An IPP is a designated defined benefit pension plan providing greater tax deferred contributions than those available through a Registered Retirement Savings Plan (RRSP). For individuals over age 50, annual IPP contributions are higher than an RRSP.

WHO QUALIFIES FOR AN IPP?

Normally, it’s the individual business owner. However, a company may have more than one employee where a defined benefit plan is appropriate and a combined plan may be more suitable. Husband and wife situations are ideal for a two person designated plan.

IPP ADVANTAGES

• For employees over age 50, the annual maximum contribution is at least $5,000 higher than the maximum contribution for an RRSP.
  
• Pension benefits are protected from creditors under pension legislation.
  
• Can provide unreduced early retirement and bridge benefits and indexing
  
• Contribution amounts increase with age.
  
• If past service is being provided and the individual has contributed to an RRSP since 1990, they must transfer their RRSP funds to the IPP. The company pays the balance of the cost to provide for past service to 1990.
  
• It may be possible to provide benefits prior to 1990. The value of the pre-1990 benefits per connected* persons cannot be greater than the value of pre-1990 benefits for non-connected person.
  
• IPP contributions and expenses are fully tax deductible to the business. These deductions could reduce corporate profits, or can be used to decrease the amounts required to be withdrawn as bonuses to bring the corporation in line with lower tax rates applicable to small business income. ** If the company borrows or amortizes the past service cost, interest charges are also deductible.