Three options when you leave
In Ontario, you have the following options when you leave your defined contribution (DC) plan before retirement:
- Transfer to an individual locked-in retirement account (LIRA) – A LIRA works much like an RRSP. You set it up with a bank or other financial institution.
- Transfer to an insurance company to buy a deferred annuity – This is a contract that guarantees to pay you an income for life. The start date is “deferred” until a future time when you want to begin receiving income. Learn more about annuities.
- Transfer to another pension plan – Transfer your pension to your new employer’s plan if they will accept it.
If you become disabled before leaving the plan
Check with your plan administrator about the disability benefit rules that apply to your plan. If you are off work due to disability, you may be able to continue earning benefits under the plan.
If you die before leaving the plan
If you die while you are still a member of the plan, your savings will be transferred to your spouse, if you have one. The amount can be transferred to your spouse’s RRSP or RRIF so the savings remain tax-sheltered until your spouse withdraws the funds. Some provinces allow transfers only to the locked-in versions of these plans (locked-in retirement account or locked-in retirement income fund).
In Ontario, and some other provinces, you and your spouse can waive your spouse’s right to this entitlement.
Payments made to any non-spouse beneficiary can be paid out in cash and are fully taxable to the beneficiary.
Tip: Designate a beneficiary: Designate a beneficiary for your plan, so benefits can be paid directly from the plan upon your death. Your plan administrator can tell you how.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca