A defined-benefit pension you build for yourself
An IPP is a defined-benefit pension plan set up by a corporation for its owner or a key employee. It is registered with the federal government and operates similarly to the pension plans large employers offer — but it is built specifically for the incorporated individual who has no employer to provide one.
Unlike an RRSP, where contribution room is capped at 18% of earned income up to a fixed annual dollar amount, an IPP allows contributions that increase with age and can exceed RRSP limits by a meaningful margin. The corporation funds the plan, and those contributions are fully tax-deductible.
IPP vs. RRSP
| IPP | RRSP | |
|---|---|---|
| Contribution limits | Higher than RRSP; increases with age — most advantageous after 40 | Capped at 18% of earned income, up to the annual dollar limit |
| Who makes contributions | The corporation — contributions are a fully deductible business expense | The individual, from personal after-tax or salary income |
| Investment rules | Governed by pension fund investment rules — more conservative by design | Broad investment choice at the account holder's discretion |
| Creditor protection | Fully creditor-protected as a registered pension plan | Protection varies by province and is not universally guaranteed |
| Retirement income | Defined-benefit formula — predictable, guaranteed monthly income | Market-dependent — retirement income varies based on investment returns |
Why incorporated owners choose an IPP
Larger contributions after 40
The IPP contribution formula increases with age. For business owners in their 50s, annual contributions can be substantially higher than RRSP room would allow.
All contributions deductible to the corporation
The corporation funds the plan, and every dollar contributed is fully deductible. This reduces corporate income tax while building personal retirement assets.
Creditor protection
As a registered pension plan, an IPP is protected from creditors in the event of business difficulty or bankruptcy — a meaningful difference from most other investment accounts.
Predictable retirement income
The IPP pays a defined benefit at retirement: a monthly income determined by a formula, not market performance. For business owners who want certainty, this is a significant advantage.
Past service catch-up
If you have been incorporated for several years and are setting up an IPP now, you may be able to make contributions for past years of service, subject to adjustments to your RRSP room.
Service area
Jatinder Singh and his team serve clients across Ontario and Alberta. Appointments are available in person at 195 Queen St E, Brampton, or by phone.