IPPs provide the maximum pension benefits allowed under the Income Tax Act. IPP contribution limits increase as the recipient approaches retirement, and can exceed the maximum limit contributed annually to an RRSP by 167%. MP Wealth Advisory is recognized as a leading firm for the implementation and ongoing management of IPP financial assets.
Individual Pension Plans (IPPs), are an effective investment tool for entrepreneurs, incorporated professionals and key personnel/executives. They are a privately sponsored registered defined benefit pension plan often implemented to use corporate profits/retained earnings, in a tax effective manner, to enhance and stabilize an individuals income in retirement. The eligible pension amount at retirement is based on an individual's years of pensionable service to the corporation and income (T4 earnings) history.
IPPs allow the sponsoring corporation to make higher contributions than what is allowed for an individual under an RRSP and receive a corresponding tax deduction for doing so. The ideal candidate is between the ages of 40-71, receives T4 income from an incorporated business of approximately $135,000 or more, and the business either has or is expected to have surplus revenue/retained earnings to contribute towards the pension. Pension plan contributions increase with age. The older you are the more your company can contribute to your IPP.
In addition to the "typical" use of IPPs, they can be an effective tool in other situations such as succession planning, intergenerational wealth transfer and various partner/shareholder buyout scenarios. Our firm is committed to working closely with your professional advisors (accountant and legal), to ensure that both the sponsoring corporation and the pension recipient receive the maximum benefit from an IPP.
There are a number of key incentives for the establishment of an IPP:
- Allows for on-going contributions higher than RRSP limits
- More prudent investment rules and limitations than RRSPs
- Creditor Protection
- Drive down the value of a corporation or trust
- Enhanced income security in retirement
- Tax effective tool to move corporate profits/retained earnings into and individuals retirement savings
- Potential for significant contribution amount (Terminal Funding) upon retirement or sale of the business
Contact us today for more information, or to schedule an initial consultation.