One-time 50% unlocking
Individuals 55 or older will be entitled to a
one-time conversion of up to 50% of holdings value into a tax-deferred
savings vehicle with no maximum withdrawal limits. If the funds
are transferred to the locked-in funds owner's own RRSP or RRIF, this
does not require contribution room, and the owner is not taxed until
the funds are later withdrawn from the RRSP or RRIF.
On the website of the Office of Superintendent of Financial
Institutions (OSFI), it is stated that the unlocked funds can be transferred to
any RRSP or RRIF, not necessarily one belonging to the holder of the
locked-in funds. This statement just confuses the issue, because
a transfer to someone else is the same as a taxable withdrawal and
Let's say Jane is unlocking $100,000 of her locked-in funds, and she
has transferred the funds to her own RRSP or RRIF. If she wants
to transfer all or a portion of the funds instead to one or more
others, this is the same as withdrawing the funds and then gifting
them to someone else. She will be taxed on the amount withdrawn.
If the recipient (spouse or other) wishes to deposit the gift to their
RRSP, they would have to have sufficient contribution room.
If Jane wishes to make a contribution to a spousal RRSP, she would
have to have sufficient contribution room.
The only time that a direct transfer to a spouse's registered plan is
necessary is to fulfill the requirements of a divorce or separation
agreement. In this case no contribution room is necessary and the
transfer does not generate taxable income.
Financial hardship unlocking
Generally, withdrawals for financial hardship can only be done once
per year, unless you have more than one locked-in account.
However, if there is only one locked-in account and the maximum
permitted amount was not withdrawn, another application for
withdrawal can be made if done within 30 days of the 1st
withdrawal. If you have more than one account and wish to make a
subsequent withdrawal, the application for the 2nd withdrawal also must
be made within 30 days of the of the 1st withdrawal. The total dollar
amount of all withdrawals must be within the permitted maximum for the
The amount that can be unlocked is:
- Low income - the amount is based on the expected income (line 236
on your tax return) for the year, and varies from a withdrawal of
50% of the YMPE (50% = $26,250 in 2014) for $0 in expected income,
to no withdrawal allowed when expected income is 75% of the YMPE
(75% = $39,375 for 2014)
- High medical or disability related costs - the amount of medical
expenses can be unlocked, up to a maximum of 50% of the YMPE, as
long as medical expenses exceed 20% of the YMPE (20% = $10,500 for
2014). The medical expenses can include expenses of the plan
holder or others, including a spouse or dependant.
If you are no longer employed by the employer from
which the pension funds originated, and you have been a non-resident of
Canada for at least 2 consecutive years, then you can unlock the total
value of your plan funds.
Shortened life expectancy unlocking
If a physician has certified that you have a
shortened life expectancy due to a physical or mental disability, then
the total value of your plan funds can be unlocked.
yearly maximum pensionable earnings (YMPE), is the maximum amount on
which contributions to the Canada Pension Plan (CPP) are based.
Thresholds which are based on the YMPE will change each year as the YMPE changes. See the CPP/EI
page for the YMPE.
Note that the unlocking of these funds will lose the
protection from creditors provided to locked-in funds.
The Office of
the Superintendent of Financial Institutions Canada (OSFI) information on Pension
Unlocking provides more information on federally-regulated pension plans.