IPP vs RRSP for physicians over 50
Key takeaways
- The RRSP limit for 2026 is $33,810 and is the same regardless of age or income.
- An Individual Pension Plan is corporate-funded and contribution room rises with age and past service.
- An IPP requires a T4 salary, you cannot fund it from dividend income.
- For a physician over 50 with significant corporate savings, an IPP can allow much larger tax-deductible contributions than an RRSP.
The RRSP limit is fixed
The RRSP limit is 18 percent of earned income to a maximum of $33,810 for 2026. That limit is the same for a physician earning $200,000 as it is for one earning $500,000. Once you hit the limit, you cannot contribute more to an RRSP no matter how much you earn.
For a physician over 50 who has been maxing their RRSP for years, the cumulative savings in the RRSP account may be substantial, but the annual contribution room stays at the $33,810 ceiling.
How an IPP works differently
An Individual Pension Plan is a defined-benefit pension plan for one person. The corporation funds the plan, and the annual contribution is calculated by an actuary based on the target pension benefit, the physician’s age, and years of past service.
For a physician over 50, the IPP allows contributions that are significantly larger than the RRSP limit because:
- The younger the physician is when the IPP is established, the more room there is for past-service contributions
- Annual contributions rise with age as the pension target date gets closer
- The plan can be funded retroactively for past years of service (up to the date the IPP is established)
| Feature | RRSP | IPP |
|---|---|---|
| Maximum contribution (2026) | $33,810 | Determined by actuary |
| Income requirement | Earned income from salary | T4 salary from corporation |
| Funding source | Personal | Corporation (deductible) |
| Past-service room | Carry-forward only | Can fund retroactively |
| Complexity / cost | Low | Higher (actuarial, T3 return) |
Why a T4 salary is required
An IPP is a registered pension plan. Pension contributions can only be based on pensionable earnings, which means salary. You cannot fund an IPP from dividend income. If a physician pays themselves only dividends, they cannot have an IPP.
For a physician over 50 who already pays enough salary to max their RRSP, the IPP adds another layer of tax-deductible corporate savings, the corporation contributes to the IPP pre-tax, and the physician defers the tax on that income until retirement.
Is an IPP always the right choice
An IPP is not free. Setting one up costs a few thousand dollars in legal and actuarial fees, and it needs an annual actuarial filing (T3 return). The plan also imposes minimum funding requirements, if investment returns are poor, the corporation must make up the shortfall.
For a physician in their 30s, an RRSP is usually the better choice because the IPP’s advantage grows with age. For a physician over 50 with high retained earnings in the corporation, the IPP’s ability to accept much larger contributions usually outweighs the costs.
Why this matters: a physician over 50 with $500,000 of retained earnings in the corporation might be able to move $100,000 or more per year into an IPP on a tax-deductible basis, compared to $33,810 into an RRSP. Over five years, the difference is hundreds of thousands of dollars of retirement savings, sheltered from tax.
Frequently asked questions
Can I have both an RRSP and an IPP?
Yes. Having an IPP reduces your RRSP contribution room through the pension adjustment, but you can still have both. Many physicians use an IPP as their primary retirement vehicle and a smaller RRSP or TFSA alongside it.
What happens to the IPP when I retire?
The IPP converts to a life annuity or a locked-in retirement account when you retire. You receive pension payments that are taxed as income in your hands.
Can I transfer my RRSP into an IPP?
In some cases, yes. A transfer of existing RRSP savings into an IPP can be done if the IPP’s funded status permits it. This is a specialized transaction that requires actuarial advice.
What if the IPP investments perform poorly?
The corporation is required to make additional contributions to meet the defined-benefit target. This is a risk, if investments underperform, the corporation must fund the shortfall.
Does an IPP need to be registered with CRA?
Yes. An IPP must be registered under the Pension Benefits Standards Act and with CRA as a registered pension plan. The registration process involves legal and actuarial filings.
Talk to us about your retirement planning at ghumans.ca/doctors.
General information only. Talk to us about your situation.