Generally speaking, in Canada, to unlock pension funds, the funds must first be transferred out of the employer's registered pension plan (RPP) and into a LIRA (locked-in retirement account) or LIF (life income fund) in your name. However, to transfer pension funds held in an RPP, you must no longer be employed by an employer member of the Plan.
It is also important to note that not all jurisdictions in Canada allow unlocking of registered funds for financial hardship reasons. At the timing of writing, Saskatchewan, New Brunswick, and Manitoba do not have legislative provisions for financial hardship unlocking.
What does the above mean for CSS members? It means that if you are currently employed with an employer member of the Plan your pension funds are locked-in to provide you with financial security in retirement and cannot be unlocked. However, if you are an inactive member of the CSS Pension Plan, meaning you are no longer employed by an employer member of CSS and no longer contributing to the Plan, you may be able to unlock your CSS holdings for financial hardship reasons if your funds are governed by legislation in a jurisdiction that allows financial hardship unlocking.
The impact of COVID-19 has been swift and, for some Canadians, quite severe financially. It has resulted in layoffs and lost employment income for many. This has led some members of defined contribution pension plans (such as CSS) to consider whether they are entitled to withdraw their pension funds for financial hardship reasons. As pointed out in #1 above, there are some circumstances where you may be able to unlock pension funds for financial hardship reasons. If you can, should you?
Before taking the drastic step of unlocking and spending the funds you'll need to help provide a financially secure retirement, you should ensure you've exhausted all other avenues. The following is not an exhaustive list but given the dramatic negative long-term financial impacts of unlocking registered retirement funds, you may find the following helpful alternatives to unlocking your registered funds due to the impacts of COVID-19:
The Canada Emergency Response Benefit (CERB) may provide you with temporary income support.
The Canada Emergency Wage Subsidy (CEWS) may encourage employers to keep and return employees to their payrolls.
Speak with a credit counsellor – in Canada, there are a number of non-profit organizations who specialize in helping consumers with debt challenges.
It is also important to keep in mind that your locked-in funds in a registered plan may be protected from creditors while they are held in the registered plan (like holding them in the CSS Plan). Unlocking those funds may expose them to creditors if you are having difficulty making debt payments.
Assuming you qualify for financial hardship unlocking (see #1 above) and have determined that you should unlock rather than utilizing another option (see #2 above), the following resources provide information on how to unlock registered locked-in funds in various jurisdictions.
Remember, in all cases, the funds must be with a financial institution to be eligible for financial hardship unlocking:
Alberta (financial hardship unlocking is referenced on page 6)
There are no legislative provisions for financial hardship unlocking in the following jurisdictions:
Unlocking registered funds is a decision with significant potential long-term negative effects and shouldn't be undertaken lightly; there may be other short-term alternatives available. Please contact a CSS Pension Plan Consultant if you wish to discuss the above in more detail.