Are you paying the highest tax rate?
If you own your own company, there is a solution.
Tax-deductible Individual Pension Plans (IPPs) can be funded by your company. The benefits payout to you when you retire. Retirement can start between the ages of 55 and 71.
An IPP also has several business tax advantages allowing more of the company’s earnings to be tax-deductible. This is especially interesting if you are planning to sell your business in the next few years.
IPPs take some work to set up – but, it also takes work to earn money. If you’re like most owners, it took years of hard work to build the business up. Now the government wants you to pay 49.8% income tax. You need a solid strategy to fund your retirement.
Well designed IPPs aim to fund the lifetime maximum pension benefit allowed under the Income Tax Act. Even when RRSP contributions have already been maximized!
Companies can also set up IPPs for minority owners and key employees. The employer can decide which employees will be provided with an IPP, but this type of pension plan is generally offered to connected employees only. A connected employee is defined as an employee who owns, directly or indirectly, ten percent or more of the company’s equity – or a directly related company.
IPP advantages include:
significant contributions for service prior to plan implementation
assets within the IPP are creditor proof
money borrowed to fund the IPP, set-up costs and ongoing administration expenses are tax-deductible to the employer
IPP assets may be topped-up in the event investment returns are inadequate to fund the IPP benefits
early retirement can be funded by a lump-sum tax-deductible contribution
retirement benefits can be paid in various forms specifically tailored to the individual
the corporation has 120 days after its year-end to make an IPP contribution
Anchor Pacific Investment Management Corp. (“Anchor Pacific”) is a Vancouver, BC-based portfolio management firm, which leverages process, technology, and infrastructure to democratize the process of managing endowment and pension style investment portfolios to deliver innovative, high-touch, and transparent investment programs across the full spectrum of asset owners and investment consumers.