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What are my options for getting at pension money that's now held in my locked-in RRSP?

If you terminate membership in a company pension plan, you may have the option of taking your pension money out and putting it into a locked-in Registered Retirement Savings Plan.

It's called a locked-in RRSP because there are restrictions on when and how much money you can take out -- much like the pension plan the money was in originally. Unlike a regular RRSP, you can't take all the money out, whenever you want. Under some plans, you can't start to withdraw the money until you are 55 or older.

If you have a locked-in RRSP, you must convert it to either a life annuity or a Life Income Fund (LIF) by the end of the calendar year in which you turn 69.

A life annuity is a contract in which you give your money to a life insurance company and it agrees to pay you, as the annuitant, fixed monthly payments for life. The payments could be made to either one or two people with, in the case of two individuals, payments continuing after the death of the first person and ending only after the death of the second.

The payments you receive on a life annuity will be affected by your life expectancy and whatever interest rates happen to be at the time you buy that annuity. If rates are high, you will receive higher monthly payments; if rates are low, your payments will be less.

A LIF is also designed to give you income for life, but offers more flexibility. It lets you stay in control of two things:

  1. How much you decide to take as income, although withdrawals are subject to minimum and maximum limits related to the age of the annuitant.
  2. Your investments, since you decide how your capital is invested.

Any remaining funds in the LIF must be used to buy a life annuity by the end of the calendar year in which you turn 80.

With a LIF, you are taking responsibility for how to invest the money. If you don't want that responsibility, you might instead want the certainty of a life annuity.

Your personal circumstances and preferences will influence whether a LIF or a life annuity is the best place to put your locked-in RRSP money.

You may need professional investment or financial advice to help determine the best option for your needs.