- Unlocking for financial hardship is available for owners of a locked-in retirement savings arrangement. Unlocking for financial hardship cannot be done directly from a pension plan.
- Eligibility for financial hardship includes the following:
- Low income – expecting total income of less than $45,667 in the next 12 months;
- Threat of foreclosure due to inability to make monthly mortgage payment;
- Threat of eviction due to inability to make rent payment;
- Inability to make first month’s rent or security deposit when trying to rent accommodations;
- Inability to pay for medical costs; or
- Inability to pay costs related to equipment or treatment related to a disability.
- An application and any required documentation must be provided to the financial institutions that hold the locked-in retirement savings arrangement to facilitate unlocking.
- Your application must indicate the amount required to be unlocked. The maximum amount of unlocking is determined by the supporting information as is required to address the specific reason for financial hardship.
- When applying to unlock due to an expected period of low income, no supporting documentation is required. Low income is based on 66.66% of Yearly Maximum Pensionable Earnings (YMPE). For 2024 that amount is $45,667. The amount that can be unlocked is determined using a sliding scale based on your expected income. If your expected income for the next 12 months is $0, a withdrawal of up to 50% of the YMPE is permitted, or $34,250 in 2024. If your expected income for the next 12 months is 66.66% of the YMPE (i.e. $45,667) or higher, you have reached the maximum limit for unlocking and are therefore ineligible. The YMPE in 2024 is $68,500.
- Consent must also be obtained from your spouse or cohabiting partner to unlock a retirement savings arrangement.
- A summary of the information reported by financial institution on the instances of financial hardship unlocking can be found here.
FAQ – Financial Hardship Unlocking
Q. | Where do I submit my application? |
A. | Your application form must be submitted to the financial institution that holds your locked-in retirement savings arrangement. Do not send your application to the Superintendent of Pensions or to the Government of Newfoundland and Labrador. |
Q. | I understand there is a dollar limit for withdrawals for low income, but how much can be withdrawn for other circumstances? |
A. | Except for circumstances of low income, there is no maximum withdrawal amount for financial hardship unlocking. Provided that the application form has been completed and the documentation provided supports the amount requested, an individual can unlock up to 100% of the amount in their locked-in retirement savings arrangement. |
Q. | Is there an age limit (upper or lower) for financial hardship unlocking? |
A. | No, applications for financial hardship unlocking can be made by anyone who owns a locked-in retirement savings arrangement covered by the Newfoundland and Labrador Pension Benefits Act, 1997. |
Q. | How often can I make a withdrawal? |
A. | You are permitted to withdraw an amount under each circumstance only ONCE PER CALENDAR YEAR. The calendar year is based on the date the completed application is received by the financial institution. If you are applying under more than one circumstance, you must complete a separate application for each (and provide the required documentation). |
Q. | How long must I wait before I can apply again for a withdrawal under the same circumstance of financial hardship? |
A. | You may apply again as soon as the next calendar year begins (i.e. January 1st), provided you again qualify under a circumstance of financial hardship. It is not necessary to wait a full 12 months since the previous withdrawal due to financial hardship. |
Q. | My funds are still in the employer’s pension plan. Can I apply to access funds due to financial hardship? |
A. | No, you must have transferred your benefit out of the pension plan into a locked-in retirement savings arrangement in your name. If you are still working for the employer that established the pension plan, you cannot access those funds until you terminate membership. This usually means that you must terminate your employment with that company. If you no longer work for the employer who provided you with the pension plan then, if eligible, you must first transfer your funds from the pension plan into a locked-in retirement savings arrangement before you can apply for financial hardship unlocking. You can do this by contacting your former employer or the pension plan administrator. |
Q. | What is withholding tax? |
A. | A withholding tax is the amount that is required to be held back when tax-sheltered savings are paid as cash. The amount withheld by the financial institution is paid directly to the tax authority and tax slips are issued to you so that you receive a credit for this tax paid when completing your tax return for the year. For more information, contact the Canada Revenue Agency. |
Q. | How does withholding tax impact the amount of money that is unlocked? |
A. | The maximum amount of funds that can be unlocked is equal to the eligible amount applied for (based on the circumstance of financial hardship) plus the additional withholding tax that would be paid directly to the tax authority. For example, in the case of a Low Income circumstance of financial hardship in 2024, if you have zero expected income in the next 12 months and the withholding tax is 30%, then a maximum of $48,928.57 can be unlocked from the LIRA (of which $34,250 goes to you, and $14,678.57 in withholding taxes goes to the tax authority). |
Q. | Can funds that are unlocked be transferred into an RRSP or RRIF? |
A. | Yes, tax-sheltered transfers are permitted subject to any requirements under the Federal Income Tax Act. Note that the deemed withholding tax would still be included in the unlocked amount as the withholding tax would apply on a subsequent withdrawal from a RRSP/RRIF. |
Q. | Can I unlock additional amounts to cover other fees and charges? |
A. | The amendments to the legislation only provided two exceptions for additional amounts to be unlocked: 1) withholding taxes, and 2) for overdue mortgage payments, additional fees being charged by the lender can be withdrawn. Therefore transaction fees and other charges would not be included in the net amount available to be unlocked. |
Q. | When unlocking money for unpaid mortgage payments, do the “additional fees” include amounts to pay for overdue property taxes? |
A. | No, the additional fees would be administrative/legal expenses being charged by the lender. Overdue taxes, whether municipal, provincial, or federal are not contemplated under the financial hardship unlocking changes. However, you may be eligible to complete a separate application for a low-income withdrawal to help pay for this amount. |