What is a Life Income Fund (LIF) in Canada?

A Life Income Fund (LIF) is a registered retirement income vehicle that holds locked-in pension funds — money originally accumulated in a registered pension plan (RPP) through employment. When you leave an employer with a defined benefit or defined contribution pension, the commuted value may transfer to a Locked-In Retirement Account (LIRA). Eventually the LIRA is converted to a LIF to provide retirement income. Unlike a RRIF, a LIF has both a minimum withdrawal (same as RRIF) and an annual maximum withdrawal, restricting how quickly you can spend the funds.

How does a LIF differ from a RRIF?

Both LIF and RRIF hold investments and require mandatory minimum withdrawals. The key difference is that a LIF also has a maximum annual withdrawal limit — you cannot take out more than the prescribed maximum in any year. This maximum is intended to ensure the fund lasts as long as possible. A RRIF has no maximum. Additionally, LIF funds originate from locked-in pension assets, while RRIF funds come from RRSPs. LIF rules vary significantly by province — each province sets its own maximum withdrawal formula.

When must I convert my LIRA to a LIF?

The deadline to convert a LIRA to a LIF varies by province — most provinces require conversion by the end of the year you turn 71, aligning with RRSP/RRIF rules. Some provinces allow conversion later. In all cases, you cannot make contributions to a LIF (just like a RRIF), and you must begin withdrawals in the calendar year following conversion. Check the specific rules for your province as they differ in maximum formulas, unlocking age provisions, and spousal consent requirements.

Can I unlock a LIF and get access to the full balance?

In most provinces, some LIF unlocking is permitted under specific circumstances. Common unlocking provisions include small balance unlocking (if the total LIF balance is below a threshold — typically 40% of the Year''s Maximum Pensionable Earnings, which was about $28,200 in 2026), financial hardship withdrawal (province-specific criteria), shortened life expectancy, non-residency (residing outside Canada for 2+ years), and one-time 50% unlocking option (available in some provinces like Alberta, BC, and Ontario). Unlocked funds transfer to an RRSP or RRIF and are no longer restricted by LIF maximums.

What happens to a LIF when I die?

If your spouse or common-law partner is named the beneficiary of your LIF (and they consent was required for the plan setup in most provinces), the LIF transfers directly to them as a survivor benefit. In provinces that require spousal consent for LIF setup, the surviving spouse can roll the LIF into their own LIF or locked-in plan on a tax-deferred basis. If no spouse exists or the spouse predeceases, the LIF balance goes to the named beneficiary or estate, taxed as income in the year of death — same as RRIF rules for non-spousal beneficiaries.

Does a LIF have a pension income credit?

Yes. LIF withdrawals qualify as pension income for the $2,000 federal pension income credit if you are 65 or older — same as RRIF income. LIF income is also eligible for pension income splitting (up to 50%) with a spouse at age 65+. Both the pension income credit and splitting can apply to LIF income, reducing combined household tax in retirement.

Life Income Fund (LIF) Guide Canada 2026

Short Answer

A Life Income Fund holds locked-in pension money from a former employer’s pension plan. It works like a RRIF (mandatory minimums, tax-deferred growth, taxable withdrawals) but adds a maximum withdrawal cap to prevent funds from being depleted too quickly. LIF rules — especially the maximum formula — vary significantly by province. For the higher-level retirement planning context, start with retirement income strategies in Canada.

LIF vs RRIF vs LIRA

If you want the operational rules after conversion, see LIF withdrawal rules in Canada.

Feature	LIRA	LIF	RRIF
Source	Pension plan (employer)	Converted from LIRA	Converted from RRSP
Contributions allowed	No	No	No
Minimum withdrawal	No	Yes (same as RRIF)	Yes
Maximum withdrawal	No	Yes	No
Conversion required	At 71 (most provinces)	N/A (is the income phase)	At 71
Can unlock	Limited	Limited	N/A
Pension income credit	No	Yes (age 65+)	Yes (age 65+)

LIF Maximum Withdrawal Calculation

The LIF maximum is designed to ensure funds last to a projected age (usually 90). Federal LIFs (and most provinces — Ontario, BC, Alberta, New Brunswick, Nova Scotia, Newfoundland and Labrador, PEI) use the same OSFI-published formula: a variable rate based on the November Bank of Canada 10-year+ government bond yield for the first 15 years of retirement, plus a fixed 6.00% assumption for the years remaining to age 90. Saskatchewan (PRIF), Manitoba, and Quebec use different rules — see the summary table below.

Federal Maximum Withdrawal Percentages (2026)

Age on Dec 31 of prior year	Federal Maximum % (2026)
55	5.2096%
56	5.2637%
57	5.3224%
58	5.3861%
59	5.4552%
60	5.5304%
61	5.6125%
62	5.7022%
63	5.8005%
64	5.9084%
65	6.0272%
66	6.1586%
67	6.3042%
68	6.4662%
69	6.6474%
70	6.8508%
71	7.0804%
72	7.3413%
73	7.6397%
74	7.9836%
75	8.3837%
76	8.8423%
77	9.3729%
78	9.9935%
79	10.7287%
80	11.6128%
81	12.6955%
82	14.0512%
83	15.7970%
84	18.1280%
85	21.3952%
86	26.3008%
87	34.4831%
88	50.8575%
89 or older	100.0000%

Source: Office of the Superintendent of Financial Institutions (OSFI) – Life Income Funds, Restricted Life Income Funds, and Variable Benefits Accounts, verified September 2, 2026. View source. Nov 2025 Bank of Canada Series V122487 rate (10yr+ GoC bonds): 3.49%, used for the first 15 years of retirement; fixed 6.00% assumption used for the years remaining to age 90. Applies to: Federally-regulated (PBSA) LIFs/RLIFs/variable benefit accounts, incl. territories. Provincially-regulated LIFs use their OWN table – see lif_max_withdrawal_provincial below (standard/manitoba_nova_scotia/quebec).

The LIF maximum increases substantially with age, reaching 100% of the balance at age 89.

Provincial LIF Rules Summary

Province	Maximum formula	One-time 50% unlock?	Small balance unlock threshold
Ontario	Standard provincial table (higher than federal)	✅ Yes (once, by Nov 30)	40% of YMPE (~$28,200 in 2026)
British Columbia	Standard provincial table (same as Ontario)	✅ Yes (once, at 55+)	20% of YMPE (~$14,100 in 2026)
Alberta	Standard provincial table (same as Ontario)	✅ Yes (at 50+)	20% of YMPE
New Brunswick	Standard provincial table (same as Ontario)	❌ No	40% of YMPE
Newfoundland and Labrador	Standard provincial table (same as Ontario)	❌ No	40% of YMPE
Saskatchewan	Standard provincial table for legacy LIFs; new accounts are PRIFs with no maximum	❌ No	40% of YMPE
Manitoba	Own lower table; plateaus at a flat 20% from age 88	❌ No	40% of YMPE
Nova Scotia	Same table as Manitoba	❌ No	40% of YMPE
Quebec	Own table, but no enforced maximum from age 55 onward	❌ No	40% of YMPE
Federal (PBSA)	Lowest of the four tables	❌ No	20% of YMPE

The exact percentages for each formula are in the LIF withdrawal rules guide. Unlock thresholds change — verify current provisions with your financial institution and provincial pension regulator.

LIF Unlocking Options

Unlocking type	Criteria	Result
Small balance	Total LIF below threshold (varies by province)	Full balance transfers to RRSP/RRIF — unlocked
50% one-time transfer (ON, BC, AB, others)	One-time election at specified age	Up to 50% moves to RRSP/RRIF — no longer restricted
Financial hardship	Province-specific low income or medical criteria	Partial withdrawal allowed
Non-residency	Resided outside Canada for 2+ years	Full balance may transfer
Shortened life expectancy	Medical certification of shortened life	Full unlocking allowed

Once unlocked to a RRSP or RRIF, the funds are no longer subject to LIF maximum restrictions and can be accessed flexibly or transferred under standard RRSP/RRIF rules.

If you are still in the pre-conversion stage, review LIRA withdrawal rules Canada.

Tax on LIF Withdrawals

Withdrawal amount	Withholding applied	Final tax treatment
Minimum (same as RRIF factor)	No withholding	Fully taxable as income
Above minimum, up to maximum	10–30% withholding based on amount	Fully taxable as income
Unlocked lump-sum transfer to RRSP	No tax (in-plan transfer)	Tax deferred into RRSP

Death and Survivor Benefits

Beneficiary	Treatment
Spouse (where spousal consent was given at setup)	Survivor benefit — LIF transfers to spouse’s LIF/locked-in plan, no immediate tax
Financially dependent child/grandchild	Rules vary by province — some allow tax-deferred rollout
Adult children or estate	Full balance taxed as income in deceased’s final return

In most provinces, your legal spouse must provide written consent when you establish a LIF — this is a pension law requirement, not just a CRA rule. Failure to obtain consent may render the LIF designation invalid.

Bottom Line

A LIF is the income-phase vehicle for Canadians with locked-in pension assets. It works like a RRIF but with a hard cap on annual withdrawals — making detailed income planning more important. Explore one-time unlocking options (available in ON, BC, AB) if you want more flexibility, and check your province’s specific maximum formula at conversion time. If you are choosing the investments to hold once the LIF is active, see best ETFs for retirement income in Canada.

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