An Individual Pension Plan (IPP) is a defined benefit pension plan established by an incorporated company typically for one individual. An IPP may enable you to make higher tax-deductible contributions than the maximum permitted for Registered Retirement Savings Plans (RRSPs) and enhance your retirement income.
Consider this if you
Advantages
-
The maximum IPP contribution limit is greater than the RRSP contribution limit
-
Contributions are tax deductible to the company
-
As a registered pension plan, it offers a level of protection from creditors
Disadvantages
-
You may not have as much flexibility to split income on retirement.
-
Your pension benefits are locked-in under applicable pension benefits legislation until retirement, at which time they must be used to provide retirement benefits (usually in the form of a life annuity or life income fund).
-
The pension adjustment arising from your IPP in the prior year will be deducted from your available RRSP contribution room each year. Thus, you may not be able to contribute to your RRSP.
-
Since an IPP is a registered defined benefit pension plan, annual federal and provincial reporting is required as well as an actuarial valuation every three years.
-
There are start-up and ongoing costs of administering an IPP.
-
The company is required to make the contribution even in less profitable years.
IPP Frequently Asked Questions
IPP Sample Illustration for Business Owners
IPP Sample Illustration for Medical Professionals
