Who is an IPP right for?
Who is the ideal candidate?
- Incorporated professional or business owner with,
- • T4 earnings of approximately $100,000 or defined benefit limit (i.e. for 2011 $127,611),
- 40 years of age or older
In addition the IPP is best suited to business owners who have well-established businesses that generate consistent profits annually.
Why you should consider an Individual Pension Plan (IPP)?
- Further tax sheltering in excess of RRSP contributions
- Additional tax deductible lump sum contribution at retirement on sale of assets of the company or sale of the company itself
- More prudent investment rules and limitations than RRSP’s
- Full creditor protection
- Pre-planned retirement income
- Succession planning within a family business
- No payroll tax levied on IPP contributions (depends on province)
- All costs associated with the pension plan are tax deductible to the company
What you need to know about IPPs before investing.
- Assets are locked-in and may, in most circumstances, only be withdrawn during retirement
- There is little contribution flexibility – in most circumstances the plan must be funded each year
- IPP affects your client’s RRSP room in the year of setup and subsequent years. In most cases RRSP room is reduced to $600 per annum. To avoid penalties do not contribute to your RRSPs in the year you setup an IPP.
