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An individual pension plan (IPP) is a registered defined benefit plan usually established for a single incorporated individual. The IPP can be established to increase retirement savings and maximize tax deferral while maximizing tax efficiency of the corporation.
After years of saving within an IPP, the decision must be made on how to wind down the IPP at retirement. There are 3 options:
· Maintain the IPP: The IPP can remain open and retirement income benefits can be paid directly from the IPP. The operating company that established the IPP must remain operating.
· Purchase an Annuity from an Insurance Company: The plan can purchase an annuity from an insurance company. The insurance company will then make lifetime retirement income payments directly to the retiree or spouse/partner.
· Transfer Assets to a Locked in Registered Account: The commuted value of the lifetime retirement benefits can be transferred to a locked in registered account (subject to maximum transfer rules in the income tax act).
As well, the retiree can decide on a combination of the above options.
IPP Investments Canada is an actuarial service provider of IPP’s and can help you and your clients enjoy tax savings today and a more secure retirement.
If you'd like to discuss individual pension plans, request a free consultation with us today.
