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.
Presented in this page is information on the maximum allowable withdrawals for 2004. Information regarding the maximum allowable withdrawals for 2005, 2003, 2002, 2001 and 2000 is also presented, in separate pages on this web site.
A new method of determining the maximum annual withdrawal from a LIF came into effect on April 1, 2004, under amendments to the Pension Benefits Standards Regulation.
The 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.
Under the new method, the prescribed rate of maximum annual withdrawal is based on the relevant Factor F from Schedule III, corresponding to the reference rate for the year, and the person’s age at the end of the preceding year.
A LIF owner’s maximum allowable withdrawal for the year under the new method is the greater of the following:
- Factor F multiplied by the value of the fund at the start of the year,
- the actual investment returns for the preceding year under the same LIF contract.
Following is a table showing the Factor F for various ages. Note that the relevant Factor F to use is the one corresponding to the person’s age at the end of the preceding year. The reference rate for 2004 is 6%.
Following the table showing Factor F is information on the old method of determining the maximum withdrawal, in effect during the first part of 2004, and in previous years.
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 |
|
The rates of maximum annual withdrawal for 2004 under the old method are the same as they were for 2003. For 2004, the maximum annual withdrawal ranges from 6.45234% of the value of the LIF, for a person who turns 55 during the year, to 11.96160% for a person who turns 80 during the year.
Presented in this page is a table of the maximum allowable withdrawals for 2004, according to the age of the owner. Information related to the maximum allowable withdrawals for 2003, 2002, 2001 and 2000, are also presented in separate pages on this web site. The maximum allowable withdrawals for 2003, 2002, 2001, 1999 and 1998 were the same as they are for 2004, though the rates were slightly higher for 2000.
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 turns 65 during 2004 is permitted to take out a maximum of 7.25513% of whatever balance was in the LIF at the start of the year.
2004 LIF Maximum Annual Withdrawal (Old Method) |
| Age Attained in 2004 |
Maximum 2004 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 2004 were the same as they were for 2003, 2002 and 2001, but were slightly less than what they had been for 2000.
Under the old method, the formula for the maximum withdrawal from a LIF 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 2003, is 5.24%. Since the prescribed CANSIM rate is less than 6%, a rate of 6% can be used instead of the CANSIM rate for the calculation of F for 2004.
The maximum annual rates of withdrawal for 2004, 2003, 2002 and 2001 are slightly lower than they were for 2000, since the rate of 6.00% must 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.
