If you are a business owner, entrepreneur or executive, an Individual Pension Plan (IPP) may be just what you are looking for.
An IPP is a registered plan that contains a defined benefit provision.
They are typically created for owners of a private company. However, they may also be established for other high level employees. It is an effective tool for higher income earners ($100k+).
Benefits include:
- Potential contributions higher than RRSP limits.
- Interest on funds borrowed to contribute are tax deductible for the corporation.
- If the return on the IPP is below the target in a given year it can be topped up by the corporation.
Although fees are deductible for tax purposes, setup and annual fees can be substantial, as the maintenance of the plan requires actuarial calculations.
Assets in the IPP are effectively locked in until retirement, and in the event of bankruptcy, may be protected in the existing IPP form.