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Locked-In Retirement Account (LIRA)


A Locked-In Retirement Account (LIRA) is a Canadian retirement savings plan designed to hold pension funds when you leave a job before retirement. It is usually set up by your former employer or by yourself using the funds from your pension plan. Funds in a LIRA are locked-in, meaning they cannot be withdrawn until retirement, and investment options may vary depending on the plan.


The phonetics of the keyword “Locked-In Retirement Account (LIRA)” would be: Lok-d In Reh-ti-r-muhnt Uh-kount (Lee-ruh)

Key Takeaways

  1. Securing Retirement Funds: A Locked-In Retirement Account (LIRA) is a Canadian retirement-oriented investment account. One of its main benefits is that it secures employer-contributed pension funds until your retirement, ensuring that these funds are preserved for your future needs.
  2. Restrictions on Withdrawals: As its name implies, funds in a LIRA are ‘locked-in’ and generally cannot be withdrawn until retirement age. This restrictive feature makes it different from other savings or investment accounts where you have more readily access to your money.
  3. Variation by Province: The laws governing LIRAs vary by province in Canada. Different provinces might have different rules around the age at which funds in a LIRA can be accessed, or under what hardship circumstances (like financial distress or severe illness) a person might be able to gain early access to these funds.


A Locked-In Retirement Account (LIRA) is crucial in the world of finance and retirement planning as it allows an individual to control and manage funds that were once part of a registered pension plan. LIRA provides the opportunity for those funds to grow tax-free until withdrawal. This kind of account is often set up when people leave their jobs before retirement and need a secure and tax-efficient place to transfer their pension funds. One significant advantage of a LIRA is that it protects your retirement assets from creditors, ensuring the funds are there when you need them. Therefore, understanding the concept and benefits of LIRA is important for financial planning and ensuring a steady retirement income in the future.


A Locked-In Retirement Account (LIRA) is essentially a tool that plays a crucial role in preserving the pension rights of an individual who is no longer with a company but has funds invested in the company pension plan. The main purpose of a LIRA is to hold pension funds for an employee until they retire, and it ensures that the funds remain locked in for the intended future use. The LIRA fulfills a crucial need as it safeguards a portion of an employee’s retirement savings, prohibiting the diversion of these funds for other short-term needs or whims. This helps maintain the sanctity of pension savings and ensures a steady source of income after retirement.The entire concept of the LIRA is based around ensuring the security of pension funds, hence it has strict withdrawal rules, with funds typically accessible only after the age of 55 and under specific life conditions defined by each jurisdiction’s pension legislation. LIRAs become particularly handy when transitioning jobs as they aid in maintaining the continuity of retirement savings. Also, one can choose from a diverse range of investment options within a LIRA, like mutual funds or stocks, which can help to further grow the retirement savings. Ultimately, LIRAs act as a critical retirement planning tool, complementing other retirement income sources such as the Canada Pension Plan, Old Age Security, or personal savings.


1. Mergers and Acquisitions: In a situation where a company is acquired or merged and the employees are given new pensions or savings plans, their existing savings might get transferred into a LIRA. For example, when Telus Communications acquired Mobilicity in 2013, employees from Mobilicity who have built pension funds could have had their funds transferred into a Locked-In Retirement Account, where it could only be accessed once retirement begins.2. Downsizing or Job Loss: When an individual is downsized or loses their job, the company pension plan, if any, may be converted into a LIRA. For example, if an employee from a company like General Motors Canada was let go or took an early retirement, the company would transfer his or her accumulated pension benefit to a LIRA on the employee’s behalf. The LIRA would lock in the funds until retirement.3. Retirement Planning: An individual, while planning for his retirement, might decide to move his wealth from conventional savings to a LIRA. For example, a successful entrepreneur in Vancouver sold his technology startup and decided to put a portion of the assets into a LIRA for his retirement. Such move would ensure a fixed income after retirement, even though the funds will be locked in until that time.

Frequently Asked Questions(FAQ)

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

A LIRA is a type of Canadian retirement account designed to hold pension funds that have been transferred from a former employer’s registered pension plan.

How does a LIRA work?

A LIRA is designed to hold pension funds until retirement. The funds in a LIRA are locked-in, which means they cannot be withdrawn until retirement or under specific conditions.

Who is eligible for a LIRA?

A LIRA is for individuals who have left their job before retirement and want to move their accumulated pension funds into a self-directed retirement savings plan.

Can money be withdrawn from a LIRA?

Generally, funds in a LIRA are not accessible until you reach a certain age, typically 55. However, exceptions might be made for financial hardship or shortened life expectancy.

How is a LIRA different from an RRSP?

Like an RRSP, a LIRA can hold various investments like stocks, bonds, and mutual funds. However, unlike an RRSP, you cannot make additional contributions to a LIRA or withdraw funds whenever you want.

What happens to a LIRA at retirement?

Once you reach retirement age, a LIRA must be converted into a life annuity or a Life Income Fund (LIF), which will provide you with a regular retirement income.

Are there any tax benefits to a LIRA?

Yes, similar to an RRSP, investments in a LIRA grow tax-free, and you don’t pay tax until you start receiving income from them in retirement.

What happens to a LIRA upon death?

In the event of death, the funds in a LIRA can be rolled over to a spouse or common-law partner’s RRSP, RRIF or their own LIRA, or can be used to purchase a life annuity for them. If there is no spouse or common-law partner, the value of the LIRA is paid to the deceased’s estate, subject to tax.

Related Finance Terms

  • Registered Retirement Savings Plan (RRSP)
  • Vesting period
  • Financial Institution
  • Pension Regulation
  • Retirement Income Fund (RIF)

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