How long to close down a LIRA? | RRSPs and RRIFs | Discussion forum

Jon said
that should put him/her on the spot.  

In situations like that, I like to say, "What is your name and extension or employee number, so I can record the details of this call for my log."

I found that once I have the CSR's name and contact info, they tend to be more diligent in their responses.

If not, I can always escalate my call to a supervisory staff member, with details of the person whose responses were unsatisfactory.

Hmm, maybe just withraw $2999 and leave the account open with $1 in it to forego the $50 account closure fee? I hate these types of bank practices, charging you to give you your own money.

Unlocking and withdrawing from a LIRA is not as routine as withdrawing from a regular RRSP account that is not locked-in under some pension act.

I think the financial institution will need to confirm that one is actually allowed to unlock and withdraw from the LIRA. That will depend on the legislation the LIRA is locked-in under.

For example, the rules for unlocking a small LIRA, locked in under Ontario rules, only allows the unlocking when

• You are at least 55 years old and the total value of all assets held in every Ontario locked-in account [LIRA, LIF or LRIF] you own is less than $22,120 (for applications signed in 2017).

In such cases, one would not be able to unlock a $1,000 Ontario LIRA if one had another Ontario LIRA or Ontario LIF with $50,000 in it.

Loonie said
As I said earlier, I am well above the minimum age and this account is well below the minimum for cashing in. I have no other LIRAs or LIFs or anything like it. As I am in Ontario, the pension fund from which it originated is clearly only available to Ontarians and registered under Ontario law, and the bank branch is in Ontario, I think this should not be at all difficult to transact. …

The only possible reason for slowing this all down might be the need to investigate total amount in such funds, but that can't be very difficult either. The province must have this on record and easily accessible for approval. If they don't, the FI would have to be sending inquiries to all the other FIs, and that would take months, if not years! - and would be highly inefficient.
… 

That's probably what takes some time to do. I don't know if the Ontario pension regulator has the required info easily accessible for the financial institutions. Maybe the financial institution has to mail in a request and wait for the information to be mailed back!

Had the LIRA been locked in under Saskatchewan legislation, all locked-in money has to be considered (not just money locked in under Saskatchewan legislation). That includes deferred pension entitlements where one did not transfer the money out to a LIRA and left it in the pension plan. As well, the LIRA contract itself also needs to allow for the small benefit unlocking:

Bulletin - Unlocking Pension Money

2. Small Benefit Rule under a LIRA
Subsection 29(8.1) and (8.2) of the Regulations permit a LIRA contract issuer (“the issuer”) to make a lump sum payment where the total value of an individual’s locked-in money is too small to warrant being administered as a pension:

“29(8.1) Notwithstanding subsection (4), but subject to subsection (8.2), the contract may provide for the withdrawal of the locked-in money as a lump sum if the amount of locked-in money in the contract does not exceed 20% of the Year’s Maximum Pensionable Earnings in effect in the year in which the withdrawal occurs.

(8.2) The issuer shall not permit a withdrawal pursuant to subsection (8.1) unless the issuer is satisfied that the owner has no other locked-in money.”

Subsection 29(8.1) of the Regulations is permissive, not mandatory. The issuer is responsible for administering the small benefit rule and must ensure that the terms of the contract provide for the release of locked-in money pursuant to the small benefit rule.

Subsection 29(8.2) of the Regulations requires the issuer to be satisfied that the LIRA owner has declared all other locked-in money for purposes of applying the small benefit rule under subsection 29(8.1). This includes locked-in money that may be subject to the pension legislation of other jurisdictions. A signed written statement from the owner, for instance, should be sufficient to release the money.

In determining the amount of an individual’s total locked-in money, the issuer must include amounts in all LIRAs held by the individual, as well as any deferred pension entitlements the individual has in a pension plan. Such an entitlement is created when a plan member terminates membership in a plan, and does not transfer the entitlement out of the plan.

The YMPE is a figure determined under the Canada Pension Plan on an annual basis. The YMPE for 2018 is $55,900. Therefore, a LIRA contract could provide for the withdrawal of the locked-in money that is subject to Saskatchewan pension legislation as a lump sum if the total amount of an individual’s locked-in money from all sources does not exceed $11,180.
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Loonie said
But at Scotia I was told this would take a MONTH!!
I was wondering if anyone thought this was normal or to be expected.
  

Loonie,

I've been following your discussion with interest, because I have a substantial LIRA that pays out the compulsory percentage each year.

Though I have not considered closing mine, I never gave much thought to the ramifications of doing so.

My understanding about a LIRA, is that unlike a RIF, it cannot be liquidated, but rather converted to an annuity, otherwise it remains invested and pays out the obligatory annual percentage.

Presumably your "under3k" LIRA falls under different rules, and I'm looking forward to reading the outcome of your situation.

When I was investigating alternative FI's to administer my LIRA, very few had the infrastructure to do it.

Mine is with a deposit broker who gives me a wide variety of options to place it in GIC's.

Stephen

Loonie said
…
Getting back to the current case, it seems from what Norman wrote earlier that the requirement to check on other LIRAs is a recent innovation. He cited applications from 2017 forward as being affected. I am pretty sure this was not in effect when I originally made my plan to liquidate this LIRA this year, although it's possible I ignored it because I knew it was not my situation.
In my opinon, if the government is going to have such a rule, then it's their responsibility to make a directory of such plans readily accessible, either directly to the FIs or, better, by giving the FIs a dedicated phone line or password in order to find out if the plan in question qualifies for redemption. Not only will this speed things along for the planholder, it is only reasonable from the point of view of both government and FIs. Anything else is going to take up unnecessary staff time. Or did they put the cart before the horse?

I don't know if there is a central directory of locked-in plans. It is possible that the government did put the cart before the horse!

The 2017 only refers to that $22,120 ceiling for small LIRA unlocking. The exact ceiling is 40% of the Year’s Maximum Pensionable Earnings for the calendar year which is adjusted each year.

The requirement to include other locked-in accounts seems to have been there as far back as January 2011.

The requirements for small Ontario LIRA unlocking are in the Revised Regulations of Ontario 1990, Regulation 909, Part III, Schedule 3 (Locked-in retirement account requirements), Section 6:

6. (1) The owner of a locked-in retirement account may, upon application in accordance with this section, withdraw all the money in the account or transfer the assets to an RRSP or RRIF if, when the owner signs the application,

(a) he or she is at least 55 years of age; and

(b) the value of all assets in all life income funds, locked-in retirement income funds and locked-in retirement accounts owned by him or her is less than 40 per cent of the Year’s Maximum Pensionable Earnings for that calendar year.

(2), (3) Revoked: O. Reg. 185/13, s. 6 (2).

(4) The application form must be signed by the owner and accompanied by one of the following documents:

1. A declaration described in section 9 about a spouse.

2. A statement signed by the owner attesting to the fact that none of the money in the account is derived, directly or indirectly, from a pension benefit provided in respect of any employment of the owner.

(5) If assets in the account consist of identifiable and transferable securities, the financial institution may transfer the securities with the consent of the owner.

(6) The contract governing the account must include the following term and, if it does not, the contract is deemed to include it:

1. The value of all assets in all life income funds, locked-in retirement income funds and locked-in retirement accounts owned by the owner when he or she signs the application under this section is to be determined using the most recent statement about each fund or account given to the owner. Each such statement must be dated within one year before the owner signs the application.

I get the feeling Loonie could easily stomach a ~$50 plan closure fee, if it he (am I correct in assuming this gender?) could get a reasonable timeline and detail on the process and steps involved.

In a situation like this, I would try and remain calm and ask the branch representative to look into this and agree on a reasonable timeframe (i.e., several days but not more than a week) to be provided, preferably via e-mail, an update on the timeline and steps involved. That shows you understand this is a less common procedure and you're flexible in allowing them to look into it. Make it clear that failure to get an adequate response within that timeframe would result in your escalating the concern to the Office of the President. 🙂

Cheers,
Doug

Loonie said
Since it also takes Scotia an entire month to send me a quarterly statement when there is no activity on my part whatsoever, I am inclined to think it is their own sluggishness that is at issue.

I'm not going to fight with them, politely or not, at this stage. My deadline is past and it's not worth my while. I'll start early for 2018, when it thaws, and will be very glad to get rid of Scotia.

I don't care about transferring it to an RIF. I am in the process of cashing out our RSPs and RIFs as fast as we reasonably can, and this small amount will fit into 2018 tax plans.

I'm wondering why you think a month is reasonable, though, Doug. I got same-day service to close an RSP last year, and instantaneous to close an RIF this year, both at BigSix. The only one that took time was at the inimitable HSBC, but even that one only took a couple of weeks and the reasons were clear - it was in a mutual fund and their systems were antiquated, AND they were falling all over themselves apologizing for the delay - none of that at Scotia, just "put up and shut up; we are the boss of your money". I guess I didn't look like a very good prospect for the "wealth business" as I always dress down for such excursions...  

I guess because registered plan transfers can take up to 28 days plus it's a locked-in plan and the branch staff likely aren't familiar with all the nuances and would likely need to liaise with the back office or ship it off to the back office to process entirely.

I'm not certain as to the specifics of the problem you had at HSBC and, while I can say that they use an antiquated system (I have a screenshot I could share with you privately if you'd like), I can say that some of the reason(s) for the delay in the closure of your RSP would likely include:

• Cheque processing time - mutual fund redemptions are processed by the HSBC back-office in Canada and mailed via a company cheque, either to the current address of the client or, optionally, to a specified branch for pick-up (this is less preferred due to cumbersome logging procedures upon receipt and pick-up by the client)
• Lack of staff training, mainly at the branch level
• Lack of licensed branch staff to facilitate the request or even approve the trade due to frequent employee turnover

FWIW, HSBC is even more likely to give you the "cold shoulder" if you don't look like a good prospect for their "wealth business," though Scotia is adopting the HSBC business model of general "snobbery" to non-wealth qualified clients and also in terms of lean business model. Looking back, it was perhaps not surprising we regularly got Scotia customers show up in branch thinking it was Scotiabank because of, presumably, the red and white colour scheme. In hindsight, perhaps the executive-coached staff behaviours and product mix were giveaways in this way? We were actually actively encouraged and told by Branch Managers to lie & make up phony excuses of why we couldn't open up a new account for a potential customer that looked to be "low income or (even) homeless" just so we could turn them away without having to refuse to open an account and prepare associated documentation for such refusal to open an account. We were even encouraged to generally give that person the appearance that we didn't value their potential business, through visual cues or word choice. 🙁

Cheers,
Doug

Interesting ideas about the colours - I'm not sure how they arrived on the colours, though National Bank is a bit more than a "splash," I'd argue. I suspect for Scotia and National, and CIBC, which is more of a lighter red than a darker shade of maroon nowadays, they went with red for the patriotic Canadian "feel"? You're quite right, though, that various internal and external consultants were paid handsome sums of money to create these branding schemes.

I think, generally, some HSBC branches are better than others. It depends on the DVP that oversees that region (we were part of Western Region, which included all of the Manitoba, Saskatchewan and Alberta branches as well as the B.C. Central & Southern Interior and Vancouver Island branches) and how the BM interprets their directives, I think. They seem to be trying to win back clients, or show the appearance of doing so instead of targeting exclusively the affluent clientele. It's probably more the latter. Trouble is, I don't think, or hope, people's memories aren't that short. 😉

As for why you had to go to your home branch, that likely goes to what Norman1 and Bill were mentioning in other threads about accounts being domiciled to certain branches and the regulations for POA handling & estate processing varying as such. Personally, we all know they centralize many activities so it shouldn't matter but I do know, because my mom worked at Scotiabank for a combined 30+ years of service (two separate service records), that Scotia keeps all of their files at the home branch, including RSP files. HSBC is that way as well but does seem to centralize more of the administrative processing. HSBC is a nightmare in terms of estate handling, though, you can go in to another branch but it's a nightmare for staff who have to make photocopies in triplicate, one for their day's work, one for the Domestic Service Centre (based in Vancouver on Virtual Way [used to be 401 W. Georgia St] and North Toronto, on Steeles Ave now [used to be Markham on Allstate Parkway]) and one for the home branch's estate file which got sent via inter-office mail. The problem is...many branches didn't do the third step and was a nightmare audit-wise! 🙁

As for the refusal to open an account, as per the Access to Basic Banking Regulations, administered by FCAC, banks have, supposedly, limited reasons they can refuse to open a new account, technically speaking. You can see here for the reason(s), though I note that the last two reasons have been added since I left in early 2014, likely due to, and probably at the request of, the proliferation of virtual banks, which likely makes you wonder: who's in charge here? The regulator(s) or do the banks tag the figurative "tail" of the regulatory "dog"? 😉

We had two internal forms we completed: first, a checklist, and second, a form letter, where we basically just dated & signed it. We gave it to the client, kept a copy for a single "Refusal to Open Account File" along with the completed checklist. Manager sign-off was not actually required for this and any staff member could do this. However, it was recommended to get a second set of eyes in case the customer makes a complaint. In the five years I was at HSBC's Westbank Branch, I think I did one, maybe two, "refusal to open an account". It didn't need to be reported but had to be divulged in the event a customer complained to FCAC. Practically speaking, however, if you turn a client away because, let's say, you tell them you have no one available to see them, no checklist needs to be done and no letter given. They can still come back another day or book an appointment but most didn't - they went elsewhere, which is what HSBC wanted. 😉

Still, that's one good thing about bank regulation, though: access to financial services. Provincially-regulated credit unions are only regulated from capital adequacy (including deposit insurance) and governance perspectives (i.e., proper notification and annual/special meeting rules are followed). There's no consumer protection regulation of provincially-regulated credit unions. Some credit unions are what I call more "consumer friendly," more open to taking clients with less than desirable credit ratings and applying lower hold periods or holding all deposits. Also, provincially-regulated credit unions don't need to adhere to federal Access to Funds Regulations (i.e., first $100 availability or same maximum hold periods).

As to the last point you cite re: TDCT, I can't speak to that, specifically, but I will say that for balance enquiries, it's often quicker just to hit "print screen" and "okay" and walk to a nearby MFD printer to pick it up than grab a "balance enquiry" form notepad, scribble in a balance and, for anal people like me, the customer's name and account number. I guess I could've just written a balance but that looks less professional - unless you wouldn't have minded that, if you were my customer, maybe? 😉

Hope that helps!

Cheers,
Doug