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What is an Individual Pension Plan?
When you’re looking for a retirement income plan that offers more room for growth than an RRSP, high-value executives and business owners have the option of implementing an individual pension plan, or IPP. An IPP is a financial instrument that provides a similar income structure to a Registered Retirement Savings Plan, although it has a much higher corporate contribution limit and better income tax shielding.
Why choose an IPP plan?
IPP plans are ideal savings instruments for any high net worth individual who is a business owner or is an executive of an incorporated company. IPP plans have certain advantages over RRSPs in that typical plans have a higher contribution limit – sometimes 25% – 90% higher. What’s more, these plans’ benefits only increase with age.
Make larger contributions with an IPP
IPP plans offer unique retirement contribution options exclusively for corporate executives with a long history of service to their company. Executives are granted the option of contributing based on years of service to the company prior to the plan’s enactment. At retirement, IPP plans can also be revised in order to receive better benefits, like early retirement pension without penalties.
IPP Corporate tax benefits
As an added bonus for business owners, every contribution your company makes to IPP plans is tax deductible, as are associated portfolio management fees, set-up fees, and other maintenance costs. You’ll effectively be preparing for the future while minimizing taxable income through your business.
Security against creditors and termination
Most IPPs are usually protected from creditors, should the contributing business be met with financial strife. RRSPs also benefit from similar protection, but most often in the case that the plans have included life insurance benefits. IPPs tend to be generally less solvent in times of corporate financial turmoil. Also, in the case of plan termination, loss of your employment or early retirement, your contributions are accessible to you so long as the plan’s annuity is paid for.
The ideal individual pension plan holder
To benefit the most from this plan, you may
Be close to retirement age (ideally 45 – 60 years of age)
Own or act as executive to a corporation
Make at least $100,000 per year
If you fall into these categories, an IPP may be your ideal retirement planning instrument.
Considerations to be made
While individual pension plans can be extremely useful, it’s important to know this instrument’s use case. If you have the potential to experience financial hardship before you reach retirement, you won’t be able to deregister corporate contributions for personal use.
IPPs offer a great deal of financial protection for spouses of the plan member, as well. In the event of the plan member’s death, spouses receive ⅔ of their pension, which may be upgraded to full pension benefits if the member has already retired.
An individual pension plan is still an uncommon retirement savings option. Because of this, it’s hard to find the right financial team that can construct and help manage an IPP plan retirement strategy. Out of all of Canada’s financial advising firms, only a small amount of teams specialize in implementing these plans.
A team you can trust
MLD Wealth Management’s team benefits from its members’ years of experience in IPP plans and other retirement wealth management strategies to give its distinguished clients a selection of savings options. When you allow us to establish an IPP for you and your business to both contribute into, you’ll be financing your future while minimizing your corporation’s tax dues in a unique and cost-effective way. Contact MLD Wealth Management today to book an introductory briefing on what retirement savings plan is right for you.