does anyone know how they can cash one of these BEFORE retirement? or is it possible at all? i believe mine is a locked in RRSP GIC. thanks for any info
Rrsp Gic
- Thread starter supersonicboy
- Start date
polisci said:
Is there no way to cash in a locked-in rrsp???
what if you moved out of the country?
.. and remember, if it is not locked in and you cash it in now, you can tell the bank to only withhold 10% for the CCRA... then you just pay the rest of the tax when you file your income tax (if you file it)
If it is truly a locked in RRSP this would be because the funds were vested (which means that employer & employee contributions are locked in and cannot be cashed out). The funds can't be taken out until retirement age (55 is the minimum I believe) and then they must be used to buy a pension (an annuity, a RIF). Unfortunately they can't be collapsed and taken as cash.
You most likely can cash it in but there will be a penalty.
They won't simply give you a proportional pro-rated interest rate based on the time.
Depending on how early it is, you may end up making a bit less interest or none at all.
Just call and find out the policy.
They won't simply give you a proportional pro-rated interest rate based on the time.
Depending on how early it is, you may end up making a bit less interest or none at all.
Just call and find out the policy.
B
belgiumcdn
you can
You can cash in a locked in rrsp but it isn't easy, you will have to apply to the goverment and show extreme hardship.
good luck
You can cash in a locked in rrsp but it isn't easy, you will have to apply to the goverment and show extreme hardship.
good luck
GICs can trade "over-the-counter" like a bond but you may have to sell at a discount to the price you bought unless interest rates were much higher at the time of purchase. Shop around if you can to get the best selling price, then move your rrsp to that institution before selling. some may quote you a better price in exchange for your business.supersonicboy said:
I just set up an ING GIC RSP.
The interest rate for a 1 year term is 3.75%.
If you cash it early they will pay you interest pro-rated at 1.5% per year.
The interest rate for a 1 year term is 3.75%.
If you cash it early they will pay you interest pro-rated at 1.5% per year.
confusion plus
There is a bit of confusion in the advice people are giving here, and that is becasue they seem to be talking about thre separate and distinct things
1) GIC's
2) RSP's
3) locked in RSP's.
GIC's can be held by the investor directly or they can be held by the investors RSP. Some GIC's are cashable early, and others are not. You need to check with the financial institution where you purchased them about the terms for the particular GIC which you hold. If they are not cashable, they can usually be sold on the bond market at either a premium or discount and the going market rate will determine which would be the case.
However if the GIC is held in an RSP then cashing it is not enough, you still have to then withdraw the funds (or deregister them) from the RSP. This can only be done from a regular RSP not a locked in RSP. Also the previous poster was only partly right about the withholding tax which the governnment keeps. 10% applies only if the withdrawl is $5,000 or less. More than $5,000 and the withholding tax jumps to 20% and up on a sliding scale depending on the amount of the withdrawal.
So in summary, the GIC's can most likely be either cashed in or sold, but the subsequent funds can only be withdrawn from the RSP if it is a non locked-in plan.
There is a bit of confusion in the advice people are giving here, and that is becasue they seem to be talking about thre separate and distinct things
1) GIC's
2) RSP's
3) locked in RSP's.
GIC's can be held by the investor directly or they can be held by the investors RSP. Some GIC's are cashable early, and others are not. You need to check with the financial institution where you purchased them about the terms for the particular GIC which you hold. If they are not cashable, they can usually be sold on the bond market at either a premium or discount and the going market rate will determine which would be the case.
However if the GIC is held in an RSP then cashing it is not enough, you still have to then withdraw the funds (or deregister them) from the RSP. This can only be done from a regular RSP not a locked in RSP. Also the previous poster was only partly right about the withholding tax which the governnment keeps. 10% applies only if the withdrawl is $5,000 or less. More than $5,000 and the withholding tax jumps to 20% and up on a sliding scale depending on the amount of the withdrawal.
So in summary, the GIC's can most likely be either cashed in or sold, but the subsequent funds can only be withdrawn from the RSP if it is a non locked-in plan.
What is a Locked-In RRSP?
If you leave a workplace pension plan before you reach retirement age and the terms of your pension allow it, you may be able to transfer your accumulated pension benefits into a locked-in account. The funds can then be invested in the same way as you would invest an RRSP. But there are a number of other restrictions. Because funds in a locked-in RRSP come from a workplace pension plan, locked-in accounts are regulated by pension legislation, which determines the terms and conditions of these plans. To minimize confusion surrounding a regular RRSP and a locked-in account, locked-in RRSPs are now generally referred to as Locked-In Retirement Accounts (LIRAs). The pension legislation requires the funds in a locked-in RRSP be used to provide a lifetime income for the holder. That means you can't make a lump sum withdrawal from a locked-in plan, nor can you cash it in at any time.
http://www.aimtrimark.com/AIM/Retail/InvestorED/RSP_Centre/rrsp_faq_retire.cfm#lock
If you leave a workplace pension plan before you reach retirement age and the terms of your pension allow it, you may be able to transfer your accumulated pension benefits into a locked-in account. The funds can then be invested in the same way as you would invest an RRSP. But there are a number of other restrictions. Because funds in a locked-in RRSP come from a workplace pension plan, locked-in accounts are regulated by pension legislation, which determines the terms and conditions of these plans. To minimize confusion surrounding a regular RRSP and a locked-in account, locked-in RRSPs are now generally referred to as Locked-In Retirement Accounts (LIRAs). The pension legislation requires the funds in a locked-in RRSP be used to provide a lifetime income for the holder. That means you can't make a lump sum withdrawal from a locked-in plan, nor can you cash it in at any time.
http://www.aimtrimark.com/AIM/Retail/InvestorED/RSP_Centre/rrsp_faq_retire.cfm#lock
you can liquidate a locked in rsp account if you suffer from a physical or mental illness that shortens your life expentancy.
Get a letter signed by a doctor and your financial institution will transfer the balance of your "locked in RSP" to a regular RSP. You can make withdrawals of any amount from a reqular RSP at any time. The only concern is whatever comes out of an RSP has to be claimed as inome in that tax year. However if you have your funds invested in a GIC inside the registered account you may not be able to physically liquidate it until it matures. It depends on the institution as far as if they will release the funds prior to maturity or not.
Hope this helps.
I used to work at a chartered bank and we "unlocked" these types of accounts all the time as long as we had a letter from a doctor.
Get a letter signed by a doctor and your financial institution will transfer the balance of your "locked in RSP" to a regular RSP. You can make withdrawals of any amount from a reqular RSP at any time. The only concern is whatever comes out of an RSP has to be claimed as inome in that tax year. However if you have your funds invested in a GIC inside the registered account you may not be able to physically liquidate it until it matures. It depends on the institution as far as if they will release the funds prior to maturity or not.
Hope this helps.
I used to work at a chartered bank and we "unlocked" these types of accounts all the time as long as we had a letter from a doctor.
Shortened life expectancy pay out
The LIF owner must complete an application to a Financial Institution to Withdraw Money From an Ontario LIRA, LIF or LRIF. The Physician's Statement section of the form must be completed by a physician or a separate written certificate must be provided, signed by the physician. It must state that the physician is licensed to practice medicine in Canada and that the LIF owner has an illness or physical disability that is likely to shorten his/her life expectancy to less than two years. If a spouse exists, a spousal waiver is also required.
Financial hardship pay out
The LIF owner must apply directly to the Financial Services Commission of Ontario (FSCO) using the appropriate one of the two following forms: - Application to the Superintendent Of Financial Services For Consent to Withdraw Money from an Ontario LIRA, LIF, or LRIF Based on Financial Hardship - Application to the Superintendent Of Financial Services For Consent to Withdraw Money from an Ontario LIRA, LIF, or LRIF Based on Low Income Financial Hardship. To qualify for this withdrawal, the LIF owner’s expected total income from all sources before taxes, for the twelve-month period following the date the application is signed, must be less than two-thirds of the Year’s Maximum Pensionable Earnings (YMPE) for the year (two-thirds of $42100 as of 2006). In addition, one who has previously redeemed locked-in funds due to low income is not eligible for further withdrawals of this nature for a twelve-month period following the date the last successful application was signed. A fee of 2% of the requested withdrawal amount is imposed by the FSCO for each separate successful application, with a minimum fee of $200 and a maximum of $600.
Marriage / relationship breakdown transfer
Up to 50% of the fund value may be transferred to a locked-in account for the former spouse or same-sex partner. A court order or domestic contract along with the completed Form T2220 - Transfer from an RRSP or a RRIF to another RRSP or RRIF on Breakdown of Marriage or Common-law Partnership is required to support the transfer.
Survivor's benefit transfer
Fund value may be transferred to the surviving spouse or same-sex partner - locking-in not required. If there is no surviving spouse or same-sex partner, funds are paid out in a lump sum to the designated beneficiary or estate. A spouse living separate and apart from the LIF owner at date of death is not entitled to receive the value of the property in the LIF.
Small balance pay out
For a LIF owner age 55 or older, whose total value of all locked-in monies regulated by the Ontario Pension Benefits Act, is less than 40% of the YMPE in effect for the year of application (presently $42100 x .4 = $16840), the funds can be paid out or transferred to a RRIF or RRSP. The LIF owner must complete an application to a Financial Institution to Withdraw Money From a LIRA, LIF or LRIF. The consent section must also be completed if the LIF owner attests that his/her spouse or same-sex partner consents to the withdrawal of funds.
The LIF owner must complete an application to a Financial Institution to Withdraw Money From an Ontario LIRA, LIF or LRIF. The Physician's Statement section of the form must be completed by a physician or a separate written certificate must be provided, signed by the physician. It must state that the physician is licensed to practice medicine in Canada and that the LIF owner has an illness or physical disability that is likely to shorten his/her life expectancy to less than two years. If a spouse exists, a spousal waiver is also required.
Financial hardship pay out
The LIF owner must apply directly to the Financial Services Commission of Ontario (FSCO) using the appropriate one of the two following forms: - Application to the Superintendent Of Financial Services For Consent to Withdraw Money from an Ontario LIRA, LIF, or LRIF Based on Financial Hardship - Application to the Superintendent Of Financial Services For Consent to Withdraw Money from an Ontario LIRA, LIF, or LRIF Based on Low Income Financial Hardship. To qualify for this withdrawal, the LIF owner’s expected total income from all sources before taxes, for the twelve-month period following the date the application is signed, must be less than two-thirds of the Year’s Maximum Pensionable Earnings (YMPE) for the year (two-thirds of $42100 as of 2006). In addition, one who has previously redeemed locked-in funds due to low income is not eligible for further withdrawals of this nature for a twelve-month period following the date the last successful application was signed. A fee of 2% of the requested withdrawal amount is imposed by the FSCO for each separate successful application, with a minimum fee of $200 and a maximum of $600.
Marriage / relationship breakdown transfer
Up to 50% of the fund value may be transferred to a locked-in account for the former spouse or same-sex partner. A court order or domestic contract along with the completed Form T2220 - Transfer from an RRSP or a RRIF to another RRSP or RRIF on Breakdown of Marriage or Common-law Partnership is required to support the transfer.
Survivor's benefit transfer
Fund value may be transferred to the surviving spouse or same-sex partner - locking-in not required. If there is no surviving spouse or same-sex partner, funds are paid out in a lump sum to the designated beneficiary or estate. A spouse living separate and apart from the LIF owner at date of death is not entitled to receive the value of the property in the LIF.
Small balance pay out
For a LIF owner age 55 or older, whose total value of all locked-in monies regulated by the Ontario Pension Benefits Act, is less than 40% of the YMPE in effect for the year of application (presently $42100 x .4 = $16840), the funds can be paid out or transferred to a RRIF or RRSP. The LIF owner must complete an application to a Financial Institution to Withdraw Money From a LIRA, LIF or LRIF. The consent section must also be completed if the LIF owner attests that his/her spouse or same-sex partner consents to the withdrawal of funds.
I seen an ad in Employment News a few weeks ago. It said "Can't cash in your lock-in RRSP? Call us, we get your money or you don't pay" So that lead me to believe that it is possible. In a discussion with an accountant friend of mine he said it all depends on the bank or trust co where you have the funds locked in. They can opt to give you the funds if they want to but you will pay a hefty fee. After taxes he said you would be lucky to get half. I called up my HR dept and asked them (I should have never done that, but that's another story) and they said as far they knew you cannot cash it in. So there are conflicting stories as to if you can or cannot I found out. Most people I talked to though seem to believe what my accountant friend told me. If the bank wants to they can give you the money if they want to... but will charge you an arm and a leg.
