Special Report

Decumulation products for Canada’s new retirees

Individual and group decumulation products broadly available in Canada include:

Registered retirement income fund

  • can be used to convert individual registered retirement savings plans and roll over lump-sum balances from defined contribution plans into retirement income
  • capital transfers into the fund and future earnings are tax-sheltered, only becoming taxable as they are withdrawn
  • minimum withdrawals are required beginning the year after the RRIF is funded
  • assets are exposed to investment risk, but can be invested in any manner permitted for RRSPs; this permits retirees to match their own risk tolerances
  • if the participant dies, remaining assets may be rolled over to the surviving spouse
  • no maximum withdrawal restrictions, although this exposes retiree to longevity risk
  • available from financial firms

Life income fund

  • similar to a registered retirement income fund, but LIFs are locked-in, meaning only plan assets can be rolled over into them
  • same characteristics as a RRIF
  • there are provincial limits on how much can be withdrawn annually to ensure some funds will remain to age 90, reducing longevity risk
  • up to 50% of the balance can be withdrawn with spousal consent in plans governed by rules in Manitoba, Alberta and Ontario, as well as corporate plans across all provinces that are governed by federal regulations
  • available from financial firms


  • financial contracts purchased with any kind of DC balance as well as other registered retirement funds
  • fixed payouts guaranteed for life
  • transfer of investment and longevity risk to the annuity issuer
  • no tax consequences to roll over assets to buy annuity; taxable upon payout
  • joint annuities allowed to pay a surviving spouse
  • pricing based on long-term bond yields at the date of purchase
  • typically offered by insurers

Defined contribution variable benefits

  • allows for assets to remain in the DC plan and be withdrawn as the retiree needs without being rolled over to a post-retirement investment vehicle
  • requires spousal consent to transfer funds into a variable benefit account
  • allows rollovers to a surviving spouse or a non-spousal beneficiary with consent
  • requires separate variable benefit accounts for locked-in and non-locked-in DC accounts
  • accounts with locked-in funds have same characteristics as the LIF; those with non-locked-in funds operate like the RRIF
  • exposes retirees to investment and longevity risk

Source: Association of Canadian Pension Management report, “Decumulation, The Next Critical Frontier: Improvements for Defined Contribution and Capital Accumulation Plans,” released March 27

This article originally appeared in the May 1, 2017 print issue as, "Decumulation products for Canada's new retirees".