Retirement Savings for Business Owners Part Two: The Individual Pension Plan

Articles Retirement Savings for Business Owners Part Two: The Individual Pension...

If you haven’t already thought about starting an Individual Pension Plan (IPP), they’re worth looking into. The IPP is a registered pension plan for business (CCPC) owners and incorporated professionals such as doctors, lawyers, architects and consultants. The IPP overcomes some of the limitations of the tried-and-true Registered Retirement Savings Plan (RRSP), giving plan members the peace of mind everyone saving for retirement deserves.

Features of Individual Pension Plans

  • Higher contribution limits than RRSPs
  • Ability to invest in assets not eligible for RRSPs
  • Full-service plan administration
  • Fiduciary obligations delegated to the pension provider
  • Superior creditor protection
  • All fees are tax-deductible and admin fees eligible for HST rebate
  • Excellent tool in succession planning


Offers more than an RRSP

One of the advantages of the IPP compared with the RRSP is that the IPP allows you to split pension income with a spouse 10 years earlier. And it does so with advantages at just about any pension income level.

With an RRSP, to split pension income the pensioner must be over 65. If you have an IPP, you can choose to start splitting your pension income when you’re 55. If you’re in the situation where your partner does not have a pension plan, you can start generating tax savings 10 years sooner than with an RRSP.

Another important feature of the IPP is superior creditor protection. In half of Canada’s provinces, RRSPs are not protected against the claims of creditors (unless the assets are within an insurance contract issued by a life insurer for which a beneficiary has been properly designated). Even in jurisdictions where RRSP holdings are protected from creditors, no protection is provided for contributions made in the 12 months before the bankruptcy date.

Pension plans, in contrast, are fully protected from creditors, even if bankruptcy is declared. If your business operates in a volatile industry, this could be a key feature for you.

An important advantage of IPPs is their ability to invest in certain asset classes not available, or essentially not available, to RRSP investors. One example is investing in shares of private companies, which is very difficult within an RRSP (though technically legal). A big advantage of access to these types of assets is that they allow you to diversify beyond the public markets. Private equity very often outperforms the public market. With an IPP, that outperformance is tax-deferred.

Another bit of savings comes from the fact that pension plan administrators can claim a 33% HST credit on fees they pay to manage IPPs, something not available to RRSP administrators.

Is it right for you? Talk to DFS Private Wealth

Because analyzing your individual circumstances is critical to the investment decisions you make, get in touch with DFS Private Wealth for a personal assessment of your situation and we can discuss whether an IPP is the right retirement savings solution for you. DFS Private Wealth will work together with you to ensure that your retirement needs are met. You’ve invested a lot of time, money and energy in building your business. Our expert financial advisors will work just as hard to provide you with the level of service you expect.