Maximizing Retirement Savings with Individual Pension Plans (IPPs)

For business owners and incorporated professionals seeking to enhance their retirement savings, Individual Pension Plans (IPPs) offer a compelling solution. An IPP is a self-directed defined benefit pension plan akin to what public sector employees receive, providing much higher contribution limits compared to Registered Retirement Savings Plans (RRSPs), especially advantageous for those over 40.

In most provinces, IPPs for business owners and incorporated professionals have been exempted from provincial oversight. This has resulted in annual funding not being enforced, making IPPs a flexible and a highly coveted strategy for retirement and tax planning purposes.

Key Advantages of IPPs:

• Higher Contribution Limits: IPPs allow for larger annual contributions than RRSPs, increasing with age. This feature enables accelerated retirement savings—up to 65% more than traditional RRSPs.
• Corporate Tax Deductions: Contributions to an IPP are made by your corporation and are tax-deductible as a business expense, effectively reducing corporate taxable income.
• Past Service Contributions: It's possible to make contributions for years of employment dating back to 1991, resulting in a substantial initial contribution that boosts retirement savings.
• Creditor Protection: Assets within an IPP are generally protected from creditors, offering an additional layer of security for your retirement funds.

Considerations:

• Eligibility: Ideal candidates for IPPs are business owners or incorporated professionals over 40 years old, earning T4 income, and seeking to maximize their retirement contributions.
• Administrative Requirements: IPPs involve setup and ongoing administrative responsibilities, including actuarial valuations and annual CRA filings.

Is an IPP Right for You?

If you're an incorporated professional or business owner looking to enhance your retirement savings beyond the limits of RRSPs or mitigate the tax associated with saving within your corporation, an IPP is a great option. Consulting with both financial advisors and actuarial experts ensures that this strategy aligns with your retirement goals and corporate financial structures.

Together, we provide the expertise and support you need to maximize the benefits of an IPP.