Individual Pension Plan (IPP)

IPPs have been approved by the Canada Revenue Agency. They offer the best tax and retirement savings solution for individuals 40 years of age and older who have T4 income from their company of more than $127,611 (2011). Ideal candidates have also historically maximized their Registered Retirement Savings Plans (RRSPs) and pension contributions. In order to qualify, income must be T4, not dividend or investment income. This is because, as with all pensions, there must be an established employer-employee relationship.

IPPs are alternative retirement savings vehicles that allow for enhanced tax relief and increased pension benefits above and beyond those available through RRSPs and other retirement plans. They can be set up for one person or for a group of employees within the same company.

An IPP is sometimes referred to as an RRSP upgrade; but it is actually a Registered Defined Benefit Pension Plan, and is typically designed to deliver the same legislated payout limit applied to retirement benefits that a member of a defined pension plan can receive in retirement. This limit is about $ $2,500 per year of service $2,552 for 2011). So it is really a pension alternative, not an additional pension like a Retirement Compensation Arrangement (discussed later). Also, a typical IPP will produce a maximum pension adjustment similar to that of most other pension plans, so going this route means that there may be no further room for RRSP contributions.

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