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LIF to annuity rules?
May 29, 2023
8:26 pm
NCC1701Z
Lower Mainland
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Does a LIRA from a federal regulated company need to be converted to an annuity from a LIF at age 80 in BC? Has the rules changes? Some sites say yes, some no

May 29, 2023
9:58 pm
Norman1
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According to The Navigator (November 2016): Locked-in retirement plans from RBC Wealth, only LIF's locked in by Newfoundland provincial pension legislation need to be converted to an annuity by age 80:

A LIF governed by Newfoundland & Labrador pension legislation differs from a RRIF and a LIF in the other jurisdictions in one significant way. If you own a LIF governed by Newfoundland & Labrador pension legislation, you must convert it to a life annuity by the end of the year in which you turn 80. In contrast, the RRIF can continue throughout your lifetime. This mandatory conversion is not required federally or under any other provincial pension legislation. Further, unlike a RRIF, a LIF has an annual maximum withdrawal restriction based on pension legislation.

Yes, the rules have changed over time. Federal LIF's used to have that annuity conversion requirement. That was abolished around 2006: Investment Executive (November 2006): Feds scrap LIF rules requiring conversion at age 80.

May 29, 2023
10:37 pm
Loonie
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Bear in mind that life expectancy in Newfoundland and Labrador is about 80 (or less, depending on gender and on whose stats you favour). The forced annuitization could be a really crappy deal for many - and a legislated gift from citizens to the insurance industry.

May 29, 2023
11:19 pm
NCC1701Z
Lower Mainland
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Thanks, now if they could only remove the maximum withdrawal %'s!

June 3, 2023
9:16 am
Norman1
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Just over a year after that November 2016 issue of The Navigator from RBC Wealth, the Newfoundland government abolished the requirement for its LIF's to be converted to an annuity.

From Amendment to Directive No. 5 – Life Income Fund Requirements, effective January 1, 2018:

Pursuant to section 40 of the Pension Benefits Act, 1997, the Newfoundland and Labrador Superintendent of Pensions has amended Directive No. 5 – Life Income Fund Requirements with effect from January 1, 2018.

The key changes to the Directive are as follows:

  • Effective January 1, 2018, there is no maximum age for the owner of a Life Income Fund (LIF). The requirement (previously under sections 15 and 16 of the Directive) for the owner of the LIF to purchase an annuity by the end of the calendar year in which they reach age 80 has been removed. Note that a LIF owner maintains the option to purchase a life annuity contract at any time, in accordance with paragraph 12(c) of the Directive.

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