Ontario Consults on New LIF, Locked-in RRIF and LIRA Unlocking Rules

On August 18, 2026, the province of Ontario proposed significant changes to Ontario Regulation 909 made under the Pension Benefits Act governing the unlocking of funds held in Life Income Funds (LIF), locked-in Registered Retirement Income Funds (RRIF) and Locked-In Retirement Accounts (LIRA). The proposal is most relevant to financial institutions that administer these accounts.

If adopted, the amendments would permit full unlocking of LIFs and locked-in RRIFs once the account owner reaches the earliest pension commencement date under the originating pension plan. They would also allow LIRA owners whose aggregate locked-in balances fall below the applicable small-benefit threshold to unlock their LIRA balances at any age. The proposal is not yet in force, and no commencement date has been specified.

The proposed rules were announced in the 2026 Ontario budget, which was described in our March 27, 2026 FTR Now, Highlights of the 2026 Ontario Budget.

How Ontario’s Current Unlocking Rules Work

Under existing Ontario pension legislation, pension funds are generally locked-in and can only be accessed at retirement, unless the member meets the criteria for one of several unlocking options. A former member of a registered pension plan may also transfer locked-in funds to a prescribed retirement savings arrangement held with a financial institution, such as a LIF, locked-in RRIF or LIRA, or to another pension plan, if the administrator of the other plan will accept the transfer, or use the funds to purchase a life annuity.

Existing regulations allow account balances in LIFs, locked-in RRIFs and LIRAs to be unlocked where the account owner meets the criteria for an unlocking option, including where the account holder is at least 55 years old and the total value of all their locked-in account balances is under the applicable small benefit threshold, or where the account owner qualifies for unlocking due to non-residency, shortened life expectancy or one of several financial hardship criteria.

Owners of locked-in accounts wishing to unlock their balances must demonstrate to the financial institution that holds the account that they meet the applicable criteria.

A locked-in-account owner with a qualifying spouse must obtain spousal consent to have the account unlocked.

What the Draft Regulation Would Change

Full Unlocking for LIFs and Locked-in RRIFs

For LIFs and locked-in RRIFs, the proposal would replace the various existing unlocking options with full unlocking for all account owners. The unlocking application would have to be submitted no earlier than the earliest date on which the owner is entitled to receive a pension under any pension plan from which money was transferred into the account, whether directly or indirectly.

Unlocking for Small Balances in LIRAs at Any Age

For LIRAs, account owners whose locked-in account balances are under the small benefit threshold, namely 40 percent of the Year’s Maximum Pensionable Earnings (YMPE) set under the Canada Pension Plan in the year of the withdrawal, would be able to access small-benefit unlocking at any age. As a result, LIRA owners would no longer be required to wait until reaching age 55 to unlock small balances. The YMPE for 2026 is $74,600, meaning a LIRA with a balance under $29,840 would be eligible for full unlocking in 2026 (provided the owner has no other locked-in balances that exceed the small-benefit threshold in aggregate).

Other existing unlocking options (i.e., non-residency, shortened life expectancy and financial hardship) would remain in place for LIRAs.

Withdrawals, Transfers and Spousal Consent

Qualifying owners of eligible LIFs, locked-in RRIFs and LIRAs will be able to apply to the financial institution that holds the account to unlock the funds and withdraw all or part of the account balance or transfer it to a Registered Retirement Savings Plan or RRIF account.

If the account owner has a spouse, the spouse would have to provide consent before the account can be unlocked. In addition to the existing requirement that the owner provide confirmation that the spouse consents to the withdrawal or transfer, the spousal statement would also have to include an acknowledgement that the withdrawal or transfer may reduce or eliminate the spouse’s entitlement on the owner’s death.

Pending Applications Would Need to Be Resubmitted

Applications to unlock funds held in a LIF account that remain pending when the new unlocking measures come into effect would be cancelled, and the account owner would be required to submit a fresh application under the new unlocking rules.

The draft amendment does not include a proposed commencement date.

Impact

The provincial government says that the new unlocking options are meant to address affordability challenges. According to the government, the new unlocking options for locked-in accounts will be more streamlined in that account owners will not be required to show that the applicable criteria have been met in support of an unlocking application, which will create a more quick and efficient process for accessing pension funds.

If the new unlocking options are brought into force, employers that administer registered pension plans with Ontario members may see an increase in former plan members electing to transfer their pension benefits out of the pension plan. It is important to understand that the new unlocking rules will not apply directly to pension plans or require any amendments to pension plan texts.

Consultation and Next Steps

Comments on the draft amendment are due by October 2, 2026.

Please contact a member of Hicks Morley’s Pensions, Benefits & Compensation Practice Group for assistance or if you require further information.

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©