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Responsibilities | Pension Plans
2009 Life Income Fund ("LIF")
Maximum Annual Withdrawal
The maximum amount that can be withdrawn each year from a Life Income Fund (a "LIF") varies according to the owner's age, current long-term interest rates and the previous year's investment returns for the fund. The maximum annual withdrawal from a LIF is prescribed by the Pension Benefits Standards Regulation (the "Regulation").
A LIF owner's maximum allowable withdrawal for a calendar year is the greater of the following:
- The value of the fund at the start of the year multiplied by the appropriate Factor F (seen below)
- the actual investment returns for the preceding year under the same LIF contract.
Following is a table showing Factor F for various ages and Reference Rates. The appropriate Factor F to use is the one corresponding to the person's age at the end of the preceding year, and under the relevant Reference Rate for the year. If a new LIF is established in the year, and does not result from a transfer of funds, directly or indirectly from another LIF of the same owner, the age to be used is the relevant age on the date on which the LIF is established.
The Reference Rate for 2009 is 6%. The appropriate Factor F to use for the 2009 maximum withdrawal is the one corresponding to the person's age at the end of 2008, and from the column corresponding to a Reference Rate of 6%.
Further detailed information on various aspects of the provisions governing LIFs is provided following the table.
Life Income Fund Factor F
Reference Rate |
| Age |
6.00% |
6.50% |
7.00% |
7.50% |
8.00% |
8.50% |
9.00% |
9.50% |
| under 55 |
0.061 |
0.063 |
0.066 |
0.069 |
0.072 |
0.075 |
0.078 |
0.081 |
| 55 |
0.064 |
0.067 |
0.070 |
0.073 |
0.076 |
0.079 |
0.082 |
0.085 |
| 56 |
0.065 |
0.067 |
0.070 |
0.073 |
0.076 |
0.079 |
0.082 |
0.085 |
| 57 |
0.065 |
0.068 |
0.071 |
0.074 |
0.077 |
0.080 |
0.083 |
0.086 |
| 58 |
0.066 |
0.069 |
0.071 |
0.074 |
0.077 |
0.080 |
0.083 |
0.086 |
| 59 |
0.067 |
0.069 |
0.072 |
0.075 |
0.078 |
0.081 |
0.084 |
0.087 |
| 60 |
0.067 |
0.070 |
0.073 |
0.076 |
0.079 |
0.082 |
0.085 |
0.088 |
| 61 |
0.068 |
0.071 |
0.074 |
0.077 |
0.079 |
0.082 |
0.086 |
0.089 |
| 62 |
0.069 |
0.072 |
0.074 |
0.077 |
0.080 |
0.083 |
0.086 |
0.089 |
| 63 |
0.070 |
0.073 |
0.075 |
0.078 |
0.081 |
0.084 |
0.087 |
0.090 |
| 64 |
0.071 |
0.074 |
0.076 |
0.079 |
0.082 |
0.085 |
0.088 |
0.091 |
| 65 |
0.072 |
0.075 |
0.077 |
0.080 |
0.083 |
0.086 |
0.089 |
0.093 |
| 66 |
0.073 |
0.076 |
0.079 |
0.082 |
0.085 |
0.088 |
0.091 |
0.094 |
| 67 |
0.074 |
0.077 |
0.080 |
0.083 |
0.086 |
0.089 |
0.092 |
0.095 |
| 68 |
0.076 |
0.078 |
0.081 |
0.084 |
0.087 |
0.090 |
0.093 |
0.096 |
| 69 |
0.077 |
0.080 |
0.083 |
0.086 |
0.089 |
0.092 |
0.095 |
0.098 |
| 70 |
0.079 |
0.082 |
0.085 |
0.088 |
0.091 |
0.094 |
0.097 |
0.100 |
| 71 |
0.081 |
0.084 |
0.087 |
0.089 |
0.092 |
0.095 |
0.098 |
0.102 |
| 72 |
0.083 |
0.086 |
0.089 |
0.092 |
0.095 |
0.098 |
0.101 |
0.104 |
| 73 |
0.085 |
0.088 |
0.091 |
0.094 |
0.097 |
0.100 |
0.103 |
0.106 |
| 74 |
0.088 |
0.091 |
0.094 |
0.097 |
0.099 |
0.102 |
0.105 |
0.108 |
| 75 |
0.091 |
0.094 |
0.097 |
0.100 |
0.102 |
0.105 |
0.108 |
0.111 |
| 76 |
0.094 |
0.097 |
0.100 |
0.103 |
0.106 |
0.109 |
0.112 |
0.114 |
| 77 |
0.098 |
0.101 |
0.104 |
0.107 |
0.110 |
0.112 |
0.115 |
0.118 |
| 78 |
0.103 |
0.106 |
0.109 |
0.111 |
0.114 |
0.117 |
0.120 |
0.123 |
| 79 |
0.108 |
0.111 |
0.114 |
0.117 |
0.119 |
0.122 |
0.125 |
0.128 |
| 80 |
0.115 |
0.117 |
0.120 |
0.123 |
0.125 |
0.128 |
0.131 |
0.133 |
| 81 |
0.121 |
0.124 |
0.127 |
0.129 |
0.132 |
0.135 |
0.137 |
0.140 |
| 82 |
0.129 |
0.132 |
0.134 |
0.137 |
0.139 |
0.142 |
0.145 |
0.147 |
| 83 |
0.138 |
0.140 |
0.143 |
0.146 |
0.148 |
0.151 |
0.154 |
0.156 |
| 84 |
0.148 |
0.151 |
0.153 |
0.156 |
0.159 |
0.161 |
0.164 |
0.167 |
| 85 |
0.160 |
0.163 |
0.165 |
0.168 |
0.171 |
0.173 |
0.176 |
0.179 |
| 86 |
0.173 |
0.176 |
0.179 |
0.182 |
0.184 |
0.187 |
0.190 |
0.193 |
| 87 |
0.189 |
0.191 |
0.194 |
0.197 |
0.200 |
0.200 |
0.200 |
0.200 |
| 88 or over |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
Reference Rate
|
| Age |
10.00% |
10.50% |
11.00% |
11.50% |
12.00% |
12.50% |
13.00% |
13.50% |
| under 55 |
0.084 |
0.087 |
0.090 |
0.093 |
0.097 |
0.100 |
0.103 |
0.107 |
| 55 |
0.088 |
0.091 |
0.094 |
0.097 |
0.101 |
0.104 |
0.107 |
0.111 |
| 56 |
0.088 |
0.091 |
0.095 |
0.098 |
0.101 |
0.104 |
0.108 |
0.111 |
| 57 |
0.089 |
0.092 |
0.095 |
0.098 |
0.102 |
0.105 |
0.108 |
0.112 |
| 58 |
0.090 |
0.093 |
0.096 |
0.099 |
0.102 |
0.106 |
0.109 |
0.112 |
| 59 |
0.090 |
0.093 |
0.097 |
0.100 |
0.103 |
0.106 |
0.110 |
0.113 |
| 60 |
0.091 |
0.094 |
0.097 |
0.101 |
0.104 |
0.107 |
0.110 |
0.114 |
| 61 |
0.092 |
0.095 |
0.098 |
0.101 |
0.105 |
0.108 |
0.111 |
0.115 |
| 62 |
0.093 |
0.096 |
0.099 |
0.102 |
0.105 |
0.109 |
0.112 |
0.115 |
| 63 |
0.094 |
0.097 |
0.100 |
0.103 |
0.106 |
0.110 |
0.113 |
0.116 |
| 64 |
0.095 |
0.098 |
0.101 |
0.104 |
0.107 |
0.111 |
0.114 |
0.117 |
| 65 |
0.096 |
0.099 |
0.102 |
0.105 |
0.108 |
0.112 |
0.115 |
0.118 |
| 66 |
0.097 |
0.100 |
0.103 |
0.106 |
0.110 |
0.113 |
0.116 |
0.119 |
| 67 |
0.098 |
0.101 |
0.104 |
0.108 |
0.111 |
0.114 |
0.117 |
0.121 |
| 68 |
0.100 |
0.103 |
0.106 |
0.109 |
0.112 |
0.115 |
0.119 |
0.122 |
| 69 |
0.101 |
0.104 |
0.107 |
0.111 |
0.114 |
0.117 |
0.120 |
0.123 |
| 70 |
0.103 |
0.106 |
0.109 |
0.112 |
0.115 |
0.119 |
0.122 |
0.125 |
| 71 |
0.105 |
0.108 |
0.111 |
0.114 |
0.117 |
0.120 |
0.123 |
0.127 |
| 72 |
0.107 |
0.110 |
0.113 |
0.116 |
0.119 |
0.122 |
0.125 |
0.129 |
| 73 |
0.109 |
0.112 |
0.115 |
0.118 |
0.121 |
0.124 |
0.127 |
0.131 |
| 74 |
0.111 |
0.114 |
0.117 |
0.120 |
0.124 |
0.127 |
0.130 |
0.133 |
| 75 |
0.114 |
0.117 |
0.120 |
0.123 |
0.126 |
0.129 |
0.132 |
0.135 |
| 76 |
0.117 |
0.120 |
0.123 |
0.126 |
0.129 |
0.132 |
0.135 |
0.138 |
| 77 |
0.121 |
0.124 |
0.127 |
0.130 |
0.133 |
0.136 |
0.139 |
0.142 |
| 78 |
0.126 |
0.128 |
0.131 |
0.134 |
0.137 |
0.140 |
0.143 |
0.146 |
| 79 |
0.131 |
0.134 |
0.137 |
0.139 |
0.142 |
0.145 |
0.148 |
0.151 |
| 80 |
0.136 |
0.139 |
0.142 |
0.144 |
0.147 |
0.150 |
0.153 |
0.155 |
| 81 |
0.143 |
0.145 |
0.148 |
0.151 |
0.153 |
0.156 |
0.159 |
0.161 |
| 82 |
0.150 |
0.153 |
0.155 |
0.158 |
0.161 |
0.163 |
0.166 |
0.169 |
| 83 |
0.159 |
0.161 |
0.164 |
0.167 |
0.169 |
0.172 |
0.175 |
0.177 |
| 84 |
0.169 |
0.172 |
0.174 |
0.177 |
0.180 |
0.182 |
0.185 |
0.187 |
| 85 |
0.181 |
0.184 |
0.187 |
0.189 |
0.192 |
0.194 |
0.197 |
0.200 |
| 86 |
0.195 |
0.198 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
| 87 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
| 88 or over |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
0.200 |
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Age Requirements to Open a LIF
Most LIF owners are age 55 or older. Under the Pension Benefits Standards Act there are age requirements for a pension plan member who elects to transfer pension money into a LIF. The person must have reached the age at which the member qualifies for early retirement under the plan (commonly age 55). A surviving spouse of a member who has died does not have that age restriction, and can have a LIF at any age. A former spouse of a pension plan member, who has received a portion of the member's pension benefits through a division of family assets pursuant to a marriage breakdown, can have a LIF when the spouse reaches age 55, or at the point in time at which the member could have commenced a pension under the terms of the pension plan. This is why the table showing Factor F has a reference to ages under 55.
No Annuity Requirement at Age 80
Under amendments to the Regulation, there is no longer a requirement that the balance remaining in a LIF be used to purchase a life annuity contract by the end of the year in which the owner reaches age 80.
No Prorating During the First Year of a LIF
There is no longer a requirement to prorate the maximum withdrawal for the first year of a LIF, under amendments to the Regulation. Previously, the maximum withdrawal for the first year of a LIF was required to be prorated according to the number of months remaining in the year from when the LIF was opened.
Basing the Maximum Withdrawal on the Previous Year's Investment Returns
The provision that allows the maximum withdrawal to be based on the previous year's investment returns requires that the investment returns have been earned under the same LIF contract. In order to qualify, the investment returns must not have been earned under a locked-in RRSP, or under a LIF with a different financial institution. What constitutes the "previous year's investment returns" is defined in section 30 (1) of the Regulation
Transfers of a LIF to Another Financial Institution
Withdrawals are not permitted during the first year of a LIF if the funds were previously in a LIF during the same year (Reg. s. 30 (8) (s)). A financial institution processing a transfer of locked-in funds to another financial institution, must notify the receiving institution in writing if the funds had been in a LIF, and the date the funds were transferred out of the LIF (Reg. ss. 29 (14.1) and 30 (17.1)).
A LIF owner who wishes to transfer the LIF assets to another financial institution part way through a year, yet still withdraw the maximum amount for the year, can only do so if all of the yearly maximum is withdrawn from the LIF prior to the transfer. No withdrawals under the LIF at the new financial institution are permitted until the following year.
The provision that allows the maximum withdrawal to be based on the previous year's investment returns requires that the investment returns have been earned under the same LIF contract. A LIF owner who transfers the LIF assets to a LIF at another financial institution, will not be able to base the maximum withdrawal under the new LIF on the previous year's investment returns until there have been investment returns for a previous year under the new LIF.
New Method for Maximum Withdrawals
A new method of determining the maximum annual withdrawal from a LIF came into effect on April 1, 2004, under amendments to the Regulation. A new method of determining the maximum withdrawal was required in order to accommodate elimination of the requirement to buy an annuity at age 80. Otherwise, the funds in the LIF would be depleted at age 90, and it would no longer achieve the purpose of being a "life" income fund. For the transitional year of 2004, the maximum withdrawal from a LIF could be based on either the new method, or the old method in effect during the first part of 2004 and prior years. The new method is the only method available for 2005, and subsequent years.
Maximum Withdrawals for Previous Years
The reference rate has been 6% each year since it came into use on April, 1 2004. Information on the maximum allowable withdrawals for 2004 , 2003 , 2002 , 2001 and 2000 , is presented in separate pages on this web site. The maximum allowable withdrawals for the years 2003, 2002, 2001, 1999 and 1998, were the same, though the rates were slightly higher for 2000.
Variation From Year-to-Year
The rates of maximum annual withdrawal from a LIF can change from year to year. This happens when long-term interest rates are near or above 6% per annum. For several recent years, however, long-term interest rates have been well below 6%. The maximum allowable withdrawals for the years 2003, 2002, 2001, 1999 and 1998 were the same, though the maximum withdrawals were slightly higher for 2000. The formula for determining the maximum withdrawal bottoms out when long-term interest rates fall much below 6%. The current rates of maximum withdrawal are as low as they can go under the existing regulatory provisions. The rates of maximum annual withdrawal from a LIF may rise in future years if long-term interest rates rise near to or above 6% per annum.
The maximum annual rates of withdrawal for a given year are influenced by the Bank of Canada CANSIM long-term interest rates for November of the preceding year. The interest rate is used in the determination of the relevant Reference Rate, which is subsequently used for selection of the appropriate Factor F, for use in determining the maximum annual withdrawal for a person's LIF. The CANSIM rate to be used is CANSIM Series V122487 (formerly B14013) for the month of November of the year preceding the year of the valuation. CANSIM Series V122487 (formerly B14013)
is compiled by Statistics Canada and published in the Bank of Canada Banking and Financial Statistics .
The prescribed CANSIM rate, based on the CANSIM rate for
November 2008, is 4.00%. The methodology of using the prescribed CANSIM interest rate to determine the Reference Rate for a particular calendar year is described in section 30 (1) of the Regulation The methodology used for the determination of the Reference Rate in B.C. is the same methodology currently used by Québec, Nova Scotia and Manitoba.
The rates of maximum annual withdrawal for 2010, can be determined after the Bank of Canada CANSIM interest rates for November 2009 become available. In the meantime, their information on Government of Canada Bond Yields , for GOVT. OF CANADA MARKETABLE BONDS, AVG. YIELD: +10 YEAR, can be used to provide updates on the current CANSIM rate throughout the year.
Information to be Provided by Financial Institutions
Savings institutions and insurance companies are required to provide LIF owners within 90 days of the beginning of the year information on the balance in the LIF, and the minimum and maximum amounts that can be withdrawn during the year. They must also provide information respecting the sums deposited, the investment income earned, the payments made out of the LIF during the previous year and the fees charged.
Minimum Withdrawal
A LIF is a registered retirement income fund (RRIF) established under the Income Tax Act (Canada), with the extra provincial provisions associated with pension money. The minimum annual withdrawal for a LIF is the same as that prescribed by the Income Tax Act for regular RRIFs .
How Governing Jurisdiction is Determined
The B.C. LIF rules apply only to LIFs which are under jurisdiction of the Regulation. Not all locked-in RRSPs and LIFs are under jurisdiction of the Regulation, even though the money, or the person who owns the money, is located in B.C..
The Regulation does not claim jurisdiction over pension money transferred out of a pension plan prior to 1993, or pension money transferred out after 1992, if it relates to service before 1993. The rules under which money is locked-in under these types of situations are determined by the rules of the pension plan from which the money was originally transferred.
Similarly, the Regulation only governs locked-in RRSPs and LIFs holding pension assets of persons who terminated employment while working in British Columbia, and who were working in provincially regulated employment. The B.C. Regulation does not apply to pension assets if the money was transferred out of a pension plan as a result of a person terminating employment while working in another province. The determination of which province's pension laws apply to locked-in pension money is made based on which province the person was working in when the person terminated employment rather than by the location of the institution holding the money, the person's subsequent place of residence, or where the pension plan is registered (unless federally registered). A LIF holding pension assets of a person who terminated employment while working in another province is governed by the laws of that province.
Similarly, the B.C. Regulation does not apply to locked-in RRSPs and LIFs containing pension money if the money came from a pension plan covering federal public sector employees, or a plan covering private sector employees working in federally regulated industries or jurisdictions. Some examples of federally regulated industries whose pension plans are under federal as opposed to provincial regulation are airlines, banks, broadcasting, telecommunications, interprovincial transportation, railways, and shipping. Pension assets of employees who work and live in the Yukon, Northwest Territories or Nunavut are also under federal as opposed to provincial regulation.
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