What is an Individual Pension Plan (IPP)?
An Individual Pension Plan (IPP) is a registered defined benefit plan for single participants. It provides all the benefits permitted under the Income Tax Act of Canada in order to maximize tax-sheltered retirement savings. Defined benefit pension plans permit larger tax-sheltered contributions for highly remunerated employees than a registered retirement savings plan (RRSP).
What are the benefits of an IPP?
IPP's are attractive to both the individual and the firm. Some of the benefits include:
- They offer higher deductible contributions than RRSPs
- Contributions increase in age whereas the maximum RRSP contributions are set
- Assets are creditor proof
- The employer can deduct the contributions and fees associated with an IPP
Ability to "top up" the contributions if the return on investments is not sufficient to meet the defined benefits
- Can fund for prior years of employment even if RRSPs are maximized
- Employers can deduct interest from borrowed funds used to fund contributions as a business expense
- Investment rules for an IPP are the same as an RRSP (e.g. foreign content and eligible investments)
- IPP can be managed like an RRSP
Who is an IPP appropriate for?
An IPP is ideal for an owner/manger, a professional (doctors, dentists etc.) with a professional corporation, executive of a private or public company or an employee of a proprietorship or partnership who receives remuneration from the sponsoring firm. Normally the individual is at least 40 years of age and is already able to maximize their RSP contributions.
We are able to have an analysis by some of the country's top actuaries to determine if an IPP will be a benefit to you. Contact us for a complimentary analysis without any obligation.
