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Home Financial Health Blog Business Owners Individual Pension Plans (IPP)

Individual Pension Plans (IPP)

by Tim Weichel

An Individual Pension Plan (IPP) is a registered pension plan (RPP) with defined benefits designed for an individual.

An IPP is suitable for business owners age 45 and up with T4 earnings of at least $75,000 for at minimum the last two years, who own at least 10% of their company.

Advantages of an IPP

  • The company pays 100% of the contributions
  • The participant makes no contributions
  • With an IPP, tax-deductible contributions can generally be higher than for a Registered Retirement Savings Plan (RRSP).
  • Administration and management fees can be charged to the company, making them tax-deductible
  • Upon retirement, certain additional benefits can be added, leading to an additional contribution and deduction
  • Assets held in an IPP cannot be seized, which means they are protected against creditors

Features of contributions to IPPs

  • Contributions can be made every year, just like contributions to an RRSP. They depend on the participant’s age and salary – the higher the age and salary, the more the company can contribute
  • Contributions are 100% tax deductible for the company and they are not considered a taxable benefit for the participant
  • Depending on the applicable pension legislation, pensions resulting from contributions may be not locked-in
  • The value of a pension resulting from contributions may be converted into a RRIF or a LIF, depending on the applicable pension plan legislation


  • IPPs can generate higher contribution deductions. The participant can buy back years of service dating back to before the plan was setup. By making retroactive contributions for these years, the company can get a tax deduction that the participant wouldn’t have been entitled to as an individual. It’s a win-win situation: greater retirement savings for the participant and a nice tax deduction for the company
  • IPPs protect retirement savings against market fluctuations. Every 4 years, IPPs undergo an actuarial valuation to establish the value of the benefits (actuarial liabilities) and establish whether there is an actuarial surplus or deficit. In the case of a deficit, the company can make up the difference and deduct this investment from its revenues. The company can choose to pay it immediately, stagger payments over several years, or put it off indefinitely.

Who’s eligible for an IPP?

You’re eligible if you:

  • Are over 45 years old
  • Have a yearly salary of more than $75,000 (declared on a T4 slip) from a company considered a taxable corporation under the Income Tax Act
  • Have accumulated years of service to be entitled to make contributions
  • Are a connected person, that is, a person who owns at least 10% of the issued shares of any class of the capital stock of the company. To set up an IPP for an employee who isn’t a connected person, contact us.

To learn more, visit Desjardins web site and to set up an IPP, please contact us at 416-230-2703, 705-798-0062 or tim@timweichel.ca

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