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Individual Pension Plans (IPPs)

Tony Maiorino - CFP, PFP, Vice President and Director, Head, RBC Wealth Management Services

“For incorporated business owners or professionals, or key employees, an IPP may be beneficial for enhancing retirement income.”

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Are you an incorporated business owner or professional receiving T4 income while contributing to an RRSP?

If so, you may want to consider an Individual Pension Plan (or IPP).

An IPP is a defined benefit pension plan your company can set up for you.

An IPP is ideal if you’re between the ages of 40 and 71, earning T4 income, and have owned your company for several years.

With an IPP, you can make higher annual contributions than an RRSP...

...and gain the ability for your company to make a large tax-deductible past- service contribution.

In addition, the company can make a top-up contribution if IPP assets fail to grow by 7.5% per year with adjustments.

Here’s a chart showing a comparison of IPP funds versus RRSP funds for someone who is 50 years old, with 23 years of past service.

As you can see, the ability to make a large past-service contribution, along with the increased annual IPP contributions, result in a higher registered plan balance.

While IPPs do involve more complexity and have higher annual fees than RRSPs, the fees are fully tax-deductible.

Consider having your RBC Wealth Management advisor run a customized IPP illustration, and then speak with your advisors to determine if an IPP is right for you.