Retirement Savings

Business owners and other highly paid employees have additional retirement saving options. Research is required to determine which option is best for you. Regardless, the first step is always discussion.

Eligible persons may consider the following:

  • IPPs or Individual Pension Plans
  • RCAs or Retirement Compensation Arrangements
  • IRPs or Insured Retirement Programs

Comparing RRSPs, IPPs, RCAs and IRPs

This simple comparison chart highlights some of the differences between a traditional RRSP, IPP, RCA and IRP.

RRSP IPP RCA IRP
Tax Benefits Contributions are tax deductible for the employee Contributions are 100% deductible by the employeer, and are a non-taxable benefit in the hands of the employee

Taxes do not apply until the money is withdrawn during retirement

Contributions are 100% deductible by the employeer, and are a non-taxable benefit in the hands of the employee

Taxes do not apply until the money is withdrawn during retirement

Deposits into the policy are not tax-deductible; however, the investment component of a tax-exempt policy grows tax-deferred

Income stream during retirement is tax-free

Your Contribution Limits 18% of previous year’s earned income, subject to CRA maximum, less any applicable Pension Adjustment Established by an actuary according to CRA rules Established by an actuary according to CRA rules Invest up to the maximum deposits allowed (governed by your age, the size of the face amount of the insurance coverage and life insurance company’s actuarial figures)
Retirement Income Retirement income depends on the fund accumulation and, therefore, the returns Specific formula guarantee and determined Retirement income The business owner has a wide range of payout options The net result from the leverage borrowing is tax-free retirement income
Risks Involved The employee takes the investment risk and poor return environments reduce the employee’s retirement benefit The employer takes the investment risk

Poor return environments can lead to additional tax-deductible contributions. Furthermore, the retirement benefits are not reduced

The employee takes the investment risk and poor return environments reduce the employee’s retirement benefit The employee must be insurable. Income Tax Act rules could change and deem this income stream to be taxable

Please note: a considerable amount of research is required to determine if one of the preceding options could be suitable to you. No matter what, though, the first step is discussion. Please contact us today to begin the conversation.