An Individual Pension Plan (IPP) is an alternative to RRSPs for many high income business owners because it offers:
- Guaranteed Pension
- Creditor Protection
- Succession and Estate Planning
An IPP offers both maximum tax relief and a maximum retirement pension to guarantee lifetime income. Any surplus in the plan belongs to the client. Normally a tax liability is imposed on the death of the second spouse for registered assets in the estate, but an IPP can be an effective way to maintain a family business by passing on registered assets to the second generation on a tax deferred basis.
Some key features of an Individual Pension Plan are:
- All contribution amounts paid by the company are tax deductible
- Creditor Protection, most RRSP’s are not creditor proof which is of great importance to business owners
- Fees associated with setting up an Individual Pension Plan are tax deductible
- Guaranteed Pension Amount
- Succession/Estate Planning Tool
- The IPP is professionally managed and subject to stricter investment disciplines than RRSPs.
- A targeted rate of return of 7.5% and can increase contribution room if that return is not achieved
- If a company borrows to put in an Individual Pension Plan tax on the interest is deductible whereas borrowing for an RRSP is not
Do you think an IPP would help your financial planning? Contact Us!