Question

allotted time: 75 minutes
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10 bonnie, aged 45, has recently resigned her job with a company that she worked at for 20 years. she plans to open a craft store in the small town where she lives. she knows that she is entitled to the $125,000 in the pension plan she had with her company. when she signs all the paper work, she asks that her pension money be transferred to her chequing account. she is planning on using $100,000 to start her business. what will the hr tell her?
a. bonnie must transfer her pension money into a registered plan, such as a registered retirement savings plan (rrsp) first, then she can withdraw it.
b. bonnie must transfer her pension money into a locked in plan and a life income fund (lif) would allow access to some of the money to start her business.
c. bonnie must transfer her pension money into a registered plan, such as a tax - free savings account (tfsa) first, then she can withdraw it.
d. bonnie must transfer her pension money into a registered retirement income fund (rrif) and will not have access to the money to start her business.
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Explanation:

To solve this, we analyze pension transfer rules:

• Option a: RRSP is for retirement savings, but pension from employer (locked - in) can't be directly transferred to RRSP for withdrawal like this.
• Option b: When leaving a job with a pension, the money is in a locked - in plan. A Life Income Fund (LIF) allows access to some funds under certain conditions (like starting a business in some cases), which matches Bonnie's situation of using money for business.
• Option c: TFSA is for tax - free savings, not for pension transfers from an employer's plan.
• Option d: RRIF is for retirement income and restricts access, which doesn't fit Bonnie's need to use money for business.

Answer:

b. Bonnie must transfer her pension money into a locked in plan and a life income fund (LIF) would allow access to some of the money to start her business.