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Individual Pension Plans

A Designated Benefit Pension Plan

An Individual Pension Plan (IPP) is a designated defined benefit pension plan providing greater tax deferred contributions than those available through an RRSP. An IPP is a designated plan typically established for an individual business owner. The IPP generally allows the incorporated business to pay tax deductible contributions for current and past service. If past service is being provided and the individual has contributed to an RRSP since 1990, they must transfer specified amounts of their RRSP funds to the IPP. The company then pays the balance of the cost.

IPP Advantages

• For employees over age 50, the annual maximum contribution is at least $5,000 higher than the maximum contribution to an RRSP
• Pension benefits are protected from creditors under pension legislation
• Unreduced early retirement benefits, bridge benefits and indexing can be provided - with tax-deductible contributions paid by the company
• Significant past service contributions may be paid by the company for the benefit of the individual business owner
• Surplus accumulations in the pension fund may be transferred to succeeding generation family members employed in the business

IPP Limitations

• There is no provision for spousal contributions as in an RRSP
• IPP pension fund benefits are subject to provincial pension legislation