Weekly Tax Tips
Consider Contributing to an Individual Pension Plan
29 Jan 2010
In addition to RRSPs, another retirement savings option is available to owners of incorporated businesses, including professionals who have incorporated. Under the rules for defined benefit pension plans, it is possible to set up an individual pension plan or IPP for business owners. Under an IPP, the benefits are set by reference to your salary, and contributions are made to build sufficient funds to fund this defined pension benefit. For many individuals (generally, in their 50s or older), the use of an IPP can allow for greater contributions when compared to an RRSP.
Additional benefits of an IPP include the ability to make up for poor investment performance and the possibility of making lump-sum contributions for past service. As well, historically, IPPs have provided greater protection of assets from business risks. However, with the changes on bankruptcy reform, the treatment of RRSPs has become more consistent with the treatment of pension plans.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 29 Jan 2010.
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