LIRAs Unlocked: Turning Locked-In Funds into Long-Term Growth

Key takeaways:

Gen X and Millennials are reshaping career norms and changing jobs more frequently. Many will transfer their company-sponsored retirement savings into Locked-In Retirement Accounts (LIRAs) when they change or lose employment.

  • LIRAs offer tax-deferred growth, allowing investments to compound without immediate tax implications. They provide flexible investment options, including private alternative investments.
  • Pension funds in a LIRA must be fully withdrawn by December 31 of the year you turn 71, typically by converting to a Life Income Fund (LIF) or an annuity.

Retirement isn’t a one-size-fits-all concept for Gen X and Millennials, who are redefining career norms and financial obligations through more frequent job changes. When transitioning out of a role, many Canadian workers opt to transfer their company-sponsored pension funds into a Locked-In Retirement Account (LIRA).

A LIRA is a type of retirement savings account in Canada designed to hold the pension funds you’ve earned through your employer after you leave a job. If you’re one of the millions of Canadians with a registered pension plan and want to create tax efficiencies in 2025/2026, you may benefit from a LIRA’s tax-deferred growth and flexible investment options.

Four smart moves to make after a job change

  1. Evaluate your retirement accounts. Review your existing retirement savings and ensure they still align with your long-term goals and current financial situation. A job change is a good time to revisit your overall strategy and adjust if needed.
  2. Understand your options. If you’re leaving a job with a company-sponsored pension plan, you typically have a few options for those funds, depending on the plan rules. Options may include leaving them in the former employer’s plan, transferring them to a new employer-sponsored plan, or transferring them to a LIRA.
  3. Resume retirement contributions. If your new employer offers a retirement savings plan, aim to start contributing as soon as you become eligible. Consistent contributions, even small ones, can have a big impact on your long-term savings.
  4. Invest through your LIRA to help maximize growth. If you’ve transferred company-sponsored pension funds into a LIRA, don’t let them sit idle. Use the account as an investment vehicle to hold a range of assets—including stocks, bonds, mutual funds, and private alternatives like real estate investment trusts (REITs) or renewable infrastructure funds. By actively investing, you can help your retirement savings grow over time.

LIRA vs. RRSP: Key differences

Both LIRAs and RRSPs (Registered Retirement Savings Plans) offer tax-deferred growth and are intended for retirement savings. However, LIRAs are specifically designed to hold company-sponsored pension funds and have restrictions on withdrawals until retirement age.

Funds in a LIRA are “locked in,” meaning you won’t be able to withdraw them until you retire. By contrast, RRSPs offer more flexibility for withdrawals, although funds in your RRSP are taxed at the time of withdrawal.

Withdrawals from a LIRA: Rules and requirements

Once you transfer your pension funds into a LIRA, they can’t be withdrawn until you are at least 55 years old and retired, subject to certain limitations. You must fully withdraw pension funds from your LIRA by December 31 of the year you turn 71. To withdraw funds, you have the option to convert your LIRA to a Life Income Fund (LIF), a life annuity, or a combination of the two. Your options depend on the provincial or federal jurisdiction that regulates your pension funds.

Here are the three different scenarios to consider:

1. Converting your LIRA to a LIF

A LIF works like a Registered Retirement Income Fund (RRIF), where your investments remain tax-sheltered until you withdraw funds, offering flexible investment options and control over the withdrawal amount. You must withdraw a certain percentage of your LIF each year based on your age.

Example: Calculation for a minimum annual withdrawal from a LIF for a 75-year-old

  • Age: 75
  • LIF value: $500,000
  • Minimum withdrawal rate: 8.2655%
  • Minimum required withdrawal: $41,327.50
  • LIF value after withdrawal: $458,672.50

In the following year:

  • Age: 76
  • Updated LIF value (assuming no investment growth or depletion for simplicity): $458,672.50
  • New minimum withdrawal rate: 8.7258%
  • Minimum required withdrawal: $40,022.84

Withdrawal rates sourced from the Government of Canada.

2. Buying a life annuity

Your second option is to convert your LIRA into a life annuity, a financial product typically purchased during retirement. Insurance providers, banks, and other financial institutions sell life annuities that provide guaranteed income. The amount of the regular income you receive depends on multiple factors, including:

  • Your gender
  • Your age and health status when you buy the annuity
  • The amount of money you invest in the annuity
  • The type of annuity you buy
  • Whether you have the option to continue payments to a beneficiary or your estate after you die
  • The length of time you want to receive payments
  • The interest rate when you buy the annuity
  • The annuity provider

3. Combination of LIF and life annuity

You can also split your LIRA funds between a LIF and a life annuity to balance flexibility and guaranteed income.

Key changes to LIRA/LIF rules in 2025 (Quebec and Nova Scotia residents only)

Quebec residents only: key changes to LIF rules in 2025

On January 1, 2025, the Quebec government made several changes to LIF regulations, allowing greater flexibility for Quebec LIF account holders. Most notably, individuals aged 55 and over no longer have a maximum withdrawal limit, so these account holders can now withdraw any amount above the mandatory minimum, at any time.

Quebec LIF account holders under 55 are still subject to both minimum and maximum withdrawal limits, but the province has updated the parameters around which the maximum is calculated.

Read more about this change and other Quebec LIF regulation changes that came into effect January 1, 2025.

Nova Scotia residents only: key changes to LIRA/LIF rules in 2025

On April 1, 2025, Nova Scotia instated several LIRA/LIF regulations that significantly increase the flexibility of locked‑in retirement funds for account holders in the province. One notable change is the new ability for individuals aged 55 or over to unlock up to 50% of their pension assets when transferring their LIRA to a LIF. With this provision, Nova Scotia is aligning with other provinces like Ontario, Alberta, and Manitoba that offer this option under certain conditions.

Read more about this change and other Nova Scotia LIRA/LIF regulation changes that came into effect April 1, 2025.

Increasing LIRA growth with Canadian private alternative investments

Although LIRAs can provide security and growth potential, how you allocate your pension funds within them can significantly influence their long-term performance, especially in volatile markets.

When planning your LIRA investments for long-term financial security, it might be worthwhile to explore beyond conventional options and consider private alternatives, like private REITs and renewable infrastructure funds. These investments can provide numerous advantages, including diversification and tax-deferred growth—essential for working professionals in Canada looking to build their retirement savings. They also have the potential to generate stable, income-producing returns, which can be particularly beneficial when you’re retired and require dependable cash flow.

Skyline offers four private alternative investment products, which are all eligible for registered accounts, including LIRAs. Each fund allows you to invest in a particular class of Canadian essential assets: multi-residential housing, industrial warehousing, “everyday essential” retail, and renewable infrastructure.

Skyline’s investments have a proven track record of resilience amid market uncertainty, providing historical annualized returns of 8-14%.1

Effective financial planning for retirement involves understanding your LIRA investment options and ensuring that your wealth management strategy is well-rounded from your working years to your golden years.

Contact a Skyline Wealth Management professional to explore LIRA or LIF investment strategies with Skyline’s private alternative investments. Our experts can assist in potentially growing your retirement income and achieving long-term financial security.

Grow your retirement income with tangible Canadian assets.
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1 The performance quoted represents since inception. Full annualized return performance is as follows: Skyline Apartment REIT, 7.48% 1-year, 8.12% 3-year, 11.38% 5-year, 14.18% 10-year, 13.40% inception (June 1, 2006); Skyline Industrial REIT, 4.60% 1-year, 5.20% 3-year, 16.23% 5-year, 15.79% 10-year, 14.03% inception (January 10, 2012); Skyline Retail REIT, 8.26% 1-year, 7.76% 3-year, 10.18% 5-year, 12.34% 10-year, 11.68% inception (October 8, 2013); Skyline Clean Energy Fund, 9.01% 1-year, 9.16% 3-year, 9.26% 5-year, and 8.94% inception (May 3, 2018). Performance is for Class A of the funds and does not guarantee future results for Class F. All Skyline REIT’s figures as at September 30, 2025. Skyline Clean Energy Fund’s figures as at October 1, 2025.

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