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An individual pension plan is a defined benefit registered pension plan that is available to incorporated individuals. The individual pension plan essentially replaces your RRSP and provides potentially more favorable contribution limits and several risk management features. The value of an individual pension plan (IPP) is unique for each individual and can only be appreciated by understanding an actuarial illustration. The illustration will help you understand your options when establishing the IPP, throughout the life of the IPP and at retirement or wind down. The illustration will take your unique information into account including:
Historical Salary:
Your historical salary is an input to determine the amount that can be bought back in past service. Historical salary is also used to determine the amount your corporation can contribute when buying back past service.
Current Retirement Savings Balance:
If you are a connected member, there is a calculation in the income tax act to determine how much of your retirement savings must be transferred to the IPP to buy back past service.
Current Salary:
Your current salary is one component that is used to calculate your current and subsequent 2 years contribution limits to the IPP.
Age:
Your age is another component that is used to calculate your current and subsequent 2 years contribution limits to the IPP as well as the amount that is eligible to fund past service when establishing the plan.
When considering an IPP, be sure to receive an actuarial illustration from an actuarial service provider to truly appreciate the value of an IPP.
If you'd like to discuss individual pension plans or receive an actuarial illustration, request a free consultation with us today.
