension jurisdiction
vidual’s locked-in account determines pension administrator. important?
many of the options available for the Pension jurisdiction is relevant
If the account is not regulated
account. These include the various because it affects how individuals can
federally, then it will be subject to
retirement income options available, access their funds, their retirement
provincial regulation. As a result
the age at which the locked-in income options, beneficiary designa-
of an agreement between all of the
account can be transferred to a retire- tions, commutation (i.e. unlocking),
provinces, with the exception of
ment income option, beneficiary des- and many other issues. This article
Prince Edward Island (PEI), the
ignations, commutation (unlocking) will focus on the most common areas
payment of benefits will be governed
rules and other access rules. of discussion.
by the law of the province where the
How is pension member was employed as of the date Retirement income options
jurisdiction determined? the member becomes entitled to
receive a benefit from the pension A Locked-in Retirement Account
Locked-in accounts are regulated
plan (sometimes referred to as the (LIRA), called a “Locked-in RRSP”
under either federal or provincial
member’s final location or final under BC and federal legislation,
pension legislation.
province of employment). Other than must by converted to one or more
It is a fairly simple process to deter- in PEI, the law of the province where retirement income options no later
mine if an account is regulated feder- the pension plan is registered has no than December 31st of the year in
ally. All employers whose activities bearing on the payment of benefits. which the client turns 71. Under
are federally regulated will be gov- federal legislation, you may also
erned by the federal Pension Benefits PEI has no legislation governing the have a “Restricted Locked-in Savings
Standards Act, 1985 (PBSA). These registration of pension plans or the Plan” (RLSP).
employers include individuals subject locking-in of pension benefits,
although in December 2010, the PEI Possible retirement income options
to the federal Public Service
government announced its intention will include life annuities, Life
Superannuation Act, individuals enti-
to introduce pension legislation. Income Funds (LIFs), Locked-in
tled to locked-in benefits under the
Therefore, currently in PEI, unless Retirement Income Funds (LRIFs),
Federal Benefits Divisions Act, employ-
the member is enrolled in a pension Prescribed Registered Retirement
ees of chartered banks, railways,
plan that is registered in another Income Funds (PRIFs), and Restricted
telecommunication companies,
province or under the federal PBSA, Life Income Funds (RLIFs). Not all
Councils and Education Authorities
no locking-in rules apply. If the plan jurisdictions make all of these retire-
of a First Nation, and individuals
is registered in another jurisdiction, ment income options available.
employed in the Northwest
Territories, Nunavut, and the Yukon. the payment of pension benefits to
If you are unsure as to whether your the PEI employee will be governed by
pension is federally regulated, we the law of the jurisdiction where the
plan is registered.
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2. Comprehensive Personal Article
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A life annuity provides a predeter- Age at which a retirement income rights to receive the death benefits,
mined payout from the time of trans- option becomes available thus allowing the annuitant to legiti-
fer until the death of the annuitant. mately name a non-spouse benefici-
The date on which a LIRA/Locked-in ary. Also, in some jurisdictions, if the
A LIF and an RLIF have annual min- RRSP can be transferred to a retire- annuitant can show that he or she
imum and maximum payouts, and ment income option is governed by acquired the locked-in plan as a
the maximum payouts are generally the pension jurisdiction. Accounts result of the death of a former spouse
based on the long-term bond rate, locked-in under federal, Manitoba, or the breakdown of a relationship
although some jurisdictions may also and Quebec jurisdictions can be with a former spouse, the annuitant
factor in the investment return from transferred at anytime, although a will not need to designate his or her
the LIF. In some jurisdictions a LIF transfer to a Manitoba PRIF or a fed- new spouse as the beneficiary to the
must be used to purchase a life annu- eral RLIF can only occur once at age plan.
ity no later than December 31st of the 55 or later. New Brunswick regulated
year in which the owner turns age 80. accounts can be converted to a LIF at Commutation rules (“unlocking”)
PEI and Saskatchewan are the only anytime, but to an annuity only at
As a general rule, an individual has
jurisdictions in which new LIFs can- age 55. Alberta accounts can be trans-
limited access to locked-in accounts,
not be purchased. ferred once the member is 50 years
as they are intended to be used to
of age or greater. All other accounts
An LRIF is similar to a LIF in that it provide benefits for life. However,
can be transferred at the earlier of
has annual minimum and maximum each jurisdiction allows some or all of
age 55 or the age at which the origi-
payouts, but the maximum payout is a locked-in account to be “commut-
nating pension plan would have
generally based on the investment ed” or “unlocked” if certain condi-
allowed the individual to begin to
return from the LRIF in the preced- tions are met. These exceptions vary
receive a lifetime pension.
ing year. There is no requirement to widely by jurisdiction, but in general
convert an LRIF to a life annuity at Beneficiary designations a jurisdiction may allow a locked-in
any time. New LRIFs are only avail- account to be commuted if the annui-
able in Newfoundland & Labrador. The rules regarding beneficiary desig- tant’s life expectancy is “diminished”,
nations also depend upon the juris- if the account is “small”, if the annui-
A PRIF is only available in Manitoba diction of the locked-in account. In all tant is a “non-resident”, and/or if the
and Saskatchewan. A PRIF has an jurisdictions a surviving spouse or annuitant is in “financial hardship”.
annual minimum but does not have common-law partner is nearly always
an annual maximum payout restric- automatically entitled to receive the Additional access
tion, therefore providing the owner proceeds of the locked-in account to locked-in accounts
with greater access to their assets. upon the annuitant’s death, even if
While the calculation of the mini-
Saskatchewan has no limit on the the annuitant had attempted to
mum payout for all jurisdictions is
locked-in accounts that can be trans- designate a non-spouse beneficiary,
the equal to the RRIF minimum pay-
ferred to a PRIF, but Manitoba only and even if the marriage or partner-
out, the maximum payouts under the
allows a person to establish a PRIF ship is relatively recent. However,
various retirement income options
once in a lifetime, with a limit of not Alberta, British Columbia, Manitoba,
differ by jurisdiction. Some jurisdic-
more than 50% of that person’s com- Newfoundland and Labrador,
tions allow individuals greater access
bined LIF and LRIF accounts. Ontario, Quebec and Saskatchewan
to their locked-in funds in certain
specifically allow a spouse or com-
circumstances:
mon-law partner to waive his or her
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3. Personal Article Comprehensive
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3 Newfoundland and Labrador, Nova 3 As discussed above, Manitoba and the owner of the account. Pension
Scotia, and Quebec provide “tempo- Saskatchewan allow for transfers to jurisdiction can have significant
rary income” for “lower income” in- a PRIF. Manitoba allows for a one- effects on an individual’s financial
dividuals younger than the age of 65. time transfer of up to 50% of the plan. For further information and
value of the account for individuals advice please contact your Investors
3 Alberta allows a one-time unlock-
who are at least 55 years of age. Group Consultant.
ing of up to 50% of the value of the
Saskatchewan has no limits on the
LIRA when transferred to a LIF or
number or value of transfers and
life annuity, subject to certain re-
transfers can occur at the earlier of
strictions.
age 55 or the age at which the origi-
3 Ontario allows a one-time unlock- nating pension plan would have al-
ing of up to 50% of the value of a lowed the individual to begin to
LIF, subject to certain restrictions. receive a lifetime pension.
3 When a federal RLIF is established, Conclusion
the owner may unlock up to 50% of
To summarize, pension jurisdiction
the assets transferred to the RLIF
is extremely important in terms of
from other federal Locked-in
how any locked-in account is admin-
RRSPs, LIFs, and pension plans.
istered and the options available to
ED MADRO B.A. Econ., CPCA
Consultant
edward.madro@investorsgroup.com
(403) 220-9654
1-866-424-6392
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“Locked-In accounts - Why pension jurisdiction is important?” ©2011 Investors Group Inc. (04/2011) MP1420