An IPP is well suited for: Business Owner Incorporated Professional Over age 40 $100,000+ in T4 Earnings

* *An IPP can be established for someone with lower earnings

1. Increased tax deductible contribution room – up to 65% more than an RRSP
2. Can reduce passive income in Corporation
3. Tax deductible contributions for prior years (past service)
4. Richest benefit plan in Canada – 2% defined benefit pension plan
5. All costs are tax deductible to the company
6. Creditor Protection
7. Increased corporate and personal tax savings
8. Can include employed family members and pass on wealth to the next generation

An IPP is similar to an RRSP in that it uses an investment account to accumulate assets over time as retirement benefits. However, unlike the RRSP, an IPP allows for the accumulation of greater assets – up to 65% more than an RRSP – and like a traditional pension plan, sets your monthly income at retirement. An IPP also provides certain additional guarantees beyond an RRSP to further protect your financial future (assets accumulated within an IPP are locked-in and may be used only for retirement purposes).

AGE               RRSP Contribution         IPP Contribution        IPP Advantage
45                      $27,830.00                     $33,700.00              $5,870       21%
50                      $27,830.00                     $37,000.00              $9,170        33%
55                      $27,830.00                     $40,600.00              $12,700     46%
60                      $27,830.00                     $44,600.00              $16,770      60%
65                      $27,830.00                     $49,800.00              $18,970      68%

IPP contributions are determined by a series of actuarial valuation reports in order to ensure the plan has sufficient assets at the time of retirement. Annual income at retirement age is calculated using: The member’s career T4 and T4PS earnings The member’s age Assumptions determined by the actuary, which are acceptable to Canada Revenue Agency (CRA) Contributions are graduated by age, so the older the member, the more their company can contribute. IPP contributions first exceed RRSP contributions around age 40. The annual contributions compounded at a 7.5% net annual rate of return will ensure your client’s plan has adequate assets to provide for their retirement benefits.

Once the member retires, they have a choice of retirement vehicles. These include a monthly pension from the plan, an annuity, a Life Income Fund (LIF), or a Locked-In Retirement Income Fund (LRIF). If an annuity is chosen, you would obtain a market comparison and choose the insurer. The plan will then transfer funds from the IPP to the life insurance company to purchase the annuity. Annuities can be either single life, covering the life of the plan member only or, if married at date of retirement, a joint & survivor (J&S), with payments that may reduce on the death of the member. The J&S option usually includes a minimum guaranteed period of 5 years and subsequent payments to the surviving spouse in full or reduced by a percentage selected at the time of retirement.