Registered Pension Plans

Locked-In Retirement Account (LIRA)

A locked-in retirement account (LIRA) is a type of registered retirement savings plan (RRSP) into which funds from a supplemental pension plan or a life income fund can be transferred (LIF).

In contrast to a regular RRSP, the amounts in a LIRA are fixed and can only be used for retirement income. Amounts cannot be withdrawn from a LIRA unless certain conditions are met, in which case a refund is permitted.

Defined Contribution Pension Plan

In a defined contribution pension plan, the amount of the contributions is set in advance. The amount of the eventual retirement income is not set in advance.

A defined contribution plan is not usually used to “pay a retirement pension”. Instead, the amount credited to the member’s account is used to purchase a life annuity from an insurer or is transferred to a LIF, from which a retirement income can be drawn.

Life Income Fund (LIF)

Locked-in retirement accounts (LIRAs) and life income funds (LIFs) are transfer instruments used to transfer amounts that have accrued in supplemental pension plans (also called pension funds or pension plans).

A LIRA is a retirement saving vehicle, while a LIF is used to draw a retirement income (withdrawal).

Defined Benefit Pension Plan

The amount of the pension in a defined benefit pension plan is determined in advance using a specific formula. An actuary determines the number of plan contributions. The plan generally sets the member contributions in advance, and the employer pays the balance of the contributions owed. The pension fund includes the employer contributions and the member contributions (if the members are required to contribute). The fund is the plan’s “account”. Unlike a defined contribution plan, the employer contributions are not distributed among the members’ accounts.

If the member uses his or her transfer right, he or she can:

• Use a LIF to draw a retirement income or to purchase a life annuity from an insurer. In the case of an annuity, the member can begin receiving payments immediately or at a latter date, as desired.
• First use other sources of income before drawing his or her retirement income by leaving his or her retirement savings in a LIRA where they will continue to grow.