Personal Pension Plan
If you can’t join a workplace pension plan, PPP lets you build your own: LaporteJanuary 23, 2020
As a Bay Street pension lawyer, Jean-Pierre Laporte often wondered why some people – public sector workers, union members – had access to great pension plans at work when many other hard-working people didn’t.
“That’s when I got the idea of taking the existing pension laws, and repackaging them at a micro level so people in the private sector got access to a good pension too – what’s good for the goose is good for the gander,” Laporte, CEO of INTEGRIS Pension Management tells Save with SPP.
The result is the Personal Pension Plan (PPP®), a design that offers a tailor-made pension plan for participants. The PPP® is essentially a pension plan where the individual running the plan is also a plan member, he explains. It is a “combination pension plan” that offers both a defined benefit (DB) pension and a defined contribution (DC) pension – and “the ability to move between the two options,” he explains.
It runs just like a big public sector pension plan would, with a statement of investment goals, actuarial filings, regulatory compliance, and even an additional voluntary contribution (AVC) feature for consolidating existing RRSPs with pension assets, he explains. Its combination design “allows one to shift away from the… DB mode of savings and into a money-purchase, or DC mode every year, if necessary.”
This could be ideal for situations where an entrepreneur is running a PPP® at the same time as a business – if sales are down, the company can “gear down” and shift into a less expensive DC pension mode, and can “gear up” when better times resume, he explains.
This design “optimizes tax deductions across a number of dimensions” that can’t be done with other savings vehicles, such as RRSPs or conventional DB plans like the Individual Pension Plan (IPP).
PPP® contributions can be much, much higher than RRSP contributions, which are capped at 18 per cent of earned income. This can allow PPP members to transfer hundreds of thousands more dollars into their PPP than they could to an RRSP in the run-up to retirement, he notes.
Other PPP® features include a wider range of investment options (including direct ownership of real estate), the ability to top up the PPP® with special payments if returns from investments are lower than expected, the deductibility of investment management fees, interest if borrowing, the ability to “turn on” the PPP® early for early retirement, and more.
As well, while the PPP® may be funded by an individual’s company, the PPP® assets are separate – so they are creditor-proof and not factored into a corporate (or individual) bankruptcy. Those setting up a PPP® for a family business can sign up family members as members, transferring the pension savings along to future generations without any “wealth transfer” taxation, he explains.
“It is for all of these reasons that the PPP® crushes the RRSP as the option for saving for retirement,” Laporte says.
While the PPP® is not intended for everyone, it is an option for a fairly broad group, Laporte explains.
“The pool of potential clients is broader than just self-employed professionals and business owners. This also works well for highly compensated key employees of larger corporations where the T4 income paid is well above $150,000 per year. This includes CEOs, CFOs, and COOs of large companies,” Laporte explains.
Laporte says he has long advocated for better pension coverage for everyone, particularly those who don’t have workplace pensions and may have to rely solely on funding their own retirement via RRSPs. He advocated 15 years ago for an expansion of the CPP, which he says is a step in the right direction. He says he got his idea for CPP expansion after learning about the goals of the Saskatchewan Pension Plan (SPP).
He says the goal of making retirement “fair for all Canadians” would be like an effort to “rise all boats” to a higher level.
We thank JP Laporte for taking the time to talk with Save with SPP.
The Saskatchewan Pension Plan is non-profit, low-cost defined contribution plan that can help you grow your retirement savings, and provides a variety of annuity options at retirement. Get in the know today!
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22|