By Pascale Hansen

If you’re a Canadian business owner or incorporated professional earning a strong income, you’ve probably been told that RRSPs alone won’t be enough to fund the retirement you want.

That’s where advanced pension-style strategies come in—specifically the Individual Pension Plan (IPP) and the Individual Retirement Plan (IRP).

They sound similar. They both aim to create tax-efficient retirement income. But structurally, legally, and strategically, they are very different tools.

Let’s break them down in plain language.

What Is an IPP (Individual Pension Plan)?

An IPP is a defined-benefit pension plan set up by a corporation for an owner-manager or key executive.

Think of it as a personal pension sponsored by your company.

How It Works:

• Your corporation contributes to the IPP each year.

• Contributions are tax-deductible to the corporation.

• Funds grow on a tax-deferred basis.

• At retirement, the plan pays you a guaranteed lifetime pension based on a formula tied to salary and years of service.

Why High Earners Like IPPs

• Contribution limits are often higher than RRSP limits (especially after age 40).

• Can allow past-service contributions, creating large one-time deductions.

• Assets are creditor-protected.

• Ideal for professionals with a stable income.

Typical IPP Candidate

• Incorporated

• Age 40+

• Consistent T4 income

• Long-term retirement focus

What Is an IRP (Individual Retirement Plan)?

An IRP is not a registered pension plan. Instead, it’s a custom-designed retirement strategy that blends corporate investing, tax planning, and often corporate-owned permanent life insurance to build retirement income in a flexible way.

Think of an IRP as a strategy framework, not a government-defined plan.

How It Works

An IRP may include:

• Corporate investment accounts

• Corporate-owned permanent life insurance

• Capital dividend account planning

• Shareholder loan strategies

• Retirement income extraction planning

The goal:
Convert corporate dollars into tax-efficient future income and tax-free estate value.

Why Business Owners Use IRPs

• No government contribution ceilings

• More flexibility than registered plans

• Can integrate retirement, estate, and tax planning

• Often pairs well with corporate surplus cash

Typical IRP Candidate

• Incorporated

• Has excess corporate cash

• Wants flexibility and estate efficiency

• May already be maxing RRSP/TFSA/IPP

Which One Is Better? Neither is universally better.

They solve different problems:

• If your goal is maximizing tax-deductible retirement savings → IPP shines

• If your goal is flexible, integrated corporate wealth and estate planning → IRP excels

• For many high-net-worth business owners, the optimal solution is both.

The real value is not choosing a product. It’s building a coordinated system.

A Common Mistake

Many professionals default to RRSPs and stop there. That’s like trying to build a commercial building using only a hammer.

Sophisticated income requires sophisticated structures.

Practical Rule of Thumb

• Under 40 → Start with RRSP/TFSA and corporate planning

• 40–55 → IPP often becomes powerful

• Any age with corporate surplus → IRP becomes relevant

But age alone is not enough. Income level, corporate cash flow, retirement timeline, and estate goals all matter.

Final Thought

An IPP is a pension.
An IRP is a strategy.

The best retirement outcomes happen when your planning:

✔ Reduces corporate tax
✔ Builds long-term capital
✔ Creates predictable retirement income
✔ Enhances estate value

If you’re an incorporated professional and want to explore whether an IPP, an IRP, or a coordinated combination fits your situation, I’m happy to walk through it with you.

Book a discovery call to map out your optimal structure:

https://calendly.com/pascalehansen/zada-discovery-meeting-1

Pascale Hansen is the Founder, CEO, and Financial Strategist at Zada.

#WealthPlanning #RetirementPlanning #BusinessOwnerWealth #IncorporatedProfessionals