Unlocking Locked-In Accounts

First remember to check for recent changes to various Pension Benefits Acts as many jurisdictions are now proposing more relaxed rules with regard to access to locked-in funds.

BUT, if you find that you still have funds that are locked in, there are a couple of strategies you can use to unlock some or all of those funds:


lock.jpgIf you have reached the age where you can convert your LIRA or LRSP to a locked-in account that allows for withdrawals (usually 55), but you are not yet ready to retire then you may be a candidate for this strategy. You can simply elect to take the maximum permitted withdrawal from the locked-in account and then make a corresponding contribution to your RRSP account. The tax payable on the locked-in account withdrawals will be offset by the contribution to your RRSP. This will essentially unlock a portion of your locked-in account. Do this as much as you can and you will have more and more flexibility with your retirement income later on.

I call this a "two step transfer" as you cannot just transfer funds from a locked-in account directly to a regularly registered account. You have to perform the transfer in two stages: One to withdraw the funds from the locked-in account, and a second to contribute to an RRSP. 

A few caveats though: You will need to have the RRSP contribution room available to make the RRSP contributions, and you will also have to understand that you will be losing that RRSP contribution room as you use it. So if you have a large amount of RRSP contribution room available and it doesn’t look like you’ll be able to use it all up in your lifetime, you can use this strategy just fine. If you are maximizing your RRSP – you won’t be able to do this.


Again, you will have to check with local legislation, but if the total value of all your locked-in accounts is below a certain limit (for example $17,480 for 2007 in Ontario) you may be able to withdraw all the money in ONE LUMP SUM once you reach 55. You will have to fill out a special form – and certainly be sure to forecast the effect on your taxes with a qualified advisor! If you have RRSP contribution room you could put it right back into an RRSP to cancel out the tax on the withdrawal. In this case, you will have completely unlocked your locked-in retirement funds.

The same warning applies as above – you will be using up RRSP contribution room so be sure that you don’t unintentionally handcuff yourself by engaging the strategy and foregoing the ability to contribute to your RRSP in the future.

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Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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  • pam cinnamon

    i am trying to find my locked-in vested money from a company i had worked for in toronto, i worked there from 1979 to 1990. i have a provincial registeration number, i did have the bank account number at one time but i cannot find it. i have been in contact with the company several times and they now say they cant find it. the reason for my wanting my locked-in vested monies is i am going to be 57 in july, and on my paperwork that has the provincial registeration number on it says i can do something with that money once i am 55. if you cant help me then maybe you can direct me to a department that can. i do receive disability money from canada, i live in illinois now. i am a landed emmigrant and have a valid social insurance number. i am at my wits end trying to find my money. so if you could help me in any way i would love that.

    thank you

    pam cinnamon