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Individual pension plan (IPP)

Set up an individual pension plan (IPP) to maximize your savings and tax benefits, sponsored by your employer.

What is an IPP?

An individual pension plan (IPP) is a registered plan usually for employees of a company who are also shareholders. Your employer sets up this plan for you and funds it. Employees of the same company who are related to you, such as someone from your immediate family, can also participate.

An IPP is a defined benefit plan, meaning you're guaranteed a certain amount of retirement income and you know what you'll receive. IPPs have no contribution limit—the annual amount is based on what must be paid out to you for retirement income. Contributions can therefore be higher than what's allowable for RRSPs, letting you maximize your retirement savings and pay less tax.

IPP advantages

Maximize your retirement savings

Contributions to an IPP are typically higher than other plans, and it may be possible for you to buy back years of service for periods you weren't participating in the IPP. When you retire, you might get the maximum pension permitted.

Pay less tax

Your IPP contributions reduce your taxable income and generate income tax-free until they're withdrawn. Employer contributions are deducted from their income and aren't considered a taxable benefit for you. If the company has extra cash, large sums can be invested tax-free until withdrawal.  

Enjoy steady, guaranteed retirement income

With defined benefits, you know in advance how much you'll receive at retirement. Every 4 years, an actuary will re-evaluate the plan to ensure you get the expected amount. Your IPP funds also can't be seized by creditors.

How an IPP works


  • You receive a salary from the company
  • You hold at least 10% of the shares in the company, unless the plan is for a high-income earner

IPP contributions

Contribution amount

The annual IPP contribution amount increases with your age. Starting at age 40, the amount is usually higher than RRSP contributions. When the IPP is set up, an actuary calculates how much must be contributed so the retirement income you receive is between the minimum (2% of the average of your 3 highest annual salaries) and maximum permitted pension. Along with your age, factors such as the number of years you've worked and your salary are included in the calculation.

Additional contributions

You can make additional contributions for years you worked before opening the IPP. Since your IPP is funded by your employer, they can make contributions on top of your own that increase with your age and salary. 

Age limit

You can contribute to your IPP until the end of the year you turn 71. That year, you must either transfer the funds to a registered retirement income fund (RRIF), life income fund (LIF) or use them to purchase an annuity.

How to open the IPP

1. Contact our team of experts

Discuss your needs with an advisor and see if an IPP is right for you. Your advisor will help you every step of the way.

2. Choose your investments

According to your savings goals and investor profile, your advisor will help you choose the right investments for you.

3. Start contri­buting

An actuary will determine the contributions required each year to guarantee your pension amount. They will also let you know the amount that can be contributed for previous work years before you opened your IPP.

IPP investment options

Generally, investments you can hold in an RRSP can also be held in an IPP. Your advisor can help you choose the right investments according to your needs and investor profile.

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 Is an IPP right for me?

An IPP has many advantages, but to make an informed decision, you should understand what it involves for you and your employer. If you're thinking about opening an IPP, keep the following points in mind:

  • You'll get almost no new RRSP contribution room and you won't be able to contribute to your spouse's or common-law partner's RRSP.
  • You'll be paid a salary rather than dividends, since your retirement pension and the required funds are based on your salary.
  • You must be making a high enough salary to cover the plan's administration fees and for your retirement benefits to be worthwhile.
  • It's expensive for a company to set up and administer an IPP, and to take out a loan for it if needed. However, these expenses are tax-deductible.
  • Administering an IPP is very complex. In particular, an actuary will have to re-evaluate the plan every 4 years to guarantee the pension and avoid any shortfalls.
  • The company has to cover any shortfalls and make additional contributions for insufficient returns.
IPP vs RRSP: What is the difference?

An IPP is different from an RRSP in many ways. The main differences include: 

  • The eligibility criteria is more limited for an IPP.
  • An IPP is set up and customized by the employer for the plan holder's specific needs.
  • IPP contributions are higher than those allowable for RRSPs.
  • The employer funds the IPP, meaning their contributions are added to yours and they cover the costs of setting up and administering the plan.
  • An IPP is a defined benefit plan, meaning the pension paid at retirement and the contributions needed to guarantee this amount are determined when the plan is opened.
  • With an IPP, tax-free withdrawals under government plans such as the Home Buyers' Plan (HBP) or the Lifelong Learning Plan (LLP) are not possible.
How does an IPP affect my RRSP?

If you want to make contributions for previous work years when you open your IPP, you must first use money from your RRSP before the company contributes. IPP contributions also reduce your annual RRSP contribution room to almost 0.

What happens to my IPP upon death?

Upon your death, any remaining funds in your IPP will be automatically transferred to your eligible spouse or common-law partner. If you don't have a spouse or common-law partner, the funds will either go to your designated beneficiaries or heirs.

Explore other useful savings plans for retirement


A registered retirement savings plan (RRSP) lets you reduce your taxable income so you pay less tax.
Learn more about RRSP


A registered retirement income fund (RRIF) converts some or all of your RRSP funds into retirement income.
Learn more about RRIF