Regulatory changes proposed in the federal budget regarding life income funds (LIFs) took effect on Thursday.
“Many people, such as seniors, pensioners and individuals facing financial hardship, will now have greater freedom to move their investments and use the money when they want, for what they want,” says Finance Minister Jim Flaherty.
LIFs hold investments stemming from federally regulated pension plans and the changes enhance the flexibility to withdraw funds from LIFs through three provisions, which are now available:
• Individuals 55 or older with total holdings in federally regulated locked-in funds of up to $22,450 will be able to wind up their accounts or convert to a tax-deferred savings vehicle with no maximum withdrawal limit, such as an RRIF or an RRSP. The threshold for small holdings will increase with the average industrial wage.
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• Individuals 55 or older will be entitled to a one-time conversion of up to 50% of LIF holdings into a tax-deferred savings vehicle with no maximum withdrawal limit.
• All individuals facing financial hardship (for example, low income, high disability or medical-related costs) will be entitled to withdraw up to $22,450 a year. This maximum will also increase with the average industrial wage.
The regulatory LIF changes also provide individuals facing financial hardship who have locked-in RRSPs that are subject to federal pension rules with the ability to withdraw up to $22,450 annually.
To comment on this story, email craig.sebastiano@rci.rogers.com.