The maximum annual withdrawal from a Life Income Fund (a "LIF") is prescribed by the Pension Benefits Standards Regulation. The maximum amount an owner of a LIF is permitted to withdraw each year varies according to the person's age and prevailing interest rates.
The maximum annual rates of withdrawal for 2003 were the same as they were for 2002 and 2001. For 2003, the maximum annual withdrawal ranged from 6.45234% of the value of the LIF, for a person who turned 55 during the year, to 11.96160% for a person who turned 80 during the year.
Presented in this page is a table of the maximum allowable withdrawals for 2003, according to the age of the owner. Tables of the maximum allowable withdrawals for 2005, 2004, 2002, 2001 and 2000 are also presented in separate pages on this web site. The maximum allowable withdrawals for 1999 and 1998 were the same as they were for 2003, 2002 and 2001.
Most LIF owners are between the ages of 55 and 80. 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). The surviving spouse of a member who has died does not have that age restriction, and can have a LIF at any age. The 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 that the member could have commenced a pension under the terms of the pension plan. This is why the following table shows maximum annual withdrawals for ages as young as 35, even though most LIF owners are at least age 55.
The rates of maximum annual withdrawal are shown as a percentage (%) of the balance in the LIF account at the start of the year. For example, a person who turned 65 during 2003 was permitted to take out a maximum of 7.25513% of whatever balance was in the LIF at the start of the year.
2003 LIF Maximum Annual Withdrawal |
| Age Attained in 2003 |
Maximum 2003 Withdrawal |
| 35 |
5.88563% |
| 36 |
5.89971% |
| 37 |
5.91472% |
| 38 |
5.93071% |
| 39 |
5.94775% |
| 40 |
5.96592% |
| 41 |
5.98531% |
| 42 |
6.00600% |
| 43 |
6.02808% |
| 44 |
6.05167% |
| 45 |
6.07687% |
| 46 |
6.10382% |
| 47 |
6.13265% |
| 48 |
6.16350% |
| 49 |
6.19655% |
| 50 |
6.23197% |
| 51 |
6.26996% |
| 52 |
6.31073% |
| 53 |
6.35454% |
| 54 |
6.40164% |
| 55 |
6.45234% |
| 56 |
6.50697% |
| 57 |
6.56589% |
| 58 |
6.62952% |
| 59 |
6.69833% |
| 60 |
6.77285% |
| 61 |
6.85367% |
| 62 |
6.94147% |
| 63 |
7.03703% |
| 64 |
7.14124% |
| 65 |
7.25513% |
| 66 |
7.37988% |
| 67 |
7.51689% |
| 68 |
7.66778% |
| 69 |
7.83449% |
| 70 |
8.01930% |
| 71 |
8.22496% |
| 72 |
8.45480% |
| 73 |
8.71288% |
| 74 |
9.00423% |
| 75 |
9.33511% |
| 76 |
9.71347% |
| 77 |
10.14952% |
| 78 |
10.65661% |
| 79 |
11.25255% |
| 80 |
11.96160% |
The rates of maximum annual withdrawal from a LIF normally change from year to year. The maximum annual rates of withdrawal for a given year depend on the Bank of Canada CANSIM interest rates for November of the preceding year. The maximum annual rates of withdrawal for 2003 were the same as they were for 2002 and 2001, but were slightly less than what they had been for 2000.
The formula for the maximum withdrawal from a LIF, as prescribed by section 30 (8) of the Pension Benefits Standards Regulation, is:
Maximum=C/F, where
C= the balance of money in the contract on the first day of the fiscal year, and
F= the value, at the beginning of the fiscal year, of a pension of which the annual payment is $1 payable at the beginning of each fiscal year between that date and December 31 of the year during which the owner reaches the age of 90 years.
The value of F must be calculated by using an interest rate of not more than 6%, or for the first 15 years of the operation of the contract, a rate exceeding 6% if the rate does not exceed the prescribed CANSIM rate. The CANSIM rate to be used is CANSIM Series B14013 for the month of November of the year preceding the year of the valuation. CANSIM Series 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 2002, is 5.55%. Since the prescribed CANSIM rate is less than 6%, a rate of 6% could be used instead of the CANSIM rate for the calculation of F for 2003.
The maximum annual rates of withdrawal for 2003, 2002 and 2001 were slightly lower than they were for 2000, since the rate of 6.00% had to be used in the calculation instead of the rate of 6.12% that was used for 2000.
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.
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.
