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Individual Pension Plans (IPP)

Individual Pension Plan (IPP)

Dramatically boost your retirement assets

What is an Individual Pension Plan (IPP)?

An Individual Pension Plan (IPP) is a defined benefit pension plan designed for business owners of incorporated companies. An IPP allows a business owner to increase their retirement savings and establish long-term financial security through considerable tax-deductible contributions.

Who is a good candidate for an IPP?

An IPP is well suited for:

  • Business Owner
  • Incorporated Professional
  • Over age 40
  • $100,000+ in T4 Earnings*

*An IPP can be established for someone with lower earnings

How an IPP works

An IPP is similar to an RRSP in that it uses an investment account to accumulate assets over time as retirement benefits.  However, unlike the RRSP, an IPP allows for the accumulation of greater assets – up to 65% more than an RRSP – and like a traditional pension plan, sets your monthly income at retirement.  An IPP also provides certain additional guarantees beyond an RRSP to further protect your financial future (assets accumulated within an IPP are locked-in and may be used only for retirement purposes).

Advantages of an IPP

  • Increased tax deductible contribution room – up to 65% more than an RRSP
  • Can reduce passive income in Corporation
  • Tax deductible contributions for prior years (past service)
  • Richest benefit plan in Canada – 2% defined benefit pension plan
  • All costs are tax deductible to the company
  • Creditor Protection
  • Increased corporate and personal tax savings
  • Can include employed family members and pass on wealth to the next generation

How much can be contributed to an IPP?

Reviewing the IPP forms and documents received from you was wonderful, everything was so well organized and prepared with so much diligence and I really appreciate that!

Supervisor, Administration Support
Raymond James Financial

Setup Process

  • Step 1
    Request a Personalized Quote

    Complete our online IPP Questionnaire or download the PDF. Your GBL representative will prepare a custom IPP quote at no cost within 1-2 business days.

  • Step 2
    Consultation

    Upon receipt of your IPP quote, please contact your GBL representative who is available for consultation to answer any questions that may arise.

  • Step 3
    Setting up the IPP

    Once the decision has been made to set up an IPP, you will receive our IPP registration package. Forms can be completed and returned by mail, email, or fax to your GBL representative. Please allow 5-10 business days to receive your IPP documentation for signing.

  • Step 4
    Execution

    Your GBL representative is available to assist in the signing process and to answer any last minute questions. Upon final execution of the IPP agreements, GBL will register the plan with Canada Revenue Agency (CRA) and the provincial authority (if applicable).

  • Step 5
    Fund the Plan

    Upon CRA approval, the IPP account can be opened and the plan can be funded.  At this time you will identify investment objectives to ensure assets are invested according to your preferences and CRA funding regulations.

How are IPP contributions calculated?

IPP contributions are determined by a series of actuarial valuation reports in order to ensure the plan has sufficient assets at the time of retirement. Annual income at retirement age is calculated using:

  • The member’s career T4 and T4PS earnings
  • The member’s age
  • Assumptions determined by the actuary, which are acceptable to Canada Revenue Agency (CRA)

Contributions are graduated by age, so the older the member, the more their company can contribute. IPP contributions first exceed RRSP contributions around age 40. The annual contributions compounded at a 7.5% net annual rate of return will ensure your client’s plan has adequate assets to provide for their retirement benefits.

What happens at retirement?

Once the member retires, they have a choice of retirement vehicles. These include a monthly pension from the plan, an annuity, a Life Income Fund (LIF), or a Locked-In Retirement Income Fund (LRIF).

If an annuity is chosen, you would obtain a market comparison and choose the insurer. The plan will then transfer funds from the IPP to the life insurance company to purchase the annuity. Annuities can be either single life, covering the life of the plan member only or, if married at date of retirement, a joint & survivor (J&S), with payments that may reduce on the death of the member. The J&S option usually includes a minimum guaranteed period of 5 years and subsequent payments to the surviving spouse in full or reduced by a percentage selected at the time of retirement.

Frequently Asked Questions

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