IPP / RPP

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 (ITA); and
• be age 40 or more and earn a minimum of $75,000 from the company sponsoring the IPP

Sponsor advantages
• guaranteed lifetime income - the IPP offers a predictable retirement income
• tax advantages - all contributions and administration expenses are tax deductible
• tax deductible contributions are often larger than under an RRSP
• past service funding - for executives and high earner, the IPP funding formula may, under certain circumstances, recognize past service and be more generous than RRSP
• ownership of plan assets - depending on the plan rules and ITA restrictions, any actuarial surplus at retirement may be granted to the member

RPP

A form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the Canada Revenue Agency. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires.

Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax deferred, so the funds are taxed when they are withdrawn from the plan.