RRSP vs IPP 2025 — Which Is Better for High-Income Owners

In 2025, professionals and incorporated business owners face one of the most strategic tax questions in Canada: should you invest through a Registered Retirement Savings Plan (RRSP) or establish an Individual Pension Plan (IPP)? The right choice can dramatically impact how much you save, how fast your retirement fund grows, and how effectively you shelter income from CRA taxation. Mackisen CPA Auditors Montreal provides expert analysis and tailored financial plans to ensure business owners, physicians, and executives maximize every dollar contributed toward retirement.

Legal and Regulatory Framework

Income Tax Act (Canada) Section 146(1): Governs RRSP contribution limits and the deduction of contributions against earned income.
Section 147.1(1): Defines IPPs as registered defined-benefit pension plans designed for incorporated professionals or key employees.
Section 147.2(2): Sets IPP contribution and actuarial funding requirements, mandating periodic valuations approved by CRA.
Section 60(l): Allows RRSP or IPP contributions to be deducted from income, creating immediate tax deferral benefits.
Section 18(1)(a): Permits corporations to deduct IPP contributions made for employee-shareholders if reasonable.
Pension Benefits Standards Act and Regulation 8503: Govern IPP benefit formulas, pension adjustments, and integration with CPP.
Taxation Act (Quebec): Mirrors federal pension registration and deduction standards; Mackisen ensures CRA and Revenu Québec filings are consistent for full recognition.

Key Court Decisions

Carter v. The Queen (2012): Affirmed that IPP contributions are valid corporate deductions when implemented for legitimate retirement purposes.
Klotz v. The Queen (2004): Denied excessive IPP deductions that lacked actuarial support, underscoring CRA’s focus on compliance and intent.
Fink v. The Queen (2020): Reiterated CRA’s authority to recover over-contributed RRSP funds with interest and penalties.
McDonald v. The Queen (2013): Clarified pension-splitting provisions and taxation on withdrawals from IPPs and RRIFs.

Why CRA Targets RRSPs and IPPs

CRA audits RRSPs and IPPs primarily to prevent over-contribution, improper deduction timing, or excessive funding by corporations. Common red flags include RRSP contributions beyond the annual limit ($31,560 for 2025), IPPs set up without service history, and corporate deductions lacking actuarial justification. CRA also monitors RRSP withdrawals converted to RRIFs for proper income inclusion. Mackisen mitigates these risks by performing pre-filing reviews, actuarial certifications, and ongoing compliance monitoring.

Mackisen’s Strategy

1. Profile Assessment — Evaluate age, income, and corporate structure to determine whether RRSP or IPP offers higher lifetime benefits.

2. RRSP Optimization — For younger professionals or those requiring flexibility, Mackisen maximizes RRSP contribution room and integrates TFSA contributions for tax-free growth.

3. IPP Implementation — For established business owners over 45 earning $150,000 or more, we establish IPPs offering 2–3 times higher annual contributions than RRSPs.

4. Corporate Deduction Alignment — Optimize IPP funding to reduce corporate tax while ensuring deductible compliance under Section 18(1)(a).

5. Actuarial Compliance — Partner with certified actuaries to file all CRA valuation reports, ensuring IPP funding levels remain within legal parameters.

6. Withdrawal Integration — Coordinate IPP payouts, RRSP withdrawals, and corporate dividends to minimize marginal tax rates and OAS clawbacks.

7. Quebec Coordination — File dual IPP registration and deduction claims with Revenu Québec and CRA to prevent mismatch audits.

Real Client Experience

A Montreal physician incorporated since 2005 replaced RRSP contributions with an IPP managed by Mackisen. His corporation contributed $90,000 annually—three times his previous RRSP limit—while deducting it fully for tax purposes. A Quebec architect nearing retirement had overcontributed to RRSPs, triggering CRA penalties. Mackisen implemented a partial RRSP-to-IPP transfer, recovering contribution limits and restoring full compliance.

Common Questions

Which plan offers better tax savings? IPPs provide higher contributions and guaranteed defined benefits for older, high-income owners, while RRSPs offer more flexibility for younger professionals.
Can I hold both RRSP and IPP accounts? Yes, but contributions to one reduce room in the other; Mackisen calculates your optimal allocation.
Are IPPs guaranteed by my corporation? Yes, IPPs are employer-sponsored pension plans with actuarially determined funding obligations.
Can CRA audit my IPP? Yes, CRA verifies funding and documentation; Mackisen ensures every valuation and filing meets audit standards.

Why Mackisen

Mackisen CPA Auditors Montreal are experts in retirement integration for business owners. Our CPAs, actuaries, and tax lawyers design compliant RRSP and IPP structures that maximize contributions, minimize taxes, and secure predictable retirement income. We manage every aspect—from CRA registration to annual reporting—ensuring your retirement plan is efficient and defensible. Call Mackisen CPA Auditors Montreal today for your 2025 RRSP vs IPP Consultation. The first meeting is free and built to increase your retirement wealth legally and efficiently.