DREAMING OF A GOLDEN RETIREMENT?
Consider An Individual Pension Plan

For business owners, professionals and executives looking to reduce their taxes and maximize their retirement savings, an Individual Pension Plan (IPP) may be ‘the best’ solution. An IPP is a defined benefit pension plan that offers individuals stability, predictability, and certainty for your retirement.

Think of it as a ‘supercharged’ RRSP.

Ideal candidates for an IPP are those 45 years and older with an annual income of $100,000 or more, not including dividend income. IPP members must have current T4 income and be employed by an incorporated company, which is taxable under the Income Tax Act. An IPP offers several tax benefits. Similar to an RRSP, an IPP provides individuals with taxsheltered growth and the potential to benefit from lower taxes in the future upon withdrawing funds. While contributions are a personal deduction on the contributor’s tax return, IPP contributions are a corporate deduction.

PENSION BENEFITS

For “associated” persons (those who indirectly or directly own 10% or more of the company or individuals not dealing at arm’s length with the company), benefits are calculated as 2% of indexed earnings for each year of service up to a set maximum. Past service is also eligible for IPP contributions. Individuals also have the ability to make a lump sum past service contribution in the year they establish the IPP.

For 2004, the annual pension maximum is $1,833. Next year, this fi gure will increase to $2,000. In 2006, the maximum will follow the rise in the average
industrial wage index. An individual’s total annual pension benefit is the sum of all benefi t amounts for all years of pensionable service.

For non-associated individuals, benefits are based on best average three-year indexed earnings for each year of pensionable service. The above maximums still apply.

ADVANTAGES & DISADVANTAGES

In addition to tax benefits, IPPs offer several advantages, including:

• Higher contribution limits than RRSPs
• Greater certainty over income
• Creditor protection
• Multiple income options

There are, however, a few disadvantages IPP members need to be aware of, such as:

• Restricted access to funds while working
• Potential for funds to be locked-in
• Reduced income splitting opportunity

Higher expenses and more legislation IPPs present a tremendous opportunity for business owners and professionals. For more information on this topic, please contact us at (519) 675-117 or (888).327.5777 or www.selectpath.ca. We’d be happy to discuss your options with you.

Individual RRSP

Many individuals aren’t aware of planning options other than RRSPs. While RRSPs have their advantages, they’re certainly not the “be all end all” of retirement planning. For the right individual, an IPP can be a better solution. Take a look at the following case study to find out how.

Meet the Smiths

Ron and Sue Smith have been thinking about their retirement options recently.
Ron is 53 years old and Sue is 47. They own a family business, and would
like to retire soon. They came to us to determine the best course of action for
them.

We calculated past and current service contributions for both Ron and Sue.
We also calculated future service contributions, assuming a gradual
increase in contributions to both the IPP and the RRSP. As you can see, an IPP
offered considerable advantages over a traditional RRSP. Contact us today to see if the same is true for you!

IPP vs. RRSP CONTRIBUTIONS: Sue
AGE	IPP	RRSP
47 (past & current service)	$68,175	$14,500
48 (future service)	20,140	15,500
49 (future service)	21,651	16,500
50 (future service)	23,275	18,000
51 (future service)	25,021	18,990
5 year total:	$158,262	$83,490
Total to age 65:	$786,752	$490,041
IPP ADVANTAGE:	$296,711
IPP vs. RRSP CONTRIBUTIONS: Ron
AGE	IPP	RRSP
53 (past & current service)	$96,270	$14,500
54 (future service)	22,543	15,500
55 (future service)	24,234	16,500
56 (future service)	26,052	18,000
57 (future service)	28,006	18,990
5 year total:	$197,105	$83,490
Total to age 65:	$511,600	$278,255
IPP ADVANTAGE:	$233,345