Individual Pension Plans

If you’re a business owner or an incorporated professional, an Individual Pension Plan (IPP) is an option you should consider to save more money for retirement.

 You can start at any time with an IPP, but especially if you’re over the age of 40 with 10+ years of employment income from your corporation.

 Here are five reasons why an IPP may be better for you than an RRSP:

 1.      Accumulate greater retirement account values. At the retirement age of 65, you could have accumulated twice as much in an IPP vs an RRSP. * See note below.

 2.      Generate significant tax deductions for the Corporation. Contributions your company makes to the plan are tax deductible. On retirement or as part of a sale of the business, significant additional deductions may be available.

 3.      Get passive assets off the Corporation’s balance sheet. Passive assets are cash or investments. If you have over $50K in passive income (income earned off investments), your small business deduction will be clawed back.  The small business deduction is a reduction in corporate taxes for Canadian controlled private corporations. The reduced rate of tax (12% in Nova Scotia for 2019) is available on active business income up to the corporation's business limit for the year. The federal business limit is $500,000 for 2009 and later years

 4.      Creditor proof significant assets. Funds in your IPP are well protected from creditors.

 5.      IPPs are easy to set up and not costly to administer. Here are key steps to set-up an IPP:

a.      Select an Actuary and an Investment Manager

b.     Provide key information (age, employment history) to the Actuary

c.      Actuary sets up a plan for you and will file it with Canada Revenue Agency

d.     Investment manager opens a trust account and manages your funds.

 IPPs are not well understood but represent an attractive option for business owners. If you’d like to learn more, I’d be happy to speak with you.