­­­­In this issue of the Millennial Money Canada newsletter, I’m sharing highlights from my latest podcast episode featuring Tatenda Mawoyo from GBL. We took a deep dive into a powerful (and often underused) strategy for incorporated business owners in Canada—the Individual Pension Plan (IPP).

If you’re already maxing out your RRSP contributions, have surplus cash in your corporation, and are looking for greater retirement savings and tax efficiency, this strategy might be exactly what you need. We unpacked how IPPs work, who they’re for, and why they can be a game-changer for small and medium-sized business owners.

Let’s get into it.

What’s an Individual Pension Plan (IPP)?

Simply put, an IPP is a defined benefit pension plan you can create through your corporation, designed for business owners or incorporated professionals.
It allows you to save more for retirement than a traditional RRSP—especially once you’re over 40. You get the benefits of predictable retirement income and significant tax advantages, all while using your corporation to fund the plan.

Why Consider an IPP?

RRSPs and TFSAs are great tools, but once you’ve maxed out those options, where do you go next?
For many incorporated business owners, the answer is an IPP.

Here’s why:

1. Higher Contributions: IPPs allow for significantly higher contribution limits than RRSPs, particularly as you age. If you’re 45 or older, the difference becomes substantial.
2. Tax Efficiency: Your corporation gets an immediate tax deduction for the contributions made into your IPP. Plus, the investments inside the IPP grow tax-deferred.
3. Creditor Protection: IPPs are generally protected from creditors—separating your investments from your corporate assets.

Who’s a Good Fit for an IPP?

We broke this down into four key points on the podcast:

1. You’re an Incorporated Business Owner

You own at least 10% of your corporation. This ensures flexibility in the funding rules and makes you eligible for the advantages an IPP offers.

2. You Pay Yourself a T4 Salary

Unlike RRSPs, IPP contribution room is based on your T4 income. If you’re only paying yourself dividends, you’ll need to shift your compensation strategy.

3. You’re Over 40 (or Close To It)

At younger ages, RRSP contributions often provide more room. But around age 40, IPP contribution limits start to surpass RRSPs. The older you get, the bigger the gap becomes.

4. You Have Consistent Corporate Profits

An IPP works best when your corporation has stable earnings. You’ll need to make regular contributions, and it’s important to have reliable cash flow.

IPPs vs RRSPs: Contribution Room Comparison

Here’s a simple example we shared:

• At age 45, RRSP contribution room caps at around $32,490 (2025 limit).
• With an IPP, you could be contributing $39,000 or more—an advantage of $6,000+ annually.
• By age 65, that gap widens significantly. IPPs allow for contributions of $54,000, compared to the RRSP’s $32,490 limit.

Multiply that by 20 years and you’re looking at a massive difference in retirement savings potential.

How Does an IPP Work?

• An IPP promises you a future retirement income (a pension), and you fund it through your corporation.
• Each year, an actuary calculates how much you need to contribute to make sure your pension is fully funded. This contribution is tax-deductible for your corporation, which reduces corporate taxes.
• Your corporation funds the plan, but you retain control over how the investments are managed—whether that’s through your existing portfolio manager or an advisor like myself.

Steps to Set Up an IPP

Here’s a high-level overview of how we help clients implement an IPP strategy:

Step 1: Illustration & Feasibility

We evaluate whether an IPP makes sense for you. We analyze your age, salary history, corporate surplus, and long-term plans.

Step 2: Application & Registration

GBL drafts and submits all necessary documents to CRA for approval. You don’t need a lawyer—we handle everything.

Step 3: Open & Fund the Plan

Once CRA approves your IPP, we open a dedicated investment account and manage the funding strategy, which often includes transferring part of your RRSP and adding new corporate contributions.

Step 4: Ongoing Management

We ensure contributions are optimized year after year, and GBL handles compliance, reporting, and actuarial valuations.

Legal & Tax Advantages

One of the hidden gems of an IPP is its legal protection.

• Pension assets are off-limits to creditors in most cases—something we always highlight for clients concerned about risk.

From a tax perspective:

• Contributions are fully deductible to your corporation.
• Assets grow tax-deferred inside the plan.
• You can sometimes make extra contributions (top-ups) if your investment returns fall below 7.5% annually, which creates more room to move cash out of your corp in a tax-efficient way.

Considerations Before You Commit

An IPP isn’t for everyone. Some things to think about:

• Administrative Fees: Expect $1,500 to $2,000 annually for GBL’s services. That needs to be weighed against the tax benefits.
• Locked-In Funds: IPP assets are locked in until retirement. Withdrawals are structured and inflexible compared to RRSPs or non-registered accounts.
• Stability Matters: If your business cash flow fluctuates wildly, an IPP may not be ideal.

What Happens at Retirement?

At retirement, you have three options:

1. Draw a Pension from your IPP—your corporation continues to pay you a predictable retirement income.
2. Transfer Funds to a Locked-In Retirement Account (LIRA), which works much like an RRSP but is locked in.
3. Purchase an Annuity from an insurance company for guaranteed income for life.

Most clients choose to transfer to a LIRA, giving them greater flexibility and often reducing administrative fees.

As a business owner myself, I know how much work goes into building a profitable, sustainable company. You deserve to get rewarded for that hard work with a solid, tax-efficient retirement strategy.

An IPP could be that next-level tool for you. It’s about maximizing what you’re already doing, using your corporation to supercharge your retirement plan while lowering taxes today.

Ready to Explore Whether an IPP is Right for You?

If you’re:

• Over 40
• Incorporated
• Paying yourself a T4 salary
• Looking to increase retirement savings beyond RRSP limits...

Then it’s time to talk 👉

­Book a free consultation­

Thanks for reading, and we’ll see you in the next issue!

Guillaume Girard, CFA CFP | Sam Lichtman, CFP
Millen Wealth Advisors

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