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February 22, 2005

Turbo-Charge Your Retirement Savings With An IPP

Retirement Planning

Interest in Individual Pension Plans (IPP) has been growing. That's because an IPP may be able to provide higher pension benefits for small business owners and others who meet specific criteria.

An IPP is an employer-sponsored, defined benefit pension plan. This means that an actuary determines the level of contributions that the employer must make to ensure a stable pension income stream for the employee. Similar to an RRSP, contributions accumulate and compound within the plan sheltered from taxes. At retirement, taxes are payable on amounts withdrawn. With an IPP, there is the potential to save more funds for retirement because of higher contribution limits than RRSPs. It's important to note that funds invested in an IPP cannot be withdrawn until retirement or plan termination.

IPPs are best suited for individuals over 45 years of age and earning over $100,000 per year. You should currently be contributing the maximum allowable to your RRSP and have at least a five-year time horizon until retirement. Additionally, an employer must be willing to set up, administer and fund the IPP.

Most financial institutions that offer IPPs will provide you with a variety of eligible investments. Like RRSPs, investments within your IPP are subject to foreign content restrictions. In addition, all investments must comply with applicable pension legislation investment guidelines. An IPP strategy should be considered within the context of a comprehensive financial and estate plan. To learn more about IPPs and how they may fit into your overall financial plan, contact a professional investment advisor.

Daniel Saikaley, CA CFP EPC
Investment Advisor
CIBC Wood Gundy

The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only. Clients are advised to seek advice regarding their particular circumstances from their personal tax advisor.

Given the complexities involved, specialized tax and pension advice must be sought to ensure an IPP is appropriate to individual situations. Also, an IPP strategy must be considered within the context of a comprehensive financial and estate plan.

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