What is a Locked-In Retirement Account (LIRA)?

Your Money Team with Jacob Gaudet

Most of us are familiar with RRSPs and TFSAs, but they’re not the only registered accounts available for retirement savings. Many Canadians have what’s called a locked-in retirement account (LIRA). It’s such an underthe-radar investment vehicle, that some LIRA holders may not even know they have one.

Think of the LIRA as a special kind of RRSP, though people can’t set one up with just any money. It’s created when someone leaves their employer and decides to invest the commuted value of their pension with a financial institution. Those funds get transferred into one of these accounts.

“When a person leaves their employer and is either too young to start receiving pension benefits or chooses instead to receive the pension’s commuted value, they transfer the value of their pension plan into a LIRA,” says Todd Sigurdson, Director, Tax and Estate Planning at IG Wealth Management.

Can a LIRA be transferred to an RRSP?

You can’t transfer the money to an unlocked account, unless the pension amount is tiny, so no, LIRA transfers to RRSPs are not allowed While LIRAs and RRSPs share many characteristics, LIRA withdrawal rules are somewhat different. Here is what you need to know.

What is a LIRAcompared to an RRSP?

The biggest difference between an RRSP and a LIRA is that the latter is locked, meaning you can’t make any more contributions. There are also strict rules around withdrawing money. These accounts have two important similarities, though: you have to pay tax on the funds in both your LIRA and RRSP when you withdraw them, and you can decide how to invest the money that it contains.

Some people get confused about a LIRA vs a locked-in RRSP, but the terms are interchangeable.

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