Did you know? In 2025, the maximum RRSP contribution limit sits at $32,490.
However, a 55-year-old incorporated professional could contribute up to $47,000 annually to an Individual Pension Plan (IPP), 45% more than RRSP.
Over time, this difference can result in a significantly larger retirement fund.
For many Canadians, the Registered Retirement Savings Plan (RRSP) is the default retirement savings vehicle. But for incorporated professionals, such as doctors, lawyers, consultants, and business owners, there’s a more effective alternative: the Individual Pension Plan (IPP).
An IPP is a defined benefit pension plan tailored for high-income earners with corporations. It allows for greater contributions, enhanced tax deductions, and improved long-term financial security compared to RRSPs.
Here’s how it outperforms the RRSP at every stage of your career:
1. Higher Contribution Limits with IPPs
RRSPs limit annual contributions to 18% of earned income, up to a maximum of $32,490 (2025). This cap can restrict the retirement savings potential for high earners.
In contrast, IPPs offer:
- Larger annual contributions
- Past service contributions
- Terminal funding at retirement
- Top-up contributions during market underperformance
These features enable incorporated professionals to contribute significantly more than RRSPs allow, accelerating retirement savings growth.
2. Corporate Tax Advantages
While RRSP contributions are made personally and offer individual tax deductions, IPPs are funded by the corporation, providing corporate tax deductions. This structure benefits both the individual and the corporation.
Additional advantages include:
- Deductible investment management and actuarial fees
- Tax-deductible top-up contributions to cover investment shortfalls
This integrated approach enhances tax efficiency and supports long-term wealth accumulation.
3. Resilience During Market Volatility
Market fluctuations can impact retirement savings. RRSPs expose individuals directly to market risks, potentially affecting retirement outcomes.
IPPs, however, include provisions for actuarial top-up contributions. If investment returns fall below expected rates, the corporation can make additional tax-deductible contributions to maintain the plan’s funding status.
This feature provides a buffer against market volatility, ensuring retirement goals remain on track.
4. Accelerated Savings for Late Starters
For professionals in their 40s, 50s, or early 60s who may have delayed retirement savings, IPPs offer increased contribution room as one ages.
This age-based scaling allows for larger contributions during peak earning years, maximizing tax deductions and retirement savings potential.
5. Strategic Retirement Planning for Incorporated Professionals
While RRSPs serve many Canadians well, they may not fully meet the needs of high-income incorporated professionals. IPPs provide a structured, tax-efficient solution that aligns with the financial goals of business owners and professionals seeking to optimize their retirement strategy.
Considering an IPP?
If you’re an incorporated professional aiming to enhance your retirement savings, exploring an Individual Pension Plan could be a prudent step.
Discover how an IPP can elevate your retirement planning.
Book an introduction call with the MacNicol & Associates Asset Management team to learn more.
