Individual Pension Plans (IPPs)

An IPP is a corporate sponsored defined benefit pension plan created on behalf of one or two individuals.

The object of the IPP is to fund the maximum lifetime pension benefit permitted under the Income Tax Act. Retirement may occur between the ages of 55 and 71.

Contributions may reflect service with the same or a related employer prior to plan implementation – even where RRSP contributions have been maximized!

Advantages of the Individual Pension Plan

The IPP is an excellent tool for individuals wanting more retirement savings than is available through an RRSP.

IPP advantages include:

  • significant contributions for service prior to plan implementation
  • assets within the IPP are creditor proof
  • monies borrowed to fund the IPP, set-up costs and ongoing administration expenses are tax deductible to the employer
  • IPP assets may be topped-up in the event investment returns are inadequate to fund the IPP benefits
  • early retirement can be funded by a lump-sum tax deductible contribution
  • retirement benefits can be paid in various forms specifically tailored to the individual
  • the corporation has 120 days after its year-end to make an IPP contribution

Target Individual

The IPP is most beneficial for the executive, incorporated professional or business owner who:

  • has attained age 40
  • receives employment (T4) income from the company
  • has service with the company or a related employer prior to plan implementation
  • requires more tax sheltering than is available under an RRSP.

IPP Contribution Example

Illustrated below is the first year IPP advantage for an individual with earnings of $151,278 and service from 1991.

Age
2019
2019 IPP
Contribution
2019 RRSP
Contribution
2019 IPP
Advantage
40 $123,571 $26,500 $97,071
45 $202,084 $26,500 $175,584
50 $288,209 $26,500 $261,709
55 $382,985 $26,500 $356,485
60 $487,066 $26,500 $460,566
62 $531,475 $26,500 $504,975

 

Annual IPP contributions, for the subsequent three years, are noted below.

Age
2019
2020
Contribution
2021
Contribution
2022
Contribution
40 $29,526 $31,823 $34,106
45 $32,398 $34,854 $37,481
50 $35,590 $38,390 $41,212
55 $39,102 $42,094 $45,297
60 $43,091 $46,303 $49,738
62 $44,687 $47,987 $51,692

 

The comparable maximum RRSP contributions are noted below.

RRSP 2020 Maximum 2021 Maximum 2022 Maximum
$27,230 Indexed* Indexed

 

*The RRSP limit is indexed annually for inflation using the Industrial Aggregate average wages and salaries in Canada.

The IPP is funded based on retirement at age 65. Where the IPP member elects to retire prior to age 65, a significant additional lump-sum tax deductible contribution may be made to cover the cost of early retirement.

Process For New Individual Pension Plans

At Lesniewski Moore Consulting Group we market to Investment Advisors (IAs) and financial planners and ask them to promote IPPs to their existing client base. As actuaries and pension consultants we focus on the liability side of the IPP equation and leave the investment of the pension fund to the professionals. As such, IAs and financial planners view us as complementary and welcome advisors to their clients.

Step 1 – Request a Personalized Quote

Simply fill in the attached IPP Data Form and send it to one of our consultants. We will send you a personalized quotation report, usually within 48 hours. Also attached is a copy of our IPP Overview 2019. Feel free to print a copy and take it with you to your client meetings.

Step 2 – Reviewing the Quotation

As mentioned above we are viewed as trusted advisors and are there to help you and your client through the IPP process. Your Lesniewski Moore Consulting Group consultant will be available (either in person or via conference call) at no additional charge as you review the quotation report with your client.

Step 3 – Setting up the IPP

Once your client has decided to set up an IPP, please fill in the attached IPP Auxillary Data Form and send it to your Lesniewski Moore Consulting Group consultant who will make sure all of the required documentation is prepared for plan registration.

Step 4 – Ongoing Administration

Once the IPP has been established, there are several annual government filings that are required. The Lesniewski Moore Consulting Group Administration Services team will make sure these filings are performed for your client accurately and on time.

In addition, every three years an actuarial valuation is required. A Lesniewski Moore Consulting Group consultant will notify you when an actuarial valuation is required. If the IPP is found to be in a deficit (assets less than liabilities) additional tax-deductible contributions can be made.

Download the most recent Pension Adjustment Calculator

IPP Overview

Download

IPP Data Form

Download

IPP Auxiliary Data Form

Download

IPP Steps from Quote to Completion

Download
Contact Mark Lesniewski

Want To Know More About IPPs?

We'd be pleased to talk with you about how LMC Group can assist in establishing an IPP to supplement or accelerate your retirement savings.
Contact Mark Lesniewski