An Individual Pension Plan (IPP) is a defined benefit pension plan that offers higher tax-deductible contributions and accelerated tax-deferred growth compared to a RRSP. It provides a guaranteed lifetime retirement income based on a formula of the member's age, salary, and years of service. Key advantages include guaranteed pension benefits, potential for higher contributions, ability to make past service contributions, and creditor protection. However, it also has disadvantages like reduced RRSP limits, inability to access funds before retirement, and higher setup and administration costs than other plans. An IPP may be suitable for business owners, executives, or employers seeking enhanced retirement benefits for key employees.

1. Individual Pension Plans
Comprehensive
A tax-advantaged investment strategy that could boost retirement savings
Retirement Planning
Why an IPP is unique
You should consider Is an IPP for you?
an IPP if you are ...
Your maximum
benefit will be …
ED MADRO B.A. Econ., CPCA
Consultant
An Individual Pension Plan (IPP) 3 a fixed dollar maximum for each
is a special type of registered plan An IPP is a defined benefit (DB) pen- year of credited service under the
designed primarily to meet the needs sion plan where the amount of the IPP (the fixed dollar maximum is
of highly paid owner-managers, pension is “defined” or “guaranteed” raised annually).
professionals and senior executives, at retirement according to a formula As an example, assuming the dollar
to provide maximum retirement based on the participant’s age, salary limit has increased to $2,800 by
benefits, and creditor protection. and years of service. Because it is a 2015, and an IPP plan member
Compared to a traditional Registered registered pension plan, employer retires in that year with 25 years of
Retirement Savings Plan (RRSP), an contributions are tax-deductible and credited service, the annual lifetime
IPP may offer higher tax-deductible investment earnings grow on a tax- pension would be $70,000 (25 X
contributions and accelerated tax- deferred basis until they are used to $2,800) plus annual indexing.
deferred growth of retirement assets. pay pension income from the IPP.
One of the main benefits of an IPP
An IPP can be a tax-effective retire-
is the ability to purchase past service
ment income-building strategy for
3 at least 40 years of age and consis- back to 1991, just as if you had been
you and your business – but it is a
tently earning a T4 salary of at least an IPP member during those years.
more complex undertaking than a
$100,000 a year
simple RRSP. We can help you assess
3 the owner of an incorporated com- whether or not an IPP makes sense
pany or a salaried, high earning ex- The objective of an IPP is to maxi- for you personally or for your com-
ecutive looking for maximum tax mize tax savings now and provide a pany – including a no-cost consulta-
relief and retirement pension maximum pension at retirement – so tion for establishing, funding and
the available benefit is the maximum operating an IPP program in your
3 an employer who wants to company. Talk to us about your IPP
enhance retirement benefits for pension allowable under tax rules.
This benefit is based on the today.
a key employee
maximum of
3 an owner/manager wishing to cre-
ate additional retirement income 3 2% of a plan member’s total
outside the company earnings while a member of the
IPP(the earning are indexed to in-
3 looking for creditor protection creases in the average wage), or
3 not a member of another registered
pension plan.
continued on next page

2. Comprehensive Retirement Planning
Does an IPP fit into your plan?
Advantages Disadvantages
continued from previous page
3 Guaranteed and predictable lifetime retirement income 3 Reduction in RRSP contribution limits for members
3 May provide significantly higher contributions than allowed by RRSP 3 Funds are locked in so you can’t access cash before retirement
3 May permit lump-sum contributions for past service back to 1991 – 3 Initial set-up fees, annual expenses and filing fees are higher than for
enabling you to significantly increase the amount deposited in the other types of registered pension plans. For example, every three years,
IPP and/or move excess company cash from the company to your the level of IPP funding is established by actuarial valuation
tax-deferred IPP 3 If there is an IPP deficit, the company must increase the level of funding
3 Set-up and administration fees are tax-deductible to the employer
3 Employer contributions are tax-deductible to the company
3 Investments grow on a tax-deferred basis
3 IPP surpluses belong to the employee and do not stay in a fund that is
used by the company to pay benefits
3 The surviving spouse of an IPP member can receive at least two-thirds
of the pension
3 Retirement benefits are indexed for inflation
3 Creditor protection that is unavailable to trusteed RRSPs
(in most provinces)
3 IPP benefits are eligible for pension income-splitting regardless of age
ED MADRO B.A. Econ., CPCA
Consultant
edward.madro@investorsgroup.com
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“Individual Pension Plans” ©2011 Investors Group Inc. (04/2011) MP1370
Investors Group Financial Services Inc.