Individual pension plans

Canadians should look for every advantage when it comes to saving for their retirement. For instance, there may be a special opportunity to increase your retirement savings by using an Individual Pension Plan (IPP).

An IPP is simply a defined benefit registered pension plan (RPP) that is set up for one individual.

IPPs are most commonly set up for employed individuals, including professionals, who operate or carry on an active business through a company.

In this case, the company establishes the IPP for the employee-owner. It is also common to see an IPP established by a company for a senior executive as part of an overall compensation package.

While we use the term “individual” pension plan, it’s quite common in the case of employee-owned companies to also include a spouse and children as members of an IPP when those individuals are employed in the business.

In the right individual circumstances, the amount of money that can be contributed to an IPP can be much greater than the amount that can be contributed to a Registered Retirement Savings Plan (RRSP) in a given year.

As a result, it’s worth looking at IPPs as an alternative to RRSPs in saving for retirement for employed business owners.

This bulletin is designed to help with determining whether an IPP might make sense for you.