In today’s budget, Ottawa proposes removing the requirement to collapse life income funds at age 80 for former employees of federally regulated industries, such as banks, federal crown corporations and telecommunication companies.

Present regulations of the federal Pension Benefits Standards Act stipulate that locked-in RRSPs must be converted into LIFs when the beneficiary reaches age 69. They also stipulate that any remaining LIF funds must be used to purchase a life annuity at age 80.

The 2005 budget proposes to eliminate this requirement. As a result, LIF beneficiaries will have the option of continuing to withdraw funds from their LIFs even after they reach age 80.

In the past, people have had to convert their LIFs into annuities, says Jamie Golombek, vice president of tax and estate planning for Toronto-based AIM Trimark Investments. “They were no longer allowed to manage own money. This is less paternalistic.”

Investors will now be able to continue to choose what they want to do with the funds within their LIFs, which can be invested in anything — stocks, bonds or mutual funds — he says.