RRSP limit too low? Consider an IPP

Individual pension plans enable high-income earners to boost their retirement income.

Gail Bebee 6 May, 2016 | 5:00PM
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RRSPs are an excellent tax-deferred savings vehicle for Canadian workers who make yearly contributions that fall below the annual RRSP limit. If you are a higher-income earner who would like to save more than this limit and still enjoy tax-deferral benefits, the individual pension plan (IPP) is a government-sanctioned alternative that might work for you.

An IPP is a registered pension plan with defined benefits that is set up and funded by an employer for a specific employee. An employer may offer an IPP as a benefit to attract talented senior-level employees. An incorporated professional or a small-business owner who sets up an IPP will realize superior tax-deferred retirement savings compared to an RRSP.

"Think of an IPP as a teacher's pension plan for business owners," says Trevor Parry, who is president of The TRP Strategy Group and has helped set up nearly 2,000 IPPs. "Your pension savings are locked in, creditor-proof and benefit from tax-deferred growth. On retiring, you receive a defined-benefit pension adjusted for inflation."

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About Author

Gail Bebee

Gail Bebee  Gail Bebee is an independent personal finance speaker, teacher and the author of No Hype--The Straight Goods on Investing Your Money. She can be reached at gbebee@gailbebee.com; her website is www.gailbebee.com.

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