NLIS 7
May 11, 2000
(Government Services and Lands)

Proposed changes to locked in retirement funds

I would like to advise honourable members that I have directed the Superintendent of Pensions of my department to make changes to locked in retirement funds that will give retirees greater control of their pension incomes.

Over the past year or so we have received a number of complaints from individuals who retired early, and because of the current rules with respect to locked in retirement accounts, could not withdraw sufficient funds to have a satisfactory standard of living until they qualify for Canada Pension Plan benefits.

Changes to our rules for Life Income Funds are being made to correct this problem and to provide greater income options to retirees under the age of 65. Current rules are creating a problem for many individuals who retire before being eligible for Canada Pension Plan Benefits, when the amount accumulated in their pension plan is relatively small. The key change will enable pensioners to have increased yearly withdrawals. In effect, under the new rules those retirees who reach age 55, or, those who are permitted to retire earlier under their pensions plans, will now be able to receive a minimum income of approximately $15,000 per year from their locked-in accounts.

Also, if the total amount in all retirees locked in accounts, regardless of age, is less than approximately $15,000, then the entire amount can be withdrawn.

In order to provide more investment options for retired persons, we are authorizing an additional locked-in retirement income fund which can be provided by financial institutions, similar to those allowed in several other provinces. Basically, a locked-in retirement income fund has a yearly withdrawal limit equivalent to the pension funds� investment rate of return and does not require a conversion to a life annuity at age 80.

These changes will be welcomed by many seniors who take early retirement, and provides a good balance between the need for retired persons to have a pension for life and the need to have adequate income until they are eligible for Canada Pension Plan Benefits.

2000 05 11                                                         2:25 p.m.