How Does an Individual Pension Plan Work?
Calculating Your Retirement Benefit
Your annual income at retirement age is calculated using:
- Your career T4 or pensionable earnings
- Your age
- Assumptions determined by the actuary, which are acceptable to CRA
Earnings are used to determine the amount you can contribute. You need to earn T4 or equivalent earnings of at least $111,111 in 2007 dollars to qualify for full benefits within an IPP.
Contributions are also graduated by age. The older you are the more you can contribute
IPP Contributions first exceed RRSP Contributions around age 38. Therefore, to fully qualify for maximum IPP benefits, T4 earnings should be larger than $105,550 in 2006 dollars and you should be age 38 years or older.
2007 Tax Deductibility |
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Age in 2007 |
Past Service from 1.1.1991 |
Current Service |
40 |
$34,300 |
$19,000 |
45 |
$64,600 |
$21,900 |
50 |
$97,800 |
$24,000 |
55 |
$134,300 |
$26,400 |
60 |
$174,400 |
$29,000 |
65 |
$224,200 |
$32,200 |
Please note: This example includes an RRSP transfer of $273,000 Assumptions: Based on Maximum Earnings updated to 2006 of $100,000 per annum Contributions are determined by the actuary |
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Reprinted with permission from Gordon B. Lang
President & Chief Executive Officer
Gordon B. Lang & Associates Inc.
http://www.gblinc.ca/