Should I Set up an IPP

This week’s question: When does it make sense to set up an IPP for my business?

An IPP, or Individual Pension Plan, is a business retirement savings vehicle that allows an individual to save for retirement in a tax-deferred way and increase the amount they can save on a tax-deductible basis.

If you have an RRSP, or Registered Retirement Savings Plan, you can open up the IPP and transfer a large sum of those funds to the IPP as long as certain conditions apply. It may make sense if you have kids involved in your business to be able to include them as part of the IPP.

What you would do is to open an IPP for your business, add the children to the IPP, and transfer the money from the RRSP to the IPP.

Let’s suppose the family member who originally saved all the money in the RRSP is older and is going to predecease the children. The money saved in the IPP won’t take a large tax hit, as it would if the family member died and left the children the RRSP.

This is just a hypothetical example and there are lots of details that you’d need to know in order to discern if this is right for you or not. This newsletter is just general guidance; if you’d like our opinion on what to do in your specific situation, please contact us.