Individual Pension Plans for Incorporated Owners

In short

An IPP is a defined benefit pension plan set up by your corporation for one person: you.
From your mid-40s on, the corporation can usually contribute more to an IPP than you could put in an RRSP, and the contributions are deductible to the corporation.
It needs T4 salary, an actuary and ongoing filings. For younger owners or dividend-only owners it rarely pays.

How it works

Your corporation sponsors a registered pension plan with you as the member. An actuary works out how much the corporation must contribute to fund a pension based on your age and salary history. The corporation deducts those contributions, and the money grows tax-deferred until you draw the pension.

Contribution room grows with age. RRSP room is the same percentage of salary at every age. IPP funding rises as you get closer to retirement, so the gap widens through your 50s and 60s.
Past service can be funded. The corporation may be able to make a lump-sum contribution for years you were paid salary before the plan existed. Part of that is usually funded by a transfer from your RRSP.
Shortfalls can be topped up. If the plan's investments fall short of what the actuary assumed, the corporation can make extra deductible contributions.
Costs are deductible too. Set-up, actuarial and investment fees are paid and deducted by the corporation.

A simple example

A 52-year-old owner has paid herself a salary at or above the pensionable maximum for fifteen years. Her RRSP room for the year is the standard limit. An actuary calculates that her corporation could contribute noticeably more than that to an IPP this year, plus a one-time amount for past service.

The extra contribution is a deduction for the corporation and moves retained earnings into a registered plan in her name. The exact figures depend on her age, salary history and the actuary's valuation, which is why the first step is always a quote.

The trade-offs

You need salary. Pension room comes from T4 income. Owners paid only in dividends don't build any.
It replaces most of your RRSP room. Once you're in an IPP, a pension adjustment cuts your RRSP room to a small amount each year.
There is paperwork. An actuarial valuation is required at set-up and every three years, plus annual filings.
The money is less flexible. Pension money is meant for retirement income. Rules on locking-in differ by province.
Contributions may be required. Depending on the province and plan design, funding can be an obligation, not a choice.

Isn't an RRSP simpler?

Yes, and for many owners it's the right answer. An IPP earns its place only when the extra deductible room is worth more than the cost of running the plan. That usually means an owner in their late 40s or older with a long history of high salary. An IPP is set up through an actuarial firm and coordinated with your accountant.

Who it fits, and who it doesn't

A reasonable fit if

You're roughly 45 or older
You've paid yourself a T4 salary near or above the pensionable maximum for years
The corporation is consistently profitable and you want to move more into retirement savings
You value creditor protection for retirement assets

Probably not for you if

You pay yourself mostly or only in dividends
You're under 40: your RRSP room is usually as large or larger
Corporate profit is uneven and required contributions would be a strain
You expect to wind up the corporation in the next few years

Run your own numbers

IPP vs RRSP Calculator. Compare how much your corporation could contribute to an IPP against your RRSP room.

Open the calculator

Questions to ask your accountant

How much T4 income have I been paid since 1991, year by year?
What would the past-service contribution be, and how much must come from my RRSP?
Are contributions mandatory in my province?
What do set-up and annual administration cost, all in?

Related guides

Figures are current as of 2026 and are general information, not tax, legal or investment advice. Rules and rates change, and how they apply depends on your facts. Confirm anything here with your accountant before acting. Dundas Wealth is an insurance brokerage (Dundas Life Inc., FSRA #37628M). We are paid by the insurance carrier if and when a policy is placed.