An incorporated firm with an interest in the financial welfare of their senior executives and business owners should consider engaging with the tax- effective individual pension plan advice that we provide. This is because individual pension plans are the perfect alternative to registered retirement savings plans where wealthy people are involved. The Canada Revenue Agency has accepted these, and they are now able to provide the optimum tax and savings benefits for those (a) older than 40, (b) with a T4 income in excess of $100,000 and (c) who have managed their registered retirement savings plans and pension contributions in past years.
While some financial advisors regard individual pension plans as little more than upgrades to registered retirement savings plans, we recognize three essential differences. Individual pension plans are of greater benefit because they have
o Markedly higher contribution caps
o Creditor protection, and
o Reduced collapsibility potential
In effect individual pension plans virtually guarantee income for retirement as they can only be collapsed in the event of critical illness, disability or financial hardship. Moreover, all employer contributions to these schemes are both entirely tax-deductable and are non-taxable employee benefits too (and this includes interest on capital borrowed to support company-funded top-ups). Upon retirement, the executive concerned owns the actuarial surpluses that may exist and can deploy them to either upgrade pension payments (or pass these over to their estate, heirs or spouse). In the case of retirement or death, surpluses may also be used to enhance spousal pension benefits by up to double the base amount.
Individual pension plans are perfect planning tools for business owners and executives who need to tailor-make their benefits in terms of defined benefit or defined contribution pension plans. By deploying opportunities like these in benefit packages your firm could be in an even better position to attract executives who are between jobs and have defined contribution pension plans in place. In so doing you release them from the restrictions that prevent them as pre-retirees from shifting the full value of their pension credits to their registered retirement savings plans – all that is required is to establish an independent pension plan for them, and then to shift benefits from existing pension funds to this without any tax implications whatsoever.
Would you like to learn more about these exciting opportunities? Call us.