Amendments to the Pension Benefits Act, 1997 to allow for the unlocking of retirement savings were introduced for second reading in the House of Assembly today.
The amendments, if passed, would provide individuals with the ability to seek access to a portion of their locked-in retirement savings if they can demonstrate financial hardship.
Presently, there are three types of approved retirement savings arrangements approved by the Superintendent: a locked-in retirement account (LIRA); a life income fund (LIF); or a locked-in retirement income fund (LRIF). Unlocking of retirement savings would not apply to any individual who is an active, contributing member to a pension plan in the province or in receipt of income directly from a pension plan.
The proposed amendments define financial hardship as the following:
- 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.
In all of these cases, documentation would be necessary to show the actual amount that is required to be unlocked from the retirement savings arrangement. Given these retirement savings arrangements are designed specifically to hold locked-in savings for individuals and their surviving spouses or partners, consent would also have to be obtained from the spouse or co-habiting partner to unlock a retirement savings arrangement.
The Provincial Government has also taken into consideration low-income individuals in the province. Unlocking for reasons of low income would be based on a formula which defines a low-income threshold of 66.66 per cent of Yearly Maximum Pensionable Earnings – which is $41,063 for 2021 – and is consistent with other jurisdictions including Nova Scotia, Alberta and British Columbia.
Additionally, while not related to financial hardship, the amendments would further allow for the unlocking of 100 per cent of a locked-in retirement savings arrangement, in cases where the owner of an arrangement has been a non-resident of Canada for at least two consecutive calendar years.
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“Determining what constitutes a current financial hardship for someone is a complex issue, and we have to balance it against ensuring fund holders have sufficient retirement income for their future. With these proposed amendments, we feel we have achieved this balance, but we strongly recommend seeking financial advice before unlocking any retirement savings.”
Honourable Sarah Stoodley
Minister of Digital Government and Service NL
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An Act to Amend the Pension Benefits Act, 1997
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Krista Dalton
Digital Government and Service NL
709-729-4748, 685-6492
kristadalton@gov.nl.ca