Individual Pension Plans for Business Owners

The IPP: A Private Pension for Business Owners

Supercharge your retirement savings. Reduce your corporate tax. Build a secure future.

The IPP: A Private Pension for Business Owners

For many incorporated business owners and professionals over the age of 40, the Individual Pension Plan (IPP) is the single most powerful retirement savings tool available in Canada. An IPP is a defined-benefit pension plan established for a single individual - essentially allowing a business owner to create their own private, super-charged pension plan as part of a comprehensive financial plan for a business owner.

How an IPP Works

An IPP is a formal pension plan registered with the Canada Revenue Agency (CRA). Your corporation makes tax-deductible contributions to the IPP on your behalf. These contributions are determined by an actuary and are based on your age, your income history, and the number of years you have worked for the company.

The goal of the IPP is to fund a predetermined level of retirement income for you, the plan member. The contributions are invested within the plan, and the growth is tax-sheltered until you begin to draw an income in retirement planning.

The Key Advantage: Massively Increased Contribution Room

The primary benefit of an IPP is the ability to make much larger tax-deductible contributions than you can with an RRSP, especially for individuals over 40.

Age	Typical RRSP Limit	Typical IPP Contribution
45	~$33,810	~$38,000+
55	~$33,810	~$48,000+
65	~$33,810	~$60,000+

Note: IPP contribution limits are illustrative and depend on individual circumstances.

Other Major Benefits of an IPP

Tax-Deductible Fees

All costs associated with managing the IPP, including investment management and actuarial fees, are fully tax-deductible to the corporation.

Creditor Protection

As a registered pension plan, the assets within an IPP are generally protected from creditors of both the business and the individual, serving as a key risk management tool.

Terminal Funding

At retirement, if assets are insufficient to fund the promised pension, the corporation can make a large, lump-sum tax-deductible contribution to make up the shortfall.

Past Service Contributions

An IPP allows for contributions related to past years of service, which can result in a very large, immediate tax-deductible contribution when the plan is established.

Is an IPP Right for You?

An IPP is a sophisticated strategy best suited for incorporated business owners who meet these criteria:

-Age 40 or Older: The contribution advantages of an IPP are most significant for those over 40.
-Consistent, High T4 Income: You need a history of stable, significant salary to support the actuarial calculations. An IPP cannot be funded based on dividend income.
-Sufficient Corporate Cash Flow: Your corporation must have the cash flow to support the higher annual contributions.

An IPP is a powerful tool for extracting wealth from your corporation in a tax-efficient manner and building a secure retirement. It should be considered alongside your owner compensation strategy as part of a comprehensive plan.