With the recent changes in the Federal Budget, namely the increase in the capital gains inclusion rate from 50% to 67%, business owners and entrepreneurs like you, have been asking about other strategies that may help them better prepare for the day they want to sell their business and retire. Arguably, an Individual Pension Plan (IPPs) may just be that tool to help you save more, protect your assets and boost your retirement income.
The attached article will provide some more information on IPPs, which are defined benefit pension plans designed for incorporated business owners, professionals, or key employees to maximize retirement savings. IPPs allow for tax-deferred growth, higher contributions compared to RRSPs, and may provide creditor protection. The sponsoring corporation funds the IPP, and contributions can cover both current and past years of service. At retirement, the IPP can either pay out a pension or transfer its value to another retirement savings vehicle. IPPs can also be beneficial for estate planning and asset protection.
Possible bullet points for advantages, might not be needed for this one:
Advantages of Individual Pension Plans (IPPs):
- Maximized Retirement Savings: IPPs allow for higher contributions than RRSPs, especially after age 40, helping to boost retirement savings.
- Tax Deferral: Contributions grow tax-deferred, reducing taxable income for the corporation while saving for retirement.
- Creditor Protection: IPP assets are generally protected from creditors under pension legislation.
- Estate Planning: Surplus funds in the IPP can be transferred tax-deferred to family members, creating inter-generational wealth transfer.
- Reducing Corporate Tax: Contributions to an IPP can reduce a corporation's taxable income, offering tax planning benefits.
Want to see if an IPP is appropriate for you? Reach out to us today and have us request an IPP illustration so you can see for yourself.
Individual Pension Plan Article - RBC