While individual pension plans have been around since 1991, they aren’t being widely used by the people they’re designed to help and remain poorly understood by the traditional pension sector, says Jean-Pierre Laporte, chief executive officer of Integris Pension Management Corp.

“There’s no published statistics, but the last number I heard from a [Canada Revenue Agency] official was that about 15,000 existed. That’s about two per cent penetration in the market.”

IPPs are designed to be sponsored by business owners, franchisees and independent professionals. They can also accept the sponsor’s employees, spouses and children as members. Sponsors — and in some cases employees — may contribute considerably higher amounts to IPPs than to registered retirement savings plans. They must also be registered as either defined benefit or defined contribution plans.

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According to Laporte, registering as a DB plan offers considerable advantages to plan sponsors. It allows IPPs to take advantage of the additional contribution opportunities, tax minimization techniques, leveraging and borrowing rules offered to DB pensions. “If you’re using the DB rules, you can put three- or four-times as much money in than if you’re using DC rules. It’s pretty clear whose winning that race.”

Aside from the different rules by which plans must abide, he says there’s very little difference between the two approaches. “Even though the benefit is DB, you control the surplus and so you get the surplus. . . . The fact that the plan is DB is irrelevant. The owner has their hands on both wheels.”

Another advantage comes into play after the death of a plan member. “If you’ve got an IPP that includes your child and you die, those funds get re-characterized as pension surplus and your child can keep growing them for the next 10, 20, 30 or 40 years.”

Laporte says one reason IPPs haven’t generated significant amounts of interest is that the people they’re designed to assist often consult with accountants. “Accountants have no incentive to recommend pension plans. If something goes wrong, they’re afraid they’ll get blamed.”

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Within the institutional pension sector, IPPs are widely misunderstood, largely because they operate under very different regulations. “From a provincial point of view, IPPs are deemed to be designated retirement plans so they don’t have to worry about max funding valuation rules and aren’t covered by the Pension Benefits Act.”

While IPPs may not be well understood by the broader pension sector,  Laporte’s company has been involved in two efforts to bridge the divide between IPPs and traditional pensions. A decade ago, Integris launched the Personal Pension Plan, a trademarked program that confederates IPPs.

More recently, it’s been involved with a group called the Canadian Physicians Pension Plan, which launched last month. The CPPP administers IPPs sponsored by its members and invests their assets through a master trust. “That’s not about pooling of risk, but for generating economies of scale. You preserve the distinction of the IPPs, but approach portfolio manager with a bigger pool in order to secure institutional pricing.”

According to the president of the CPPP, Vu Kiet Tran, the organization has registered just 10 members to date. Laporte says it has great potential. “There’s a great deal of innovation in the IPP space, but the CPPP’s master trust model offers the best of the best.”

Read: A look at MEPPs in a shifting pension landscape