Individual Pension Plans

Featuring Sean Fahy, Bcomm, Financial Planner

Duration: 2 minutes

If you own or manage a business, or if you are an incorporated professional such as a doctor, dentist or lawyer, an individual pension plan offers more contribution room, tax savings and security than an RSP.

Although an individual pension plan IPP is more complex than RSP, as requires hiring an actuary from time to time and is thus more costly, it has many benefits over an RSP. There are two main benefits of an IPP over an RSP.

The first is you are allowed a higher annual contribution to an IPP. The second and more importantly is in the event of a market correction, you are allowed to replenish the funds you have lost in an IPP with new money. Contributions to an IPP are calculated by an actuary based on a benefit formula, which includes items such as the individual’s age, their earnings history and other actuarial assumptions.

The end result is a pension much closer to the individual’s income during their working career than an RSP could provide. An IPP is especially beneficial to individuals in the last ten to fifteen years of their working career as they can top up their RSP with significant amounts of capital in order to receive the deductions at their highest marginal rate of tax.

Presenter: Mr. Sean Fahy, Financial Planner, Vancouver, BC

Local Practitioners: Financial Planner