Individual Pension Plans (IPPs)

For many business owners their business is often viewed as their pension in retirement. What many do not realizes is the business can fund the entrepreneur’s very own pension plan, similar to the gold plated pensions you hear public servants or teachers having. In some ways you can think of it as a corporate RRSP with significantly more contribution room relative to your RRSP.

The Individual Pension Plan (IPP)

When does it make sense?

  • Over the age of 40 as the contribution limit exceeds that available in an RRSP
  • Incorporated business professional and family members
  • Senior executives
  • Business has sufficient cash flow 

Funding the IPP

  • Like an RRSP, the allowable contribution room is based off earned employment income that year
  • Past years of employment with the sponsoring company will allow you to contribute as if you had the plan in previous years
  • Additional contributions can be made to the plan at retirement

Who is eligible?

  • Controlling shareholder
  • Specified individual
    • Connected individual
      • They or in combination with someone they are related to owns 10% or more of the corporation's shares
      • Family members can be included if they work for the company
    • Non-connected individual 
      • Key employees who earn 2.5 times the yearly maximum pensionable earnings 
  • Maximum of 3 plan members

Retirement Options

  • Sponsoring company remains active
    • A plan member can start receiving the pension benefits at any age before the end of the calendar year in which age 71 is attained 
  • Sponsoring company is sold
    • The IPP winds-up with the commuted value transferred out to another registered plan such as an RRSP, RRIF, Life Income Fund, or a Locked-in RRSP
    • Any excess of funds are payable as a cash payment and subject to taxes 
  • Member wants benefit pension to last a lifetime
    • Purchase an annuity 


  • Greater accumulation of capital
  • Funds within grow tax deferred growth
  • Predictable income paid out
  • Tax efficiency as management fees become tax deductible unlike an RRSP & RRIF
  • Greater control of investment returns
  • Remove money out of the corporation at a tax deferred basis
  • IPPs are a separate legal entity
    • Creditor protection
    • Remove surplus assets out of the corporation 

What to consider 

  • Complexity of the plan since the use of an actuary is needed
  • Ongoing fees and cost
  • Mandatory funding requirements