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INDIVIDUAL PENSION PLAN
An Individual Pension Plan (IPP) is a registered defined benefit plan for single participants. It provides contribution amounts in excess of the money purchase pension plan / RRSP contribution limit. Defined benefit pension plans permit larger tax-sheltered contributions for high income employees than does a registered retirement savings plan (RRSP).
IPP's are attractive to both the individual and the firm. Some of the benefits include:
- They offer higher deductible contributions than RRSPs
- Contributions increase in age whereas the maximum RRSP contributions are set
- Assets are creditor proof
- The employer can deduct the contributions and fees associated with an IPP
Ability to "top up" the contributions if the return on investments is not sufficient to meet the defined benefits
- Can fund for prior years of employment even if RRSPs are maximized
- Employers can deduct interest from borrowed funds used to fund contributions as a business expense
- Investment rules for an IPP are the same as an RRSP (e.g. foreign content and eligible investments)
- IPP can be managed like an RRSP
An IPP is ideal for an owner/manger, a professional (doctors, dentists etc.) with a professional corporation, executive of a private or public company who receives remuneration from the sponsoring firm. Normally the individual is at least 40 years of age and is already able to maximize their RSP contributions.
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IPP contribution room versus RRSP contribution room |
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IPP contribution room from 1991 |
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Age |
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2003 |
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2004 |
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2005 |
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2006 |
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40 |
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$45,478 |
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$18,200 |
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$19,565 |
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$21,032 |
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45 |
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$66,489 |
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$19,992 |
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$21,491 |
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$23,103 |
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50 |
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$89,452 |
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$21,960 |
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$23,607 |
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$25,378 |
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55 |
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$114,743 |
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$24,122 |
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$25,931 |
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$27,875 |
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60 |
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$142,512 |
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$26,497 |
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$28,484 |
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$30,620 |
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65 |
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$158,873 |
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$27,895 |
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$29,987 |
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$32,236 |
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RRSP Contribution room |
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2003 |
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2004 |
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2005 |
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2006 |
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$14,500 |
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$15,500 |
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$16,500 |
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$18,000 |
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The above is meant to give a brief overview of Individual Pension Plans. For more information please call us at 604.687.7773 or email solutions@customplanfinancial.com
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