IPP vs RRSP: Helpful Tips for Canadian Business Owners

An RRSP is a flexible retirement account with fixed annual contribution limits. An IPP (Individual Pension Plan) is a corporate-funded pension plan for incorporated owners and professionals, allowing much higher contributions after age 40 plus predictable retirement income. 

RRSPs work best early in a career; IPPs work best when income is high, stable, and taxed through a corporation.

IPP vs RRSP: Helping Business Owners Decide 

At a certain age, maybe when your birthday candles start to feel like a bit of a fire hazard, retirement stops being theoretical and becomes something you want to plan with intention. For many Canadian small business owners, that moment comes with a surprising realization: income and taxes have gone up, but RRSP contribution room has not.

That’s often followed by the question: “Is there something I’m missing here? Should I be doing more than just my RRSP?” The answer is yes. You should be thinking about an IPP.

This guide compares IPP vs RRSP without jargon, sales pressure, or assuming that you have a finance degree. Get ready for clear explanations and relatable stories about two very different retirement tools.

Are RRSPs the Right Choice for Business Owners and Incorporated Professionals? 

For many Canadians, including business owners and incorporated professionals, RRSPs are a natural starting point. They are simple to use and offer flexibility. You contribute as little or as much as you can, up to the CRA limit. Your investments grow tax deferred, and you can access the funds if life changes or cash flow gets tight (withdrawals are taxed). 

Whether an RRSP is the right choice depends on where you are in your business journey. RRSPs tend to work best in the early and mid stages of your career when income may not be consistent, and you need room to adjust contributions. They also suit people who prefer controlling their own investments or who are not ready for the structure and long-term funding commitments of a pension-style plan.

What Is an IPP and Why Aren’t More People Talking About Them? 

An IPP is a defined-benefit pension plan funded by your corporation and structured to provide a predictable retirement income. It works much like the pension plans offered by large employers, but it is designed for a single person rather than a group.

One of the best features of an IPP is that your contribution room increases with age. As you get older, your corporation can set aside significantly more than RRSP limits allow. For many business owners in their 40s or 50s, this is a great way to catch up on savings and build a more substantial retirement foundation.

It always surprises me how few people know about IPPs. Most incorporated professionals only learn about IPPs when a colleague or advisor mentions them later in their career, and their reaction is almost always the same: “Why didn’t anyone tell me about this earlier?”

How an IPP Helped Dev Feel Caught Up in His Retirement Planning

Dev runs an engineering firm. For twenty-five years, he did what most business owners are told to do: pay himself a T4 and max out his RRSP.

But one evening, while reviewing his retirement projections, something unsettling struck him. His income had nearly quadrupled since his early thirties, but his retirement savings room had barely budged. 

He started imagining what life might look like in his early 60s. Not full retirement, but a transition towards working less. Maybe a few consulting projects a year, shorter weeks, and more travel with his partner. But all of that required financial resources he didn’t have. He also wanted a buffer against rising healthcare costs and the possibility of stepping away from the business earlier than planned if needed.

The following week, Dev asked his accountant, “Why am I saving the same amount as someone earning half of what I do?”

That’s when he learned about the IPP.

While RRSP limits are rigid, IPP contributions are tied to age and income. At 52, he was eligible for significantly higher annual contributions and could even fund past service from earlier working years. More importantly, the contributions came from his corporation.

Once the IPP was set up, Dev felt more excited about the future. His RRSP still offered flexibility, but the IPP gave his entire retirement strategy more certainty and stability. 

Why Alina Chose to Stick With RRSPs 

Alina is a digital marketing consultant with a thriving, but unpredictable business. One season she is booked solid with long-term retainers, and the next she is juggling a mix of smaller contracts. Her income is healthy, but it fluctuates. 

At a networking event, she heard colleagues talking about IPPs and the high contribution room they offer. The idea was tempting, especially after a particularly strong financial year. But when she sat with the numbers, something didn’t feel right. What she needed most at this stage was flexibility. 

Some years, Alina wants to contribute aggressively to her retirement savings. Other times, she needs every dollar she earns. An IPP felt too rigid for the life she was living right now. Her RRSP, on the other hand, gave her exactly the level of control she needed. She could dial up her contributions in strong years, and pause when cash flow tightened. It matched the pace and unpredictability of entrepreneurship.

Alina hasn’t ruled out setting up an IPP in the future. She sees it as something that might make sense once her income stabilizes. For now, though, her RRSP is a flexible, responsive tool that aligns with her current circumstances. 

Less Taxes and More Savings for a High-Earning Professional

Jordan owns a successful dental practice in Calgary. He recently reached a point where every additional dollar he paid himself was getting taxed at the highest rates, and profits parked inside the corporation were becoming a concern.

He wanted a smarter way to move money out of the corporation without increasing his personal tax burden.

That was when Jordan learned how an IPP could help. By setting one up, his corporation could make significant tax-deductible contributions. Those contributions reduced taxable surplus inside the corporation and built predictable retirement income at the same time.

He continued using his RRSP for growth-oriented investments, but the IPP became the cornerstone of his long-term tax and wealth strategy.

The combination gave Jordan something he hadn’t had before: a way to build retirement income while keeping his corporation lean, tax-efficient, and aligned with the future growth of his practice.

IPP vs RRSP Checklist

If these sound like you, an RRSP may be the better fit:

• Your income varies year to year
• You value flexibility over structure
• You contribute more in some years and less in others
• You prefer managing your own investments
• You’re still growing or stabilizing your business

If these feel truer for you, an IPP may be worth exploring:

• Your annual T4 income is consistently over $80,000
• You’re 40+ and want to save more than RRSP limits allow
• Your corporation is profitable, and you want additional tax efficiency
• You prefer a pension-like structure as retirement gets closer
• You’d like predictable retirement income

If you see yourself in both…

You’re in the sweet spot where many business owners choose both: an RRSP for flexibility, alongside an IPP for long-term structure and larger contributions.

And if you’re still not sure…

Don’t stress. Lots of people struggle to decide what to do. Your next step is to get more info and expert insights. Sit down with a trusted professional who understands you, your financial situation, and each of the options. They can walk you through projections and explain what each path would look like for your situation.

Find The Right Plan for You

Your choice between an IPP and an RRSP usually comes down to where you are in your business journey as much as how the numbers add up.

Some people feel aligned with Dev’s story. They crave structure, stability, and higher contributions. Others see a bit of themselves in Alina; growing, flexible, and still navigating the rhythm of their fluctuating income. And many find themselves in Jordan’s position, wanting a mix of flexibility and tax efficiency as their business becomes more profitable. 

If you’d like someone to walk you through the options, book your free, no-obligation consultation to find out if an IPP is the right choice. You’ll get lots of insights and maybe even have a little fun as we talk about what’s possible!