iAtoday

On December 27, 2023, the government of Quebec published the draft regulation to amend the Regulation respecting supplemental pension plans (the “Draft Regulation”) on the rules for:

• Disbursement of life income funds (LIFs), and
• Variable benefits from defined contribution (DC) pension plans

This draft regulation is intended to allow higher payments of locked-in funds held in an LIF or a DC plan offering variable benefits.

If the draft regulation is adopted, certain changes will take effect on July 1, 2024, and others on January 1, 2025.

Highlights of the proposed changes for funds held in an LIF or a DC plan offering variable benefits:

• People aged 55 and older: Funds will not be subject to a maximum annual withdrawal limit. These people will be able to withdraw their funds in whole or in part, in a single payment or in several instalments.
• People under age 55: New calculation rules will apply to the maximum annual withdrawal limit. A prescribed rate based on the return on long-term Government of Canada bonds will now be used in the calculations, instead of a reference rate set by the regulation.
• Calculation of temporary income: The calculation for people under age 55 will be modified and people aged 55 and older will no longer be able to request it.
• New communication requirements for people aged 55 and older: To inform them of their new withdrawal rights and the new estimated life income that their funds could provide up to age 95.
• Funds from an LIF cannot be transferred directly to a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF) or a non-locked-in account in a voluntary retirement savings plan (VRSP).

By allowing the withdrawal of the maximum annual limit starting at age 55, Quebec residents will benefit from more flexibility in their retirement savings disbursement strategies. They will be able to delay the start of government benefits by withdrawing larger sums from their LIF or certain DC pension plans during the early years of their retirement. It will be important to inform them of the impact that early withdrawals or higher withdrawals could have on their financial health in retirement.

This draft regulation will not change the locking-in rules for locked-in retirement accounts (LIRAs).