Case Studies
Strategy Employed (Figures updated March 2005)
Our Couple
Male 51 year old business owner and his spouse 49 establish an IPP. The Business has been in existence for 15 years. Therefore, the couple qualify for full past service benefits from January 1, 1991.
| Contribution type | Contributions Member & Spouse |
|---|---|
| RRSP rollover (no tax consequences) | $398,400 |
| Past Service additional Contributions | $184,600 |
| Current Service Contributions | $43,200 |
| Total maximum 1st year deductible contribution to the Company = $227,800 | |
Total Plan Assets at Age 69 for each Plan Member
At December 31st of the year each Participant reaches age 69, when monies must begin to be drawn out as pension payments, the projected attributes of the Plan are as follows (The assets below are combined):
| Past Service Contribution + RRSP rollover | $583,000 |
| Total current contributions to IPP till age 69 (no interest) | $1,966,700 |
| Both amounts above + 7.5% per annum compound growth | $6,138,813 |
| Additional Funding at time of Retirement | $598,962 |
| Total Plan Assets at Age 69 | $6,737,775 |
Compare this to an RRSP only Strategy. Our couple's RRSP total combined accumulation at age 69 would be = $4,034,294
Assuming;
- Existing RRSP = $398,400,
- Future RRSP Contributions for 2004 = $15,500, 2005 = $16,500, 2006 = $18,000 etc..
- Interest on Investments = 7.5%
With an RRSP there is no additional RRSP lump sum contribution available at the time of retirement.
Reprinted with permission from Gordon B. Lang
President & Chief Executive Officer
Gordon B. Lang & Associates Inc.
http://www.gblinc.ca/