Registered Savings Plans / IPPs - Individual Pension Plans
IPPs - Individual Pension Plans
If you are a business owner, incorporated professional or an executive you can get up to 65% more into your retirement fund while your company makes large tax deductible contributions on our behalf or to benefit your family members or key executives.
Who Needs IPPs?
The ideal candidate would be a business owner or incorporated professional over age 40 who is in the top marginal tax bracket. For the proper candidates, an IPP is an excellent way to have your company make large tax deductible contributions to your retirement fund. The IPP works similarly to an RRSP in that it uses an investment account to accumulate your retirement benefits. However, unlike an RRSP, an IPP provides certain guarantees and has safer investment rules.
What are some of the KEY BENEFITS
An Individual Pension Plan (IPP) is an alternative to an RRSP that allows business owners and professionals to defer taxation in far greater amounts than with an RRSP. IPPs provide much larger tax deductions than RRSPs. Accordingly, business owners can build significantly larger retirement assets with an IPP.
An RRSP allows a taxpayer to save 18% of the previous year's earned income, up to a maximum dollar limit (currently $22,000 in 2010), regardless of their age. By contrast, the IPP contribution is age-related. It grows each and every year. For example, for a 40 year old earning $122,222, the 2009 IPP contribution limit is $23,022. For a 50-year old, the 2009 contribution limit is $27,778, and for a 65-year old it is $36,816.
You also get a credit for pension purposes in respect of years of past service with the company. This creates a cost that requires supplementary tax-deductible contributions that can be funded in one instalment or over a period of up to 15 years from your corporation. For example, a 50-year old who has earned $100,000 or more since 1991 would be able to contribute approximately $160,000 to fund the past service payable for their pension. At the time of retirement, if there is cash available in the company, the Income Tax Act allows for "terminal funding" to improve the pension and this creates a tax deduction that can be in excess of $350,000.
One of the top benefits of an IPP is that these higher contributions allow one to defer taxation of corporate income and tax free investment growth. This can amount to hundreds of thousands of dollars over the long-term. The IPP is the answer to many important retirement planning issues, such as lower RRSP contribution limits, inflation adjustment in retirement, tax free growth, survivor income and advanced estate planning.
|
|
|
|
Key Benefits
Allows for larger tax deductible contributions to your retirement fund
Potential for significant up front contribution
Assets in plan are 100% creditor proof
Provides pre-determined retirement benefits (Defined Pension Plan)
Allows for additional significant tax deductible contribution at retirement
Pension surpluses belong to the member
Safer investment rules than an RRSP
All costs associated with the IPP are tax deductible to the company
Additional contributions can be made if the return on plan assets does not exceed 7.5%
|
