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:
The IPP is most beneficial for the executive, incorporated professional or business owner who:
IPP Contribution Example
Illustrated below is the first year IPP advantage for an individual with earnings of $180,500 and service from 1991.
Annual IPP contributions, for the subsequent three years, are noted below.
The comparable maximum RRSP contributions are noted below.
*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.