Changes to the Life Income Fund (LIF) - Frequently Asked Questions

Updated: March 1, 2010

The following questions and answers relate to the changes in the rules for New LIFs and the new application forms that come into effect on January 1, 2010. In these questions and answers, reference to the “New LIF” refers to a LIF governed by Schedule 1.1 of the Regulations, and reference to the “Old LIF” refers to a LIF governed by Schedule 1 of the Regulations.

FORM 5.1 WITHDRAWN MARCH 1, 2010: Applications using Form 5.1 were required to be made within the 60 day period following the date that the money was transferred to a New LIF and the transfer could not be later than December 31, 2009. As a result, Form 5.1 was withdrawn on March 1, 2010, which is the last day that Form 5.1 could have been used. The questions and answers will be updated shortly to reflect this change.

Transitional Questions

Q: I want to transfer money to a New LIF and withdraw an amount. What is the key date that determines whether I can apply to withdraw up to 25% or 50%?

A: The key date is the date the money was transferred into your New LIF.

If the money was transferred into your New LIF before January 1, 2010, you can apply to withdraw or transfer up to 25% of the amount transferred into it; you must use the current FSCO pension Form 5.1; and you have 60 days from the date the money was transferred into your New LIF to apply. After January 1, 2010, you can apply to withdraw or transfer up to an additional 25% using FSCO pension Form 5.1.1.

If the money was transferred into your New LIF after December 31, 2009, you can apply to withdraw or transfer up to 50% of the amount transferred in; you must use FSCO pension Form 5.2; and you have 60 days from the date the money was transferred into your New LIF to apply.

If you are not sure of the date the money was transferred into your New LIF, you should check with your financial institution.

Example 1: I transferred $50,000 into a New LIF on December 20, 2009. I applied for and obtained a withdrawal of 25% ($12,500) on December 22, 2009.

In 2010, what application can I make, and for how much?

You can apply for a withdrawal or transfer of up to an additional 25% of the total amount that was transferred into your New LIF prior to January 1, 2010. In this example, you may apply for 25% of $50,000 ($12,500). Any increase or decrease in the value of the New LIF is not taken into account for the purpose of this application.
You must use FSCO pension Form 5.1.1 to make the application. The completed FSCO pension Form 5.1.1 must be received by your financial institution no later than December 31, 2010.

Example 2: I transferred $50,000 into a New LIF on December 20, 2009. By the end of 2009, I have not applied for any withdrawal or transfer.

In 2010, what application can I make, and for how much?

Since the money was transferred into your New LIF prior to January 1, 2010 and you have not yet applied for a withdrawal or transfer, you need to make two separate applications.
You can make the first application to withdraw or transfer up to 25% of the amount that was transferred into your New LIF on December 20, 2009. You must use the current FSCO pension Form 5.1 to make the application. You must apply within 60 days of the date the money was transferred into your New LIF (December 20, 2009). The 25% is based on the amount that was transferred into your New LIF on that date ($50,000, 25% of which would be $12,500).
You can then make the second application to withdraw or transfer up to an additional 25% of the money that was transferred into your New LIF prior to January 1, 2010. You must use FSCO pension Form 5.1.1. You must make your application by December 31, 2010. The 25% is based on the amount that was transferred into your New LIF prior to January 1, 2010 ($50,000, 25% of which would be $12,500). Any increase or decrease in the value of the New LIF is not taken into account for the purposes of this application.

Example 3: I arranged to open a New LIF in December 2009 and $50,000 was transferred into it on January 5, 2010. I want to apply for a withdrawal or transfer in 2010.

What application can I make, and for how much?

You can apply to withdraw or transfer up to 50% of the amount that was transferred into your New LIF on January 5, 2010. You must use FSCO pension Form 5.2 to make the application. You must apply within 60 days of the date the money was transferred into your New LIF (January 5, 2010). The 50% is based on the amount that was transferred into your New LIF on that date ($50,000, 50% of which would be $25,000). Any increase or decrease in the value of the New LIF is not taken into account for the purpose of this application.

Q: I transferred $100,000 into a New LIF with Company A in March 2008 and withdrew 25% ($25,000) on April 1, 2008. From April 1, 2008, to September 1, 2009, the New LIF increased in value to $80,000. On September 1, 2009, I transferred the entire amount in the New LIF ($80,000) to a different New LIF with Company B. Starting in January 2010, can I apply for an additional 25% withdrawal or transfer from the New LIF with Company B? Which form should I use, what is the deadline for my application, and on what amount is the additional 25% based?

A: You may apply for a withdrawal or transfer of the additional 25% withdrawal or transfer from the New LIF with Company B. The 25% will be calculated against the total amount that was transferred into the New LIF with Company B before 2010, including any amount transferred from another New LIF. In this example, the total amount that was transferred into the Company B New LIF prior to January 1, 2010, was $80,000, and you can withdraw up to 25% of that amount.

Q: I transferred $40,000 into a New LIF with Company A in July 2009 and withdrew $10,000 (25%) in September 2009. In January 2010, I transferred $30,000 (the full amount in the New LIF) to a different New LIF with Company B. Can I apply to withdraw or transfer an additional 25% from the Company B New LIF in 2010?

A: No. The amount you can withdraw or transfer is based on the total of all amounts that were transferred into the Company B New LIF before 2010. In this example, there was no amount transferred into the Company B New LIF before January 1, 2010. If you had wanted to withdraw an additional 25%, you should have applied for a withdrawal from the Company A New LIF before the money was transferred to the Company B New LIF.

50% Withdrawal after December 31, 2009

Q: I transferred $100,000 into a New LIF after December 31, 2009. How much can I withdraw or transfer? Which form must I use, and by when must I apply?

A: If you transferred money from a pension plan, Old LIF, LRIF or LIRA after December 31, 2009, you may apply to withdraw or transfer up to 50% of the money transferred into the New LIF. You must use Form 5.2 and you must make your application within 60 days after the date the money is transferred into your New LIF. In this example, you may apply to withdraw or transfer up to $50,000. After December 31, 2010, you will not be able to withdraw or transfer any money from an Old LIF or LRIF.

Q: I own a New LIF with Company A. After December 31, 2009, if I transfer all the money in that New LIF to another New LIF with Company B, can I apply to withdraw up to 50%?

A: No. You cannot apply for a 50% withdrawal or transfer for money transferred from one New LIF to another New LIF unless the transfer was made under the terms of an order under the Family Law Act, a family arbitration award or a domestic contract as defined in Part IV of that Act.

Q: I transferred $100,000 into my New LIF on January 2, 2010. By the time I apply for the withdrawal of up to 50%, the value of the LIF has fallen to $90,000. Which amount do I use to determine the withdrawal?

A: The market value of the funds at the date that the funds were transferred into the New LIF determines the amount that can be withdrawn. In this case it is 50% of $100,000 ($50,000).

Q: I opened a New LIF on November 30, 2009 and money was transferred into it on December 10, 2009. I have 60 days to apply for a withdrawal or transfer. What happens if I wait until January 2010 to apply?

A: Since the transfer of money into the New LIF occurred before January 1, 2010, you must make your application in two stages. You have 60 days from the date of the transfer (December 10, 2009) to apply using FSCO pension Form 5.1 to withdraw or transfer up to 25% of the amount transferred into the New LIF. You can make this application on FSCO pension Form 5.1 even if the 60-day period ends in 2010. You can also withdraw or transfer an additional 25% by completing a separate application after December 31, 2009, using FSCO pension Form 5.1.1. You have until December 31, 2010, to make this second application.

Additional 25% Withdrawal

Q: I transferred money into a New LIF in 2009, withdrew 25%, and now want to apply for an additional 25% withdrawal or transfer. When can I make the application, on what form, by what deadline, and what amount do I use to determine the 25%?

A: You can make an application to withdraw or transfer up to an additional 25% of the total amount transferred into your New LIF prior to January 1, 2010, by using Form 5.1.1. The application can be made at any time after December 31, 2009 and must be made by December 31, 2010.

Q: I transferred money into a New LIF in 2009 and withdrew 25%. My spouse consented at the time of that withdrawal. Must my spouse consent to an additional withdrawal or transfer using Form 5.1.1?

A: Yes, your spouse must consent to the additional application.

Q: I transferred money into a New LIF in 2009 but did not apply for a 25% withdrawal or transfer within 60 days of the date the money was transferred. Can I apply for the additional 25% withdrawal or transfer after December 31, 2009? If so, can I apply for the “first” 25% withdrawal or transfer at the same time?

A: You may apply for a withdrawal or transfer of an additional 25% by December 31, 2010, using Form 5.1.1, but you cannot now apply for the “first” 25% withdrawal or transfer. The ability to apply for the initial 25% withdrawal or transfer expired 60 days after the date the money was transferred into your New LIF.

Questions for Financial Institutions

Q: In determining whether a client can apply for 25% or 50% withdrawal or transfer from a New LIF, which form he or she should use and the deadline, what is the key date that determines these questions?

A: The key date is the date the money was transferred into the New LIF.

Transferred before January 1, 2010:

If the money was transferred into his or her New LIF before January 1, 2010, he or she can apply to withdraw or transfer 25% of the amount transferred in; he or she must use the current FSCO pension Form 5.1; and he or she has 60 days from the date the money was transferred into his or her New LIF to apply. He or she can then apply to withdraw or transfer an additional 25% using FSCO pension Form 5.1.1.

Transferred after December 31, 2009:

If the money was transferred into his or her New LIF after December 31, 2009, he or she can apply to withdraw or transfer 50% of the amount transferred in; he or she must use FSCO pension Form 5.2; and he or she has 60 days from the date the money was transferred into his or her New LIF to apply.

Q: A client applies for withdrawal of an additional 25% from his New LIF in January 2010 using FSCO pension Form 5.1.1. Section 8.1(1) under Schedule 1.1 under the Regulation provides that the 25% is based on “the total market value of all assets transferred into the fund on or before December 31, 2009”. How do we determine this figure?

A: “The total market value of all the assets transferred into the fund on or before December 31, 2009” is the market value of the assets transferred in relation to each particular transfer and is determined as of the date of the relevant transfer. You do not take into account any increase or decrease in the value of his account after the money was transferred into the New LIF.

Q: A client transfers $100,000 into her New LIF in January, 2010 and applies to transfer 50% of the total market value of the assets into her RRSP using FSCO pension Form 5.2. Section 8(2.1) under Schedule 1.1 under the Regulation provides that the 50% is based on “the total market value of the assets transferred into the fund in relation to a transfer of assets made on or after January 1, 2010”. How do we determine this figure?

A: “The total market value of the assets transferred into the fund in relation to a transfer of assets made on or after January 1, 2010” is the amount that was transferred into her New LIF on the relevant transfer date, which should be available in your records. You do not take into account any increase or decrease in the value of her New LIF after the money was transferred into it.

Q: How does the 25/50% withdrawal or transfer option work with the annual amount that is paid from a New LIF? Let’s say that a client transfers $100,000 into a New LIF from a LIRA on January 10, 2010. He applies for his annual income payment and is paid $6,000, and he then applies for his 50% withdrawal or transfer. How much can he withdraw or transfer?

A: The amount he can withdraw or transfer is based solely on the amount that was transferred into his New LIF, and the amount of his annual income payment is based on the amount in his New LIF at the start of the fiscal year. In this example, he can withdraw or transfer 50% of the amount transferred into his New LIF, or $50,000.