Individual Pension Plan
A superior retirement solution for business owners and incorporated professionals
The High‑Income Dilemma
High-income business owners are outgrowing traditional registered plans like RRSPs and TFSAs. These accounts simply don’t scale with higher earnings, leaving many incorporated professionals without an efficient way to build long-term, tax-advantaged wealth.
On top of that, tax changes over the past decade have included higher taxes on passive income, adjustments to dividend integration, and the grind on the small-business tax rate, making it increasingly difficult to invest profits effectively within a Canadian-Controlled Private Corporation.
What is an Individual Pension Plan?
An Individual Pension Plan (IPP) is a defined-benefit pension plan designed specifically for business owners, incorporated professionals, and key executives. It offers a tax-efficient alternative to Registered Retirement Savings Plans (RRSPs) with higher contribution limits and additional benefits.
IPPs are particularly beneficial for individuals over 40 years old with T4 income from their corporation, allowing them to maximise retirement savings while providing significant tax advantages.
Key Benefits of an IPP
Individual Pension Plans offer numerous advantages for business owners and incorporated professionals seeking to optimise their retirement strategy.
Higher Contribution Limits
IPPs allow for significantly higher contributions than RRSPs, especially for individuals over 40, helping you build a larger retirement nest egg.
Corporate Tax Deductions
Contributions to an IPP are tax-deductible business expenses for your corporation, providing immediate tax benefits.
Creditor Protection
Assets in an IPP are protected from creditors, providing security for business owners and professionals in all market conditions.
Investment Flexibility
IPPs offer a wide range of investment options, managed by professional advisors to optimise returns and manage risk.
Retirement Security
As a defined-benefit plan, an IPP provides a guaranteed retirement income, offering peace of mind for your future.
Past Service Contributions
IPPs allow for additional contributions for past years of service, potentially creating substantial initial funding.
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Case Study
Dr. Smith: Maximising Retirement Savings with an IPP
Dr. Smith, a 55-year-old incorporated physician taking $145,000 in T4 income annually from his professional corporation, was looking for ways to maximise his savings and reduce his tax burden.
The Challenge
Dr. Smith had been contributing the maximum amount to his RRSP for years but was concerned about having enough savings for retirement. He also wanted to find tax-efficient ways to invest corporately.
The Solution
After analyzing Dr. Smith’s situation, we recommended establishing an Individual Pension Plan (IPP) as it would allow for significantly higher contributions than his RRSP and tax-sheltered growth.
The Results
- Increased annual contributions from $26,100 (RRSP limit) to $36,300 (IPP)
- Past service contribution of $512,500 for years of service
- Corporate tax deduction created for Dr. Smith’s company
- Creditor protection for retirement assets
- Defined-benefit pension providing guaranteed income in retirement
Over the next 10 years until his planned retirement, Dr. Smith’s IPP is projected to accumulate approximately $2,378,100, compared to $1,307,300 if he had continued with only RRSP contributions.
Disclaimer
The case study mentioned in this material is provided for illustrative purposes only and does not represent an actual client’s experience. Results may vary.
IPP Benefit Analysis
Find out how much more you could save with an Individual Pension Plan. Fill out the form below for a personalized calculation.