A LIRA, Locked-In Retirement Account, is designed to help Canadians accumulate pension money outside of a pension plan.
When you leave a company where you have a pension, whether you left or you have been laid off—you have to transfer your pension money to a LIRA (In some provinces it’s referred to as Locked-In RRSP or LRSP).
LIRAs are somewhat similar to RRSPs since both accounts are tax-sheltered and allow you to invest in a wide variety of investments. Having said that, there are some key differences, for example:
- No contributions are allowed in LIRA accounts, but your portfolio can still grow from your investments
- You cannot withdraw funds until a certain age or until you meet a certain criteria
The purpose of this account is to provide you with income during your retirement years. If you left your employer before retirement, the purpose remains the same and the funds are locked for your retirement years.
In some circumstances, you’ll be allowed to withdraw funds before the prescribed retirement age, for reasons such as financial hardships, disability, medical costs, shortened life expectancy, etc.
The prescribed retirement age and special withdrawal circumstances vary based on the province your account is registered with. Learn more about withdrawing from a LIRA