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Pension Plan For Veterinarian

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Personal Registered Pension Plans available to Canadian incorporated Veterinarian & their families.

The Personal Pension Plan (PPP®) is a solution for Candian veterinarian offering the greatest tax deductions available under legislation and the maximum accumlated savings for your requirement – surpassing all other retirement savings methods like TFSAs, RRSPs and IPPs.

How Much More Can You Save In a PPP? Potentially $1,660,000…

Let’s consider a 50-year-old veterinarian with 20 years of past service and average historical T4 income of $100,000/year, who expects to continue to work for the next 20 years earning a minimum $140,000 of T4 income. As per the graph to the left, under a PPP, this doctor will be retiring with an extra $1,660,000 in their retirement fund, compared to what would have been accumulated in their RRSPs alone.

Chart: PPP vs RRSP(diff) The PPP gives you access to higher retirement income

Assumption set by the CRA: Salary increase= 5.5%, Rate of return =7.5%, Payement indexing after retirement = 3.0%

Table: Extra PPP contributions

Age PPP RRSP Extra Contribution
40
$28,501
$2,001
45
$31,307
$4,807
50
$34,389
$26,500
$7,889
55
$37,775
$11,275
60
$41,494
$14,994
64
$44,731
$18,231

Legal notice: Figures are based on tax laws and actuarial standards in effect as of January 1, 2019 and are for illustrative purposes only. Individuals should their professional advisors as to their own circumstances.

Regardless of your age, your annual RRSP contribution limit remains constant each year.

By contrast, as you get older, your annual PPP contribution limits grow and exceed those under RRSP rules. The table illustrates extra contribution allowed in the PPP at different ages. (you can set up your PPP as late as age 71)

Key PPP Advantages

Additional annual contributions explain a large part of the extra savings created by the PPP, but is only one of many additional factors that generate this wealth increase. Other pension-specific tad-deductions include: past service buy-back, special payments, fee deductibility, terminal funding etc, as illustrated in the infographic on the left.

Contact us to find out more about the PPP and to prepare your own PPP illustration.

Key Advantages Of the Personal Pension Plan:

Ability to pass wealth to the next generation without triggering taxes

Funding flexibility

Higher annual taxes deductible contributions than RRSP

Ability to Top Up contributions tax effectively in poor markets

Assets are invested by existing financial advisors (not INTEGRIS)

Highest level of creditor protection in Canada

Fiduciary oversight (Pension Committee)

Ability to invest in RRSP eligible asset classes

All fees are tax-deductible

Actuarial services provided by IA financial group. Plan Administration provided by Integris Pension Management corporation.
Copyright ⓒ 2018/2019 All rights reserved.

What is the difference between an Individual Pension Plan (IPP) and an INTEGRIS Personal Pension Plan (PPP)?

Thank you for your interest in the Personal Pension Plan. You were asking us to clarify how the INTEGRIS Personal Pension Plan differs from the Individual Pension Plan (or IPP).

We can subdivide the answer to your question across a number of dimensions:

Structure

Flexibility

Tax optimization

Fiduciary oversight

Structure

It is important to recall that the term “Personal Pension Plan” is not a defined term under the Income Tax Act (Canada), but rather is a common law trade-mark used by INTEGRIS Pension Management Corp. to refer to our core product. From a pure legal point of view the PPP has the following characteristics:

Moreover, individuals have the right to elect to flip between the DB and DC/AVC sides of the PPP each year without filing a plan amendment. This allows the member to control how much gets contributed each year without losing any potential tax-deferral savings room. When the DB component is not in use, the DC rules are as follows: Mandatory employer contribution = 1% of T4 income. Voluntary member contributions = between 0% and 17% of T4 income. Existing RRSPs can also be rolled into the AVC account on a tax-deferred basis with a CRA Form T2033. [This creditor protects these assets, allows the IMFs to be tax-deductible to the corporation and allows these assets to be deployed in non-RRSP eligible asset classes].

By contrast, in order to reduce or eliminate current service cost contributions in a conventional IPP, one would have to either freeze accruals, or opt for T4 compensation of $0.00, thereby temporarily fixing the contribution issue but permanently removing the year of credited service. Our flexible plan architecture allows for seamless and cost-free movement between the two main ways to accrue benefits under an RPP.

Furthermore, if an individual decides to dial down contributions to the DC side of the plan [recall that our plan only requires a mere 1% of T4 income from the employer] for a number of years, it is always possible at a later date, once the company has a lot more disposable income, to do a plan amendment and convert the DC years into DB years, and thus provide the corporation with an ability to do a retroactive purchase of past service.

Tax Optimization

Perhaps the most innovative aspect of the PPP is its ability to further increase the overall tax-deductible contributions an individual is legally allowed to make to a tax-deferred savings vehicle under the ITA. 
This stems from the fact that from age 18 to 40, an individual using the DC component of the PPP can contribute substantially more pre-tax income to a PPP than by using an IPP.

If an RRSP is used instead [because the savings limit between DC and RRSP plans is quite minor], the individual in question who waits until age 40 to set up an IPP then foregoes these additional tax deductions:

Also, should an IPP end up being ‘overfunded’ and considered by the CRA to be in “excess surplus”, with the addition of another year of credited service, a Pension Adjustment would be created, and this would reduce the member’s personal RRSP contribution room to a mere $600 (the PA Offset amount).

By contrast, in such a situation, the PPP allows the member to switch to the DC and AVC components of the plan. Because another year of credited service is not added to the Defined Benefit component of the plan, there is no pension adjustment. This allows the PPP member to contribute up to 17% of T4 income (capped by the money purchase limit) to the Additional Voluntary Contribution component of the plan. This generates a personal tax deduction, reported in Box 20 of the T4 slip, and deductible against the high marginal tax brackets facing the member.

Recent actuarial modelling undertaken shows that for a 30 year old individual earning 6% (whether an IPP or PPP is set up at that age) and wishing to retire at 65, the cumulative additional assets of the PPP will exceed the IPP by approximately $790,000. This assumes the exact same level of market risk being borne by the member. It makes the PPP the most tax-effective retirement savings vehicle permitted by the rules under the Income Tax Actand its regulations in Canada.

Fiduciary Oversight

All PPPs are currently administered by INTEGRIS, who acts as the pension committee of the PPP, and as such acquires a fiduciary duty of care in connection to its plan members. This fiduciary duty of care is anchored in the provincial pension legislation and the law of agency. While INTEGRIS could also act as a fiduciary of an IPP, to date few remain in IPPs in view of the additional value provided by the PPP architecture.

In practical terms, the fiduciary obligations undertaken by INTEGRIS translates into immediate value for PPP clients in the following manner:

By contrast, IPP suppliers merely act as service providers and refuse to share the fiduciary burden of plan administration with the corporate clients. Since IPPs are highly individualized, it is often very difficult to achieve economies of scale.

We hope the foregoing provides a useful summary of the key differences between IPPs and PPPs.

The Personal Pension Plan for the Incorporated Veterinarian

Veterinarian X and his wife Ms. Y both work for Veterinarian X. Professional Corporation.

Both withdraw a yearly salary of $138,500 with excess earnings paid as dividends.

If they made the maximum RRSP contribution from age 45 to age 65, and earned 7.5%, (paying fees of 1%), their combined RRSPs would be $2.8 Million.

If Veterinarian X and Ms. Y had Veterinarian X Professional Corporation sponsor a Personal Pension Plan for each, using the same assumptions, their combined pension assets would be $4.3Million.

Why is the PPP tailor-made for veterinarian?

Veterinarian are some of the most heavily-taxed health care professionals in Canada.

But because until 2004 they were not able to incorporate in Ontario, they could only save through RRSPs which are capped at a lower level of contributions than pension plans.

The PPP allows medical professionals to enjoy the benefits of a pension without having to be part of a hospital since it is the professional medical corporation that pays for this benefit.