When it comes to retirement planning, most Canadians think of RRSPs (Registered Retirement Savings Plans) and TFSAs (Tax-Free Savings Accounts). But for incorporated business owners and professionals, there’s another option that can provide significant advantages: the Individual Pension Plan (IPP).

IPPs aren’t for everyone, but if you’re earning a high income and want to maximize tax-deferred savings while planning for retirement, they may be worth serious consideration.

What Is an IPP?

An IPP is a defined benefit pension plan set up for one person, usually a business owner or incorporated professional. Unlike an RRSP, which is contribution-based, an IPP provides a predictable retirement income based on your earnings and years of service.

The contributions are made by your corporation and are tax-deductible for the company. The funds inside the plan then grow tax-deferred until you retire and start drawing income.

IPPs vs. RRSPs

Most Canadians rely on RRSPs for retirement, but there are some important differences:

• Contribution Limits: RRSP contributions are capped at 18% of your income (up to $32,490 in 2024). With IPPs, the contribution room increases with age, meaning older professionals can often put away much more than in an RRSP.
• Tax Deduction: RRSPs give you a personal tax deduction. With IPPs, the contributions are made by your corporation, reducing corporate taxable income.
• Retirement Income: RRSP withdrawals are uncertain and depend on investment returns. An IPP, being a defined benefit plan, provides a predictable retirement payout.

IPPs vs. TFSAs

TFSAs are another popular retirement tool—but they serve a different purpose:

• Contribution Room: TFSAs have a lifetime limit of $95,000 (2024), far lower than what can be accumulated in an IPP.
• Withdrawals: TFSA withdrawals are tax-free, while IPP withdrawals are taxable as pension income.
• Best Use: TFSAs are great for flexible, tax-free savings. IPPs are better suited for long-term, high-value retirement planning.

Why IPPs Matter for Business Owners

For Nova Scotia business owners and incorporated professionals, IPPs can be especially valuable because:

1. Higher Contributions After Age 40 – If you’re an established professional in your 40s, 50s, or 60s, an IPP lets you contribute significantly more than an RRSP.
2. Tax Efficiency – Contributions reduce your corporation’s taxable income, while assets grow tax-deferred.
3. Creditor Protection – Pension assets in an IPP are generally protected from creditors, an important safeguard for entrepreneurs.
4. Intergenerational Planning – In some cases, IPPs can be structured to continue benefiting your spouse or heirs.

Is an IPP Right for You?

An IPP may be ideal if:

• You are an incorporated professional or business owner,
• You earn more than $150,000 annually,
• You’re over 40, and
• You want to contribute more to retirement savings than RRSP limits allow.

If you’re younger or need more flexible access to funds, RRSPs and TFSAs may be better.

Final Thoughts

An IPP isn’t a one-size-fits-all solution. But for the right business owner or professional, it can be a powerful way to maximize retirement income, save on taxes, and protect assets.

If you’re wondering how an IPP might fit into your financial plan, working with a financial advisor who understands both corporate and personal tax planning is key.

^{*The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article was written by Rick Irwin, for the benefit of Rick Irwin, Mutual Fund Representative with Trinity Wealth Partners, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.}