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How to Access Locked in money within an RRSP

    Money that is in a locked in RRSP or other retirement investment usually comes from employer contributions to the employee pension plan.  When the employee quits or is dismissed from the employer, the money that has been contributed to the pension plan transfers to a locked in RRSP or similar plan. The reasoning behind this transfer to a locked rather than to a normal RRSP is that the funds will be there upon retirement.  The governments created this pension legislation to protect the employee’s investments for when they retire. 

    In doing so, the locked-in funds are typically paid out on a regular basis after a certain age similar to a pension; this age and frequency of withdrawal, as well as the maximum and minimum withdrawal, change based on which province the individual lives in.

    There are different ways to access the locked-in money and the amount that can be accessed varies by province.  With strict regulations and rules pertaining to locked-in money, governments allow only limited access to the money, prior to retirement.

    1. At any age, the money can be accessed if the individual no longer resides in Canada for two calendar years and is no longer employed by the contributing employer.

    2. The money can also be accessed if the individual is diagnosed with a shorter than expected life expectancy.  This can be for either a physical or mental disability and must be certified by a physician.
    The amounts that can be withdrawn with the non-residency or limited life expectancy are 100%.  

    3. The final reason the money can be unlocked early is if the individual comes upon financial hardship.

    There are limits to how much money that is available to withdrawal when the individual qualifies for financial hardship.  The individual is allowed to withdraw money on a sliding scale based on the amount of yearly maximum pensionable earnings and contributions to the Canadian Pension Plan (CPP).

    This amount can be up to 50% of the yearly maximum pensionable earnings. Depending on province of residency, a one-time withdrawal of up to 50% of the locked in money is allowed. This can be done the year the individual turns 55 or any year subsequent.

    This is a one-time withdrawal and, if the individual withdraws an amount less than 50%, they may not make another withdrawal of the remainder.


    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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