A Locked-In Retirement Account (LIRA) is a registered account that holds pension funds transferred out of an employer-sponsored pension plan. Provincial pension legislation (or federal for federally regulated employers) determines the LIRA rules. Funds in a LIRA are restricted to providing retirement income.
Common scenario
An employee leaves a Defined Benefit pension plan and elects to transfer the commuted value out instead of leaving it as a deferred vested benefit. The portion within the Income Tax Act limit transfers to a LIRA. Any excess goes to the employee’s RRSP (taxable) or as a cash payment (also taxable).
Conversion
By December 31 of the year the LIRA holder turns 71, the LIRA must be converted to a Life Income Fund (LIF), a Locked-In Retirement Income Fund (LRIF), a Restricted Life Income Fund (RLIF), or an annuity. Each type has minimum AND maximum withdrawal limits per year.
Investment options
LIRAs hold the same eligible investments as RRSPs: stocks, ETFs, mutual funds, GICs, and bonds.