How do I unlock a locked-in RRSP?
August 14, 2006 7:38 AM   Subscribe

I have a locked-in RRSP (well, at the moment a DCPP) in Ontario, Canada. Please please please help me unlock it!

I paid attention to this account for the first time after leaving my previous employer. Apparantly I've been contributing money for years to a locked-in account like a sucker. Now I'm furious that this was never made clear to me, and I want to unlock it and do whatever the hell I want with it. Well, mostly I want to be able to use my RRSP funds as a downpayment (subject to all those rules), but I can't, because it's locked in. So I'd like to either unlock the funds and continue to hold them in a regular RRSP account, or withdraw the cash altogether out of spite.

Everything I read says no way. It doesn't appear that it's possible, but if anyone has any experience with this, even to confirm that it's impossible and that I should give up trying, I'd really appreciate it.

(PS: Before anyone says anything, I know how important retirement savings are, this account is not my main source of RRSP funds and my tax situation is such that I wouldn't pay anything even if I were to withdraw it in cash).
posted by loquax to Work & Money (7 answers total)
Locked-in accounts are more or less equivalent to a pension plan -- in fact, I had the option of transferring my pension to a locked-in account when I left my government job. Pension funds are generally not accessible for other uses either, and contributions to them can be just as mandatory, if you have one.
posted by mcwetboy at 9:13 AM on August 14, 2006

I overheard someone who was fired from where I work called the ex-employer begging to cash out his pension money because he had no source of income and no food. And apparently he got it because it was an emergency situation.

The story might even be true.
posted by rinkjustice at 11:01 AM on August 14, 2006

It sounds like you're thinking about this account as an RRSP (understandable, since that's what it's called). Instead, think about it as a pension (because that's what it is). In that context it makes more sense.
posted by raedyn at 12:29 PM on August 14, 2006

Best answer: It -is- possible, but once again it has to be a serious emergency.

The only case I have been aware of where a locked in RSP was redeemed (this was also in BC, and I am not sure if there are some differences in the rules between BC/Ontario), was because the contributor in question required the money for treatment of a fatal desease. Time was limited for the person in question, and the money was never going to see maturity anyway. With this, it was still a huge hassle to get the funds.

I also found this to support the theory (LIRA = Locked in RSP):
"In recent years, LIRAs have grown to resemble regular RRSPs even more closely. Under pressure from Canadians who consider the locked-in provisions unfair, pension regulators in various jurisdictions have been relaxing some of the rules. For example, since 2000, plan holders in Ontario may apply to withdraw locked-in funds for reasons of financial hardship or shortened life expectancy."

If you would really not hurt from the tax implications and various redemption fees associated with redeeming the account, why are you worrying about this money? Ignore the account, let it grow, and make sure whoever holds it has your most current address so you can collect when it pays out.
posted by billy_the_punk at 2:46 PM on August 14, 2006

Best answer: Just checked with my financial advisor husband and nope, you can't get that money. LIRA's are locked up until you're 55. You can't even take them out for the downpayment on your first house like you can with a regular RRSP. The only loophole is terminal illness. If you can prove you're dying, you can get the money out before then. If you think of it as a pension, this makes sense. If you were in a defined benefits pension, you can't borrow that money for a downpayment either. It sucks, but there it is.

quick disclaimer: My husband is licensed in SK, not Ontario. So there's a remote possibility that the rules are different where you live. It's very unlikely though.

Make sure your advisor for your "main source or RRSP funds" knows about this $$, so it can be accounted for in your big-picture planning. Even though it's locked in, you can control how it's invested the same as any RRSP: how agressive a portfolio, how much equity vs income etc. The other advantage this defined contribution pension has over a defined benefit plan is that at the end of the day, you or your heirs get all your contibutions and growth. In a DB plan - depending on many factors - you MAY pay in more than you ever get out (if you die quite young for example).
posted by raedyn at 2:56 PM on August 14, 2006

Response by poster: Thanks for the help all. I didn't make it clear, but there's only about $20k in the account (the limit of what can be used towards a downpayment for a house) and I was expecting to use it as such, that's why I'm so frustrated. I thought it was a regular RRSP account. After leaving my job, closing the Defined Contribution Pension Plan and moving the funds into a LIRA, I'll never contribute anything to it again, as I have normal, non-locked in retirement savings. So I'll always have this relatively small account, following me around that I'll have to take care of. Which is also frustrating, as I was just going to merge it with my RRSPs. I know it's not really a problem I should be complaining about having, but when I read that Ontario MPPs are the only people in the province legally allowed to "unlock" their "locked-in" pensions because of the bill they passed allowing them to do so, it makes loquax want to smash!
posted by loquax at 6:39 AM on August 15, 2006

Allowing themselves to unlock their LIRA is lame. Tell your MPP that's a bunch of garbage.
posted by raedyn at 8:43 AM on August 15, 2006

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