If you’re a Manitoban who owns any of the following: a pension through work, a Locked-In Retirement Account (LIRA) or a Life Income Fund (LIF), then recent legislation is about to dramatically change your retirement vision. Bill 8, titled “the Pension Benefits Amendment Act” is one of the biggest changes to the pension landscape in years.
This bill effectively makes pension unlocking far, far easier than ever before for Manitoba pensions. Coming into effect on October 1st, it provides unlocking under two circumstances:
- It expands the rules of accessing pension funds in cases of financial hardship. If you’re struggling with low income, rental eviction, mortgage foreclosure or medical debts, you may be able to access some of your pension funds to help offset.
- It allows for Manitobans, 65 and older, to fully unlock their entire pension. LIFs traditionally have an annual cap on the amount you can withdraw in any given year. For qualifying plans, that restriction can be removed, entirely!
I’ve written previously about Manitoba’s ability to unlock 50% of your pension. Bill 8 completely upends that strategy by enabling 100% unlocking. This has many significant pros and also some potential cons.
Pros:
The benefits to unlocking your pension are relatively apparent. You can take more money from your pension in a given year than previously allowed. Do you want to travel more or upgrade your home in the early years of retirement? Go ahead! Do you want to strategically tax plan around low-income years? Now you can!
Flexibility in retirement income planning is incredibly valuable. Bill 8 gives Manitobans, with pensions, full control in planning for their futures.
Cons:
The biggest risk that Bill 8 introduces is the risk of outliving your money. When you could only unlock half of your pension, the remaining half is effectively shielded from your own desire to spend. By legislatively restricting withdrawals, the province protected individuals from rapidly depleting their retirement resources.
Takeaway:
If you can handle the personal responsibility of budgeting your retirement income, then unlocking your pension becomes a huge win. You now have maximum control over funding your lifestyle.
If the idea of budgeting and holding yourself accountable to not overspend is daunting, don’t do it! Following the legislated LIF maximum guide is a great way to avoid depleting your accounts too rapidly.
Starting October 1st, you should have a conversation with your Financial Advisor on what unlocking your pension could mean for your retirement. How can you take advantage of this change? How can you protect the longevity of your money? Bill 8 is a brand new tool in your financial toolkit that could make all the difference for your future!
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