Individual pension plans for incorporated professionals

Issue: BCMJ, vol. 52 , No. 3 , April 2010 , Pages 134 News

Individual pension plans (IPPs) can be an attractive vehicle for retirement and estate planning for the right incorporated physician.

An IPP is a defined benefit registered pension plan established for the benefit of a single employee. The annual retirement benefits are defined by the terms of the plan and are based on a percentage of the employee’s annual employment income. 

Dividend income, income from a sole proprietorship, and income from partnership does not qualify as income for the IPP. To set up an IPP you must make a formal agreement with your pro­fessional corporation. Only your employer can administer your IPP; if you are incorporated the employer is the corporation you control.  

The primary candidates for IPPs are incorporated physicians over the age of 45 with an annual income great­er than $125000.

The most significant advantage of an IPP is the higher contribution limit than that available under a registered retirement savings plan (RRSP), thus enabling you to accumulate significantly higher retirement savings. Other potential advantages include:

• The ability to make pension contributions in respect of past employment service.

• Contributions are tax deductible for the employer.

• Pension benefits are creditor protected under pension legislation.

• Investments that are RRSP eligible generally qualify for an IPP and can be managed in a similar way as a self-directed RRSP.

• Multiple retirement income options: the IPP may pay an annual pension, annuities may be purchased, or funds may be transferred to an RRSP.

Potential disadvantages include:
• More regulatory compliance require­ments than an RRSP.

• Set-up costs and annual operating costs may be higher than those as­sociated with an RRSP (an IPP re­quires a valuation on set-up and every 3 years thereafter, to be done by an actuary).

• Funds are locked in while employed.

• No income splitting as in a spousal RRSP.

To fund an IPP, the Income Tax Act requires that RRSP contributions made for the period of employment covered by the IPP be either withdrawn or transferred to the IPP in order to offset the cost of past service. The past service liability is based on all the pension plan contributions you could have made had you not used an RRSP instead, as calculated in the valuation of the IPP. 

The transfer of RRSP funds to the IPP is tax free. Once the RRSP funds are transferred into the IPP account they cease to be treated as RRSP money and form part of the IPP. Any remaining RRSP funds can be left where they are. The excess of the past service contribution room (as determined by the actuarial valuation) over the eligible RRSP transfer is the available contribution for the net past service and is deductible by the employer when paid.

The Table shows the contribution amounts to an IPP compared with maximum contribution amounts to an RRSP, assuming the physician draws the maximum salary ($125000 for 2010) that would generate the maximum pension allowable under CRA, and the physician is eligible for the maximum past service contribution.

Since IPP design varies for each individual, you will need to consult with your financial advisor or an actuary to find out whether this arrangement will work for you. If you have general questions, please contact me at cahpin@bcma.bc.ca.
—Christiane Ahpin
BCMA Chief Operating Officer

Christiane AhPin,. Individual pension plans for incorporated professionals. BCMJ, Vol. 52, No. 3, April, 2010, Page(s) 134 - News.



Above is the information needed to cite this article in your paper or presentation. The International Committee of Medical Journal Editors (ICMJE) recommends the following citation style, which is the now nearly universally accepted citation style for scientific papers:
Halpern SD, Ubel PA, Caplan AL, Marion DW, Palmer AM, Schiding JK, et al. Solid-organ transplantation in HIV-infected patients. N Engl J Med. 2002;347:284-7.

About the ICMJE and citation styles

The ICMJE is small group of editors of general medical journals who first met informally in Vancouver, British Columbia, in 1978 to establish guidelines for the format of manuscripts submitted to their journals. The group became known as the Vancouver Group. Its requirements for manuscripts, including formats for bibliographic references developed by the U.S. National Library of Medicine (NLM), were first published in 1979. The Vancouver Group expanded and evolved into the International Committee of Medical Journal Editors (ICMJE), which meets annually. The ICMJE created the Recommendations for the Conduct, Reporting, Editing, and Publication of Scholarly Work in Medical Journals to help authors and editors create and distribute accurate, clear, easily accessible reports of biomedical studies.

An alternate version of ICMJE style is to additionally list the month an issue number, but since most journals use continuous pagination, the shorter form provides sufficient information to locate the reference. The NLM now lists all authors.

BCMJ standard citation style is a slight modification of the ICMJE/NLM style, as follows:

  • Only the first three authors are listed, followed by "et al."
  • There is no period after the journal name.
  • Page numbers are not abbreviated.


For more information on the ICMJE Recommendations for the Conduct, Reporting, Editing, and Publication of Scholarly Work in Medical Journals, visit www.icmje.org

BCMJ Guidelines for Authors

Leave a Reply