IPP: A tax-advantaged investment strategy that could boost retirement savings
An Individual Pension Plan (IPP) is a special type of registered plan designed primarily to meet the needs of highly paid owner-managers, professionals and senior executives to provide maximum retirement benefits and creditor protection. Compared to a traditional Registered Retirement Savings Plan (RRSP), an IPP may offer higher tax-deductible contributions and accelerated tax-deferred growth of retirement assets.
You should consider an IPP if you are:
- at least 40 years of age,
- consistently earning a T4 salary of at least $100,000 a year,
- the owner of an incorporated company or a salaried, high earning executive looking for maximum tax relief and retirement pension,
- an employer who wants to enhance retirement benefits for a key employee,
- an owner/manager wishing to create additional retirement income outside the company,
- looking for creditor protection,
- not a member of another registered pension plan.
Why an IPP is unique?
An IPP is a defined benefit (DB) pension plan where the amount of the pension is “defined” or “guaranteed” at retirement according to a formula based on the participant's age, salary and years of service. Because it is a registered pension plan, employer contributions are tax-deductible and investment earnings grow on a tax-deferred basis until they are used to pay pension income from the IPP.
One of the main benefits of an IPP is the ability to purchase past service back to 1991, just as if you had been an IPP member during those years. For example, if your IPP is established in 2007, you could receive immediate credit for up to16 years of service between 1991 and 2006 inclusive.
The objective of an IPP is to maximize tax savings now and provide a maximum pension at retirement – so the available benefit is the maximum pension allowable under tax rules.
Does an IPP fit into your plan?
An IPP can be a tax-effective retirement income-building strategy for you and your business – but it is a more complex undertaking than a simple group RRSP. Investors Goup can help you assess whether or not an IPP makes sense for you personally or for your company – including a no-cost consultation for establishing, funding and operating an IPP program in your company. Talk to an Investors Group Consultant about your IPP today.
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This article, written and published by Investors Group, is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.
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