An Individual Pension Plan (IPP) is a made-to-measure plan designed for company owners as well as self-employed individuals whose average annual income is generally over $100,000.
This document presents several of the advantages of the IPP and the Retirement Compensation Arrangement (RCA) over an RRSP.
An IPP is often set up once a company has generated significant earnings and wants to avoid paying too much tax. Employers can choose to pay contributions into their IPP, which will be an expense for the company, reducing its earnings and therefore its tax burden.
Contributions made to the plan by the employer are not a taxable benefit for the plan member.
In other words, company owners can pay contributions into their own IPP to save money for their retirement and cut their company’s tax bill.
Since for this type of pension plan, the plan member and the employer are very often the same person, an IPP offers a number of benefits from both the member’s and the employer’s perspective.