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What is an IPP?

An Individual Pension Plan (IPP) is a defined benefit pension plan designed for incorporated business owners and professionals. It allows for higher tax-deferred retirement savings compared to an RRSP.

Who can setup an IPP?

An IPP is ideal for individuals who:

  • Own a corporation or are incorporated professionals
  • Are over the age of 40
  • Have an annual T4 income exceeding $100,000
  • Seek a tax-efficient retirement strategy
Benefits of an IPP for small business owners and employees
  • Tax Deductions: Contributions made by the corporation to the IPP are tax-deductible, reducing the company’s taxable income.
  • Capital Gains Tax Reduction: IPPs reduce the business’s taxable value, lowering capital gains tax when selling the business.
  • Transfer to Spouse at Death: Upon the owner’s death, assets within the IPP can be transferred to a spouse’s pension or RRSP, ensuring tax efficiency.
  • Lump-Sum Contribution at Plan Setup: Business owners can make a large past service contribution when starting the IPP, reducing taxable income.
  • Lump-Sum Contribution Before Selling the Business: Additional contributions (terminal funding) can maximize pension benefits and lower corporate taxable income.
  • Creditor Protection: IPP assets are safeguarded from creditors, unlike RRSPs in some provinces.
FAQs about IPP
  • How does an IPP differ from an RRSP?
    An IPP provides a guaranteed retirement income, whereas an RRSP depends on investment performance.
  • Can family members be included?
    Yes! If they are employed by the corporation and receive T4 income, they can participate.
  • What happens to the IPP upon retirement or death?
    Retired members receive lifetime pension income.
    Upon death, benefits can transfer to a spouse’s pension or RRSP.
  • Can I still contribute to an RRSP if I have an IPP?
    RRSP contribution room is reduced due to pension adjustments.
  • Are there administrative requirements?
    Yes. IPPs require actuarial reviews, corporate filings, and ongoing plan management.
IPP vs. RRSP Contribution Limits

IPP RRSP Comparison Chart

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We work together with actuaries in IPP setup and compliance, providing investment management to help business owners maximize retirement savings. Contact us for a free consult today!