When can the IPP tax-shelter larger contributions than the maximum RRSP?
Because of the magic factor of 9, older plan members can gain an advantage by being in an IPP instead of being in a DC Plan. To maximize the tax-effectiveness of an IPP, the plan member should be age 40 or older and have Pensionable Earnings equal to the maximum pension limit divided by 2.0% (e.g., $111,111 for a member retiring in 2007, $116,667 for a member retiring in 2008, and $122,222 for a member retiring in 2009) or more. For a plan member with these age / earnings characteristics, the IPP will be able to tax-shelter larger contributions than the maximum RRSP contributions from plan inception to retirement age. IMPORTANT: For a plan member age 40 or older with Pensionable Earnings of less than the maximums shown above, the IPP will provide a proportional contribution advantage over the RRSP.
Because of the magic factor of 9, older plan members can gain an advantage by being in an IPP instead of being in a DC Plan. To maximize the tax-effectiveness of an IPP, the plan member should be between age 40 and age 71, and have Pensionable Earnings equal to the maximum pension limit divided by 2.0% (e.g., $116,667 for a member retiring in 2008, and $122,222 for a member retiring in 2009) or more. For a plan member with these age / earnings characteristics, the IPP will be able to tax-shelter larger contributions than the maximum RRSP contributions from plan inception to retirement age. IMPORTANT: For a plan member age 40 or older with Pensionable Earnings of less than the maximums shown above, the IPP will provide a proportional contribution advantage over the RRSP. In other words, for members at least age 40, the IPP will generate a Current Service contribution greater than 18% of T4 earnings. The 2009 Maximum Contributions can be seen by clicking here.
