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
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 $154,611 and service from 1991.
Annual IPP contributions, for the subsequent three years, are noted below.
The comparable maximum RRSP contributions are noted below.
|RRSP||2020 Maximum||2021 Maximum||2022 Maximum|
*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. 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.