Registered pension plan (RPP) withdrawal rules

Key takeaways

When you change employers, you have some options for your pension plan funds.
Depending on the legislation, you may be able to withdraw funds due to financial hardship once they’ve been transferred to a locked-in RRSP, locked-in RRIF, LIRA or LIF.

What is a registered pension plan (RPP)?

An RPP is a plan your employer sets up to provide you with retirement income. They’re required to contribute to it, and depending on your plan, you may be required to contribute as well.

Who owns the money in an RPP?

Most pension regulators allow RPP plan members to vest immediately. This means your contributions and those made by your employer belong to you. They’re locked in and can only provide you with income when you retire. When you receive that money, you’ll pay tax on it.

However, some pension legislation may require you to work at your employer or be a pension plan member for a period of time before becoming vested. In this situation, when you leave your employer, you keep your own contributions, but may forfeit any employer contributions made on your behalf.

What happens to my pension if I leave my job?

If you’re under 71 years-of-age and the pension regulations allow it, locked-in RPP funds can only be transferred to:

Another group pension plan
A locked-in retirement account (LIRA)
A locked-in registered retirement savings plan (RRSP)

You may also have the option of leaving your money in the employer’s plan.

And if the RPP is not locked in, you can choose to take the cash value. However, you’ll have to pay tax on this money.

Can you withdraw pension money in an emergency?

While you're employed, unless the pension legislation allows otherwise, you cannot withdraw from or “unlock” pension funds.

Some pension regulators have reasons that permit you to unlock locked-in pension funds that have been transferred to a LIRA or a locked in RRSP. Some of those reasons include:

Low income
Potential foreclosure
Eviction for being behind in rent
First month’s rent and security deposit
High medical or disability-related costs
Shortened life expectancy

In addition, some pension regulators let you unlock 50% of your locked-in funds, 1-time, if you’re 55 years of age or older. If you leave a job or retire, some pension regulators also let you unlock if the balance of your funds is below a certain amount.

Review your pension documentation to confirm your options.

What's next?

Now that you understand more about RPPs and their withdrawal rules, you may also want to:

Confirm with your employer which type of pension plan you have and what the plan allows.
Talk with your advisor about whether your pension plan will meet your retirement needs.

This material is for information purposes only and shouldn’t be construed as providing legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible. All comments related to taxation are general in nature and are based on current Canadian provincial and federal pension legislation and tax and interpretations for Canadian residents, which are subject to change. For individual circumstances, consult with your tax, legal or accounting professionals. This information is provided by The Canada Life Assurance Company and is current as of date of publication.