Assets are protected from personal and corporated creditors by pension legislation.
All fees associated with the Pension Plan, including investments, are tax deductible.
Interest on money borrowed is tax deductible, unlike an RRSP.
Top-up funding (additional tax deductions), if investment return is less than 7.5% per annum.
Terminal funding options at retirement (more tax deductions).
Retirement Options
LIFE INCOME FUND (LIF) - The LIF is a RRIF, except maximums are imposed on the annual withdrawals. When you attain age 80, any remaining assets within the LIF are annuitized.
LOCKED-IN RETIREMENT FUND (LRIF) - Similar to a LIF, except that annuitization is not required at age 80.
ANNUITIZATION - A lifetime annuity may be purchased from an insurance company.
DIRECT PAYMENT OF PENSION - Should the participant choose not to collapse the EPP upon retirement, the payments are made directly to the pensioner.
Succession planning possibilities.
Under the LIF, LRIF, and DIRECT PAYMENT options, investment control is maintained. If the pensioner should die, all of the remaining assets pass on to the beneficiaries of the pensioner's estate.
Flexibility
Past service contributions can be one single payment or paid over 15 years or until retirement.
The annual current service contributions are a function of your future annual T4 income.
If you have a personal T4 income but your company is short of funds, it may borrow and the interest is tax deductible, unlike an RRSP.
If the company has serious financial problems, the plan can be amended to provide reduced benefits or even wound up.
If wound up, the money can be transferred tax-free to a locked-in personal RRSP.
Every three years there is an Actuarial valuation. If there is an investment deficiency (meaning earnings have been less than 7.5% compounded annually), additional tax deductible contributions can be made to make up the deficiency.
This deficiency can be made with one contribution or several over five years.
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