An IPP is a defined benefit pension plan and sets your monthly income at retirement.
Covered earnings for IPPs are up to $132,334 in 2012 dollars. An IPP permits the accumulation of greater retirement assets, up to 65% more compared to an RRSP. Contributions to an IPP are based on a percentage of employment earnings graduated by age, therefore the older you are, the more you can contribute.
The IPP is similar to an RRSP in that it uses an investment account that accumulates over time to provide retirement benefits. Unlike the RRSP, the IPP provides greater certainty of retirement assets, and allows the company to make additional tax deductible contributions should the rate of return on plan assets be less than 7.5% a year.
Key Benefits of the Individual Pension Plan (IPP)
- Increase retirement assets and have your company make large tax deductible contributions.
- Up to 65% more annual contribution room compared to RRSPs.
- Reduce investment risk. Additional tax deductible contributions are allowed by the company should the rate of return be less than 7.5% per year.
- 100% creditor proofing of plan assets.
- Safer investment rules and limitations compared to RRSPs.
- Pension plan surpluses belong to the member.
- Provides pre-determined retirement benefits.
- Allows a significant tax deductible contribution at retirement.
- All costs, including investment expenses associated with the IPP are tax deductible to the company.
The Ideal Candidate
An owner, incorporated professional, or executive, age 40 and over, and earning over $132,334 in T4 or T4PS income, is the ideal candidate. IPP contribution limits increase with age, therefore an IPP may also be established for candidates with lower earnings.
To learn more about this product, contact GBL or register as an advisor.
