What Is a Locked-In Retirement Account (LIRA)?

If you have an employer-sponsored pension plan and quit your work, you will need to determine what to do with your pension. Transferring it to an LIRA might be one of your choices.

In this blog post we’ll explore what a LIRA is and why you might choose to use one.

What is a Locked-in Retirement Account?

The Locked-in Retirement Account (LIRA) is a registered retirement savings account that is used to keep the money from your old pension plan set aside until you retire.

Unlike an RRSP, you can’t personally contribute to a LIRA. The only way that funds go into a LIRA is if they are transferred there from your pension at a previous employer.

Your funds are “locked-in” in an LIRA, which means you cannot access them until you retire. Only in the most rare of situations may funds in a Locked-in Retirement Account (LIRA) be withdrawn before retirement. Unlike a regular RRSP, the funds cannot be taken out early and borrowed for non-retirement costs such as education or housing.

When you’re ready to use the funds at retirement, a LIRA can be used to acquire a life annuity or can be transferred into a Life Income Fund (LIF) or a Locked-in Retirement Income Fund (LRIF). After you reach retirement, these can be used to provide your pension income.

Sound complicated? Actually, think of your LIRA as an investment account. Your money can be invested so that it grows. There is no tax on that growth. You can invest in stocks or fixed income or investment funds, etc. Importantly, this is money for you when you no longer work. So, don’t lose it. It’s not play money. Your pension money grows in a LIRA. Then you withdraw as an income in retirement.

Is the Locked-In Retirement Account a good option?

If you’re leaving your employer who has a company pension plan and you want to manage and control your pension funds, it can be a great option. You can easily create a LIRA to hold the funds transferred from your pension plan. However, since your funds are “locked-in”, it isn’t as flexible as a RRSP where you have the possibility of withdrawing and borrowing funds early for education or purchasing a house. Instead, a LIRA is only suitable to offer you retirement income.

That being said, you can unlock 50% of the Locked-in Retirement Account funds a single time, and only if you are over 55 years old. Keep in mind that this is not possible everywhere, only in certain locations and under specific circumstances as well. Having a Certified Financial Planner can help provide you with all the guidance you need if you’re unsure about whether or not a LIRA is a good choice for you. As we said earlier, local regulations come into play, so rules will differ based on where you live.


A Locked-In Retirement Account is suitable for a lot of people that just want to set money aside for their retirement. Not only is it a great way to safeguard your pension, but you can also guide investments and plan to turn your LIRA into an income fund when you retire.

At Pension Solutions Canada, we specialize in assisting people in preparing for retirement. Allow us to evaluate and review your retirement income sources and assist you with retirement planning. Call us at 1-888-554-6661, or click here to book a virtual Zoom meeting.

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