The Individual Pension Plan (IPP)

An IPP is a registered pension plan which provides the maximum defined benefits permitted by Canada Revenue Agency. As a retirement savings alternative to an RRSP the IPP permits employees, including connected persons (10% + share ownership), to accumulate a larger retirement fund. This is due to the fact that annual tax-sheltered contributions are greater than those permitted by an RRSP.

An IPP is a registered defined benefit pension plan sponsored by the employer with membership limited to an individual and spouse. Special rules govern contributions and investments and each IPP must be register with CRA and the appropriate provincial authority.


Maximum annual tax deductible employer contributions to the IPP/RRSP combination are substantially (25% to 70%) higher than maximum RRSP contributions alone.

The IPP is regulated by both CRA and provincial Law so as to be creditor-proof. Recent court decisions have cast doubt regarding RRSPs creditor-proof status.

All contributions made and expenses incurred to establish and maintain the IPP are tax deductible to the employer. The expenses may also be paid from the IPP fund.

The IPP guarantees a certain level of pension benefits at retirement. Because of this, the IPP, unlike the RRSP, permits additional contributions if the plan assets earn less than 7.5%. In addition, if the plan member retires before age 65, additional terminal funding of an IPP is available; this can amount up to 50% of the then accumulated IPP assets.

Past Service after 1990
Past Service may be established for years after 1990 without a corresponding plan for non-connected employees. This feature can provide additional tax sheltered contributions.

RRSP Transfer
When post-90 past service benefits are provided, the value of these benefits, called a Past Service Pension Adjustment (PSPA), is imposed upon the member's RRSP by CRA. The PSPA is then eliminated by withdrawing RRSP assets or transferring them to the IPP. The total amount of RRSPs transferred may be equal to $8,000 less than the PSPA.

Allowable investments for an IPP are similar to those permitted for RRSPs. The IPP "fundholder" may be a Life Insurance Company or a Trust administered by three individual Trustees. As with RRSPs, the plan member, through the Trustees or Life Insurance Company, may make the investment decisions or delegate them to a professional money manager.

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