Updated September 9, 2021 taking into consideration the release of the Province of Ontario’s Bill 213.
If you’re looking for alternative to a Registered Retirement Savings Plan ("RRSP"), an Individual Pension Plan ("IPP") may be an option.
An IPP is a registered retirement vehicle that is established by a corporation (known as the Sponsoring Corporation) for an individual (or more if the participants are family members) - a shareholder or executive who hold (directly or indirectly) no less than 10 per cent of the shares in the corporation and receive a salary from the corporation.
Like an RRSP, an IPP serves as an investment account used to accumulate assets over time for your retirement on a tax-deferred basis. It also acts like a “traditional” pension plan with the monthly income at retirement being defined under an IPP.
IPPs can be a valuable option for retirement and tax savings for several reasons, amongst which include:
Of course, an Individual Pension Plan also has a few disadvantages for both the participant and the Sponsoring Corporation. The following outlines some potential disadvantages.
Knowing the difference between an IPP and an RRSP is crucial for any business owner planning for their eventual retirement.
While an IPP may offer better retirement saving opportunities to eligible individuals, IPPs are complex and may not be appropriate for everyone. Our team of tax and advisory professionals are ready to help you determine if an IPP is a good retirement strategy for you and will provide strategically tailored advice so that you’re confident in making the right choice for your specific situation.