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