What are the benefits?
Since for this type of pension plan, the plan member and the employer are very often the same person, an IPP offers a number of benefits from both the member’s and the employer’s perspective.
Advantages for plan members
- Plan funded by the company
- Allows more money to be saved for retirement than an RRSP
- Recognizes years of past service, increasing the retirement pension
- Customization is possible: indexation of benefits, early retirement without reduction and bridge benefit
- Assets grow tax-free up to retirement; possibility for assets to continue tax-free growth after retirement if pension benefits are drawn directly from the IPP
- Assets in an IPP are exempt from seizure by creditors
- Contributions to social programs (EI, CPP) are not applicable to money invested in an IPP.
Advantages for employers
- Significant tax savings: contributions reduce company earnings
- Assets in an IPP reduce shareholders’ equity, which can facilitate the sale of the company