Individual Pension Plan (IPP): complete guide 2026

What is an IPP?

An IPP is a registered defined benefit pension plan established by a corporation for a single participant (typically the owner-operator). Unlike the RRSP with its fixed limit ($31,560 in 2026), the IPP uses an actuarial formula based on age and salary, allowing substantially higher contributions, especially after age 50.

The corporation deducts IPP contributions as a business expense, reducing its taxable income. The participant accumulates retirement benefits on a tax-sheltered basis until withdrawal.

IPP contributions vs RRSP: the comparison

The RRSP contribution limit is 18% of prior-year earned income, up to a maximum of $31,560 (2026). The IPP uses a defined benefit formula: the target annual pension is typically 2% of salary per year of service. The contributions required to fund this pension are calculated actuarially and increase with age.

As a guideline, a 50-year-old professional with a $200,000 salary could contribute approximately $40,000 to $50,000 per year to an IPP, compared to $31,560 to an RRSP. At age 60, the IPP contribution can exceed $60,000. These amounts vary based on actuarial assumptions and specific circumstances.

Past service buyback (retroactive to 1991)

One of the major advantages of the IPP is the ability to buy back past service years. The buyback can go back to 1991, provided the participant had eligible T4 employment income during those years. This allows a significant initial contribution when the plan is established.

For example, a 55-year-old professional establishing an IPP and buying back 20 years of past service could transfer existing RRSPs into the IPP and make a substantial additional contribution, all deductible by the corporation.

Creditor protection

Assets held in an IPP benefit from creditor protection under pension legislation (Supplemental Pension Plans Act in Quebec). This protection applies to creditors of both the participant and the corporation, unlike RRSPs which do not offer the same protection in Quebec (except locked-in group RRSPs).

For professionals at risk of lawsuits (physicians, dentists, lawyers), this protection represents a significant advantage over RRSPs.

Terminal funding obligation

At plan wind-up (typically at retirement), a final actuarial valuation determines whether assets are sufficient to cover promised benefits. If a shortfall exists, the corporation must make an additional contribution to fund it. This contribution is fully tax-deductible.

Terminal funding can represent an additional tax planning opportunity, as it allows a significant corporate deduction in the year of wind-up. However, it requires the corporation to have sufficient liquidity.

Who should consider an IPP?

The IPP is optimal for incorporated professionals aged 45+ who pay themselves a T4 salary of at least $150,000 per year. It is particularly suited for physicians, dentists, lawyers, engineers, and accountants seeking to maximize retirement savings beyond RRSP limits, benefit from creditor protection, and obtain a significant corporate tax deduction.

Setup and administration costs (actuarial valuation, annual administration) are typically $3,000 to $5,000 per year, which is quickly offset by the tax advantages for high salaries.

Frequently asked questions