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Whenever I sit down with a client to discuss their business structures, a major concern that always pops up is post-retirement cash flow. Quite often our discussions will lead to the topic of individual pension plans (IPPs), as they are an invaluable tool to minimize corporate tax while planning for the owner-manager’s retirement.
An Overview of the IPP
Benefits of an IPP
The IPP has many benefits, some of which include:
How do you set up and maintain an IPP?
In order to create an IPP, there are a number of steps that must be completed. An actuarial valuation must be obtained, certain documents must be structured, the investment account must be opened and the plan must be filed with the regulators.
Because an IPP is a defined benefit pension plan, there is maintenance required on an on-going basis. There is a need for actuarial advice and tri-annual actuarial valuations. In addition, it is necessary to maintain adequate records of the members and the trust agreement. There are annual information returns to be filed with regulators in addition to annual regulatory fees.
The IPP is another valuable tool for retirement planning. Because of the IPP's complexity, it is advisable that this be discussed with your tax advisors in addition to seeking the advice and services of an actuarial firm.
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