Explainer
The individual pension plan, explained like a person
An IPP can move more money into retirement savings than an RRSP for the right owner. It also comes with an actuary, filings and commitments. Here is the whole picture.
An individual pension plan, or IPP, is a registered defined benefit pension plan built for one person, usually the owner of an incorporated business. It exists because of an arithmetic fact: for an owner in their 40s, 50s or 60s earning a strong salary, the pension rules allow the corporation to contribute more, sometimes considerably more, toward retirement than the RRSP limit allows. Whether that arithmetic wins in a real case depends on the owner's age, salary history, and how long the corporation will keep funding it.
How an IPP works
The corporation contributes, and deducts. Contributions are made by the corporation and are a deductible corporate expense. They are calculated by an actuary to fund a defined retirement pension, based on the owner's salary and years of service, including, in many cases, buying back past service with a lump sum contribution at setup.
An actuary runs the machinery. This is stated plainly because it is the part brochures soften: an IPP is set up and maintained by an actuary. The plan must be registered, actuarial valuations are required on a regular cycle, annual filings are made, and there are real setup and ongoing administration costs. Those costs are part of the honest comparison, and any illustration that leaves them out is not a fair one.
Why owners consider one. Higher contribution room than an RRSP at older ages, because a defined benefit promises a pension and the funding math grows with age. Corporate deduction of contributions and of the plan's administration costs. A pension asset that is generally protected from creditors. And at retirement, the possibility of additional deductible corporate contributions to top up the plan (often called terminal funding), depending on the plan's position and the rules at the time.
Why owners decide against one. The contributions are a commitment: a defined benefit plan expects funding discipline in lean years too. The money is pension money, locked to pension rules, not a flexible corporate investment account. Withdrawal and surplus rules are technical. And for a younger owner, the RRSP is often the simpler and better answer, because the IPP advantage grows with age.
Who does what, stated plainly
An actuary designs, registers and maintains an IPP, and only an actuary can. Your accountant confirms the corporate tax picture. Wealth Champions' role is education and coordination: helping you understand whether the IPP question is even worth an actuary's quote in your situation, and making sure the pension decision fits the rest of your plan, your salary and dividend mix, and your exit thinking. If an IPP is right for you, we refer the work out to the professionals who implement it, and stay in the coordinator's seat.
Wondering if an IPP fits your numbers?
The honest first step is not a quote. It is a conversation about age, salary history and how long the corporation will fund a plan, which decides whether an actuary should even be engaged. That conversation is free, and it is 30 minutes.
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Reach out during working hours (9:00 AM to 9:00 PM Eastern) and you will hear from Sean within 2 hours. Reach out after hours and you will hear from Sean within 2 hours of the next working period.
Scope and sources
This page is education only. It is not pension, tax or legal advice, and it does not recommend an IPP for any specific person. Pension rules are technical, they differ in detail by province of employment, and they change; any real case starts with an actuary's feasibility work. Figures comparing IPP and RRSP room are deliberately not shown as a generic table here, because the honest comparison is personal: it depends on age, salary and service, which is exactly what the feasibility work calculates.
Sources: Income Tax Act and Regulations provisions governing registered pension plans and individual pension plans (including the defined benefit funding and past service rules, described in plain language); Canada Revenue Agency registered pension plan guidance; Financial Services Regulatory Authority of Ontario pension plan administration requirements.
You do not have to sort this out on your own.
You don't have to figure this out alone. I'm here to help you through every step.
Reach out during working hours (9:00 AM to 9:00 PM Eastern) and you will hear from Sean within 2 hours. Reach out after hours and you will hear from Sean within 2 hours of the next working period.