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Individual Pension Plans

Many professionals and small business owners should take advantage of this worthwhile retirement strategy. Certain reductions in reporting and administration make it possible to provide such arrangements at a substantially reduced cost.

The IPP differs from a traditional self directed RRSP in certain key areas.

• The IPP is a trust created arrangement and as such can provide bulletproof creditor protection from personal and corporate creditors.
• Is an excellent tool in succession planning for the small business owner.
• The contributions to an IPP are graduated by age, and as such as the individual grows older so their contributions increases by a rate of 7.5% per year unlike the RRSPs fixed maximum of $14,500. For example an individual who is earning $100,000 per at age 55 can contribute $22,400 for that year as opposed to the $14,500 limit imposed under RRSP rules.
• The IPP is funded with a past service contribution, composed of a rollover of existing RRSP assets and an additional company contribution. This contribution can often be in the hundreds of thousands of dollars.
• Unlike an RRSP which face the consequences of long term poor markets the IPP has an ongoing actuarial valuation requirement of 7.5% which may require additional contributions if the portfolio has underperformed those mandated requirements. This allows the security of knowing what funding will be available upon retirement.
• An RRSP has no rules on diversification while the IPP mandates a safety first approach by ensuring that the portfolio is not allowed to invest more than 10% of its assets in any one investment. The 30% foreign content restriction applies in both instances.
• The IPP rules permits lump sum payments to the Plan upon retirement in order to fund early retirement prior to age 65 and enhanced indexing.