Individual Pension Plan – Tax Strategies from AWM

What Is an IPP?

It is a registered defined benefit pension plan. More specifically, it provides the retiree with a guaranteed income at retirement that's been funded by the corporation; in many cases your own company. The plan must be sponsored and funded by your employer, although the plan member may assist with funding (differs from RRSP, where no employer involvement is required).

The Ideal Candidate

  • Business owner
  • Professional with professional company
  • Executive of private company
  • Age 50 – 56
  • Must be incorporated since 1990
  • T4 income consistently above $100,000
  • Motivated to create wealth

Features of the IPP

  • Greater sheltering opportunity than an RRSP
  • Transfer of assets from a business to a business owner in a tax-deferred vehicle
  • Retirement income guaranteed by the business owner's business
  • Able to top up contributions if investment returns are insufficient to provide promised benefits (unlike RRSPs)
  • Assets are creditor-proof
  • Contributions and fees deductible by employer
  • Opportunity to make deductible lump sum contribution at time of retirement

Retirement Payment Options

  • Purchase an annuity
  • Pay pensioner from the fund (keeping the pension plan running)
  • Transfer to a LIRA or LIF
  • Terminal funding

What are the Advantages of Terminal Funding?

It is an effective strategy for lowering the value of a business for sale to partners, children, or third-party buyers. For more advantages, contact AWM.

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