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Services > Individual/Executive Pension Plans

Individual/Executive Pension Plans

An Individual Pension Plan (IPP) is a defined benefit pension plan. It provides senior executives and business owners with the opportunity to achieve maximum tax relief combined with maximum retirement pension. The IPP is a sound business decision for both entrepreneurs and executives who have the income to support a more aggressive tax deferral arrangement.

To qualify for an IPP, a member must:

  • have T4 income
  • be an employee of an incorporated company which is taxable under the Income Tax Act; and
  • be age 40 or more and earn a minimum of $75,000 from the company sponsoring the IPP. This amount may be lowered to $50,000 provided it is the sole source of taxable income of the individual.

Sponsor advantages

  • tax advantages - all contributions and expenses are tax deductible. The pension benefit is equal to 2% of each year's income, indexed to reflect the increases in the Average Industrial Wage until retirement.


  • ownership of plan assets - depending on the plan rules, any actuarial surplus at retirement may be granted to the member. Within certain limits, the surplus may be used to upgrade pension benefits.
  • guaranteed lifetime income - the IPP offers a predictable retirement income. An actuary determines the current annual funding requirements of the future retirement income. In the event of the member's death after retirement, the surviving spouse will receive 2/3 of the member's pension. However, if the member’s death occurs within 5 years of retirement, the spouse will receive the member's full pension for the remainder of the initial 5 year period.
  • past service funding - for executives and high earners, the IPP funding formula is more generous than the RRSP limits. Considering certain conditions, an IPP allows contributions for years of service prior to plan set-up, as long as the member was employed with the company.
  • terminal funding - Revenue Canada restricts the benefits that can be pre-funded. Granted certain conditions however, the IPP can be amended at retirement to provide the most generous terms possible, including a pension indexed in full to consumer price increases, an early retirement pension with no reduction, as well as bridge benefits.
  • maximum flexibility at termination and retirement - the member has several options when employment is terminated or at retirement. The commuted value of the IPP may be transferred to or invested in a single or joint and last survivor annuity, a locked-in investment retirement vehicle (Locked-in RRSP, LIRA, LIF, or LRIF depending on applicable provincial legislation) or, if permitted under the terms of a new employer’s plan, to the Registered Pension Plan of a new employer.
 
 
 
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