LIF: Life Income Fund

Start paying yourself during retirement.

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Reviewed by Paul Thorne

If you’re a Sun Life Client, book an appointment with your advisor to open your LIF.

What is a life income fund (LIF)?

A LIF is a type of Registered Retirement Income Fund (RRIF) that pays you income from your locked-in pension assets. It’s designed to provide you with income during your retirement years. 

The main differences between a LIF and a RRIF are:

1. The source of your savings: Money in LIFs is transferred from locked-in pension assets. Money in RRIFs is transferred from registered Canadian accounts like RRSPs, and other RRIFs

2. LIFs have annual withdrawal maximum rules: The maximum is set by federal or provincial pension law, meaning your maximum may be different from someone else’s. A RRIF does not have a maximum withdrawal requirement.

Many provinces restrict you from withdrawing all your funds out of a LIF at once. This makes it a great way to ensure your retirement savings last. However, pension rules federally and provincially may allow full withdrawal in certain conditions.

Benefits of a LIF

Tax advantages

Your savings are tax-deferred until withdrawn. You’ll be paying taxes only on the money you withdraw each year.

Flexibility

Investments in your plan are under your control, so you can hold a variety of investments for income and growth.

Survivor’s benefits

When you die, any money left in your plan goes to your spouse or common-law partner (CLP). If you don’t have a spouse or CLP at that time, it goes to your designated beneficiaries or estate, as applicable.

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What is a LIF?

Watch time: 1 minute 41 seconds

In this “Simply Put” video, learn the basics about LIFs – and how LIFs can help you fund your retirement.

What is a LIF?

Simply put, a Life Income Fund, or LIF, is a type of registered fund that pays you regular retirement income.

How does a LIF work?

Your employer may offer a pension plan that lets you contribute a portion of your paycheque to retirement savings. These funds are “locked-in” until you retire. You can then transfer part, or all of these funds into a LIF or a life annuity, or both. Many people choose a LIF.

The amount you can transfer may be subject to some limits. It depends on the rules of your original plan and where it’s registered.

You can choose any amount of income to withdraw, within a minimum and maximum range. Federal income tax law sets the minimum percentage for all of Canada. You must withdraw this from your LIF each year. The maximum percentage that you can withdraw each year is set by federal or provincial pension law. That means your maximum may be different from someone else’s.

Your age… account balance… and life expectancy also factor into these limits.

What type of investments can a LIF hold?

You can choose from a variety of investments for your LIF. These include mutual funds… segregated funds… or guaranteed investment certificates… better known as GICs.

Why would I consider a LIF?

The money in a LIF is tax-sheltered. That means you pay tax only on the retirement income you withdraw yearly. A LIF also gives you some control over your income and your investments. That can help you customize your retirement plan.

For more tips and tools, visit sunlife.ca.

How does a LIF work?

When you retire or leave an employer with assets in a company pension plan, you may have the option to transfer the money to a locked-in retirement account (LIRA), or other locked-in assets. By December 31 of the year you turn age 71, you need to transfer those assets to a LIF or purchase an annuity to start receiving income. You can also turn your locked-in asset into a LIF prior to age 71 if you want access to the money.

If you decide to convert your locked-in funds to a LIF, you:

  • Choose the types of investments to hold in your LIF
  • Choose when you want to start being paid (any time between when you open a LIF to before the end of the year after) subject to pension law limits
  • Can change how much you’d like to withdraw every year, based on government withdrawal rates

Connect with an advisor to find out what type of locked-in products are available in your province. 

Is a LIF right for me?

A LIF might be right for you if:

  • You want to continue choosing what investments to hold in retirement
  • You want payments to be given to your spouse in the event of your death
  • You want to leave any remaining savings in your account to a beneficiary, if applicable or estate
  • You know and are aware of the LIF minimum and maximum withdrawal rules that apply to you

Note: Your spouse or common-law partner’s consent may be required to open a LIF.

Why open a LIF with Sun Life

Here are 3 benefits to opening a LIF with Sun Life:

Range of competitive products

We offer investment products across a range of categories that can be used to suit your individual needs.

We take care of the math for you – if you want

Unsure about how much retirement income to withdraw each year? Worried about running out of money. An advisor can help.

Expert support

You have access to our team of advisors and consultants to help you every step of the way – from enrollment, answering your questions, and achieving your best retirement. 

Or have more questions? A Sun Life advisor can help you figure it out and build a plan that fits your financial needs and goals.

LIF investment options at Sun Life

You can hold many of the same assets in a LIF as an RRSP, including investments like mutual funds, segregated funds, accumulation annuities (insurance GICs), and more.

Mutual Funds

A mutual fund combines the money from many investors into a pool. These pools of money are invested in stocks, bonds, or other securities. Each pool is managed by a professional investment manager.

 

Learn more about mutual funds

Guaranteed interest products

With insurance GICs, your principal and interest are guaranteed, safeguarding you from changes in the market.

 

 

Learn more about insurance GICs

Segregated funds

A segregated fund is an investment fund that combines the growth potential of a mutual fund with the estate planning benefits of a life insurance contract. You can buy a segregated fund contract that offers guarantees and some additional benefits which can help you protect your investments.

Learn more about segregated funds

Annuities

A payout annuity offers guaranteed income for life or a specified period. To help meet your retirement income needs, you might want to purchase a payout annuity to get guaranteed income from your RRSP.

 

Learn more about payout annuities

Exchange Traded Funds (ETFs)

ETFs are investment products that track an index or a basket of securities (generally stocks and bonds) that trade daily on an exchange. Like stocks, ETFs can be traded throughout the day on a designated exchange.

 

 

LIF eligibility and general rules

You may transfer funds that are locked-in to a LIF if you:

  • Have a LIRA and you’ve reached retirement age as specified by your pension legislation
  • Have participated in an employer pension plan and you’ve reached retirement age or early retirement age as specified by your pension legislation
  • Have a spouse or common-law partner,* you must get their consent before setting up a LIF as withdrawals can affect their future benefits.

Note: If you haven’t done so, you will have to convert your LIRA to a LIF or an annuity before December 31 of the year you turn age 71

*Throughout this page, the term “spouse” refers to both married couples and common-law partners

LIF withdrawal rules:

  • You need to withdraw a minimum amount from your LIF in the year after you open your account. You’ll need to withdraw in one or more installments. Federal income tax law sets the minimum percentage for all of Canada
  • If you have a younger spouse, you can use your spouse’s age to determine your minimum LIF payments. This way you might be able to withdraw a lower amount and reduce your taxable income. 
  • If you want to withdraw more than the minimum: 
    • You can establish a payment schedule during the year 
    • Federal or provincial pension law sets the maximum percentage you can withdraw each year. This means your maximum may be different from someone else’s. Quebec now allows full withdrawal at age 55.
  • Your withdrawals are considered income, and you will have to pay tax on them at your marginal tax rate.

Connect with an advisor for more detailed information about LIF withdrawal rates.

LIF FAQs

No, LIF accounts are funded by your former employer pension plan assets or a LIRA. You can’t make additional contributions to a LIF account. You can only withdraw from it.

You must withdraw the minimum amount from your LIF every year. The funds that you don’t need can be contributed into various accounts like your TFSA or RRSP if you have contribution room and are eligible. Some provinces may allow you to transfer your assets from a LIF back to a LIRA to stop minimum payments if you are under age 71.

No, you may be allowed to have a LIF even if you’re a non-resident of Canada.

There are however, restrictions to the types of investments you’d be able to transfer to your LIF.

Connect with a Sun Life advisor to discuss your unique situation

These plans are similar but there are a few differences between them to be aware of.

Connect with a Sun Life advisor to discuss your unique situation

A payout annuity is an income-generating insurance product that provides guaranteed income.

A LIF, however, is a type of plan that can hold a variety of investment products. Income withdrawn can vary between annual minimum and maximum withdrawal rates based on various factors, like your age and the value of your funds.

A LIF and a payout annuity, in combination, can be a helpful source of income for you during your retirement years.

Talk to an advisor to find out what’s right for you

When you die, your spouse or common-law partner at the time of death will receive the value of your LIF funds, unless they have waived their entitlement to the LIF.

If they have waived their entitlement, or if you don’t have a spouse or common-law partner at the time of death, then either your estate or if applicable, if applicable, a named beneficiary will receive the money remaining in your LIF.

Connect with an advisor for more detailed information

More LIF resources

LIF temporary income information

If your LIF is locked-in under the rules of one of these provinces – Newfoundland and Labrador, Nova Scotia, or Quebec – you may qualify for temporary income.

LIF temporary income information

How to keep more of your retirement income and pay less tax

Want to turn your savings into as much retirement income as you can? Try looking at your retirement income through a tax lens.

How to keep more of your retirement income and pay less tax

Decumulation: turning retirement savings into retirement income

A decumulation plan can turn your savings into income, help you pay less tax, make your money last and give you peace of mind.

Decumulation: turning retirement savings into retirement income

Already have a LIF with Sun Life?

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This information is meant for educational and illustrative purposes only. Some exclusions and restrictions apply. Last updated: January 1, 2025.

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