Personal Pension Plan (PPP): What Is it and How Is it Different from an Individual Pension Plan (IPP)?

Articles Personal Pension Plan (PPP): What Is it and How Is...

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The PPP is a pension plan that is tailored for entrepreneurs, business owners and professionals looking for a better way to save for retirement. It is a newly-created retirement savings plan designed to make setting-up a pension plan much easier and less expensive. The PPP is a worry free solution that resolves the problems associated with conventional Individual Pension Plans (IPP).

Plan features: PPP solutions to IPP problems

  1. Contribution schedule flexibility – The PPP is a combination pension plan. It provides an ‘escape hatch’ by allowing plan members to switch from Defined Benefit to Defined Contribution components and back. Contribution changes can be made annually.
  1. Ability to generate economies of scale – The PPP provider generates economies of scale by spreading resources throughout their entire client pool. These savings are passed down to the client
  1. Plan administration responsibility – The PPP allows clients to delegate administrative duties to the pension manager/provider. Conversely, the IPP makes the client responsible for administrating the plan, hiring actuaries and pension officers.
  1. Requirement to be age 40+ to benefit – Clients under the age of 40 are eligible to open a PPP. By saving through the Defined Contribution component of the plan you can contribute up to $440 more than in an RRSP in 2015. In addition, PPP clients can take advantage of tax savings that are unavailable to RRSP savers (tax deductions for fees and for interest paid on borrowings).
  1. Misconception: Must earn higher salary to benefit – Clients could set a modest salary level to avoid excess personal taxes and save under the PPP’s Defined Contribution component of the plan (for example, if they prefer splitting dividends or saving retained earnings in a holding company). They can also get large corporate tax deductions connected to investment management and administrative fees, if they transfer RRSP assets into the Additional Voluntary Contribution (AVC) subaccount.
  1. Fiduciary obligations – The Client’s Corporation delegates administrative and fiduciary duties to the pension manager/provider. Clients have unlimited access to an online reporting tool and are able to track progress
  1. Investment options – The PPP provider can give clients exposure to more robust institutional pension-style investing, through its established relationships with specialized corporate trustees
  1. Locked-in nature of pension amounts – Amounts transferred from an RRSP to AVC subaccount and voluntary contributions made to the AVC subaccount are covered by pension legislation and protected against creditors, but are not locked-in by the PPP. Clients can access AVC assets when necessary


For inquires about the Personal Pension Plan, and to receive a complimentary retirement savings illustration, contact us at Dedicated Financial Solutions. We’re happy to introduce and discuss this pension plan option to business owners, entrepreneurs and professionals!