Ontario eases rules on locked-in plans

Money can be withdrawn if life expectancy shortened or small amounts involved.

In what may be the thin edge of a large wedge, the Ontario government recently announced that locked-in retirement funds may be withdrawn in cases of shortened life expectancy, or when small amounts of money are involved.

Finance Minister Ernie Eves said that the move was in response “to the concerns of Ontarians who want early access to these funds when they have the greatest need.”

People who face a life expectancy of less than two years because of terminal illness or physical disability will be able to get access to their money by applying to the financial institution that holds the plan. The announcement affects locked-in RRSPs, Life Income Funds, and deferred pensions.

Applications must be accompanied by a doctor’s certificate stating that the person’s life expectancy is less than two years. As well, there must be written consent from any spouse or same-sex partner.

Mr. Eves also announced that anyone 55 or older whose total in all locked-in accounts is less than 40% of the year’s maximum pensionable earnings may withdraw the funds or transfer them to a regur RRSP or RRIF. Currently, any locked-in accounts totaling less than $15,040 would qualify.

For years, locked-in accounts have been deemed to be sacrosanct by governments, even in situations where a person was facing bankruptcy or needed the money for medical purposes or other emergencies.

Although the scope of this announcement is limited, it could open the door to other exceptions down the road.