Physicians understand the need to save for retirement. With patient demand for family doctors outpacing the number of available physicians, there is little opportunity to sell ones practice in the way that a dentist could to fund retirement. Fortunately, the Contributory Professional Retirement Savings Plan (CPRSP) benefit is available to assist eligible physicians practising in BC with saving for this important milestone.
As most physicians will be aware, the CPRSP is comprised of two components; the Basic Benefit, and the Length of Service Benefit. The Basic Benefit is a dollar for dollar matching benefit based on the member’s contribution to their Registered Retirement Savings Plan (RRSP) up to the maximum. The Length of Service benefit is paid based on length of service and is only paid once the maximum basic benefit has been claimed. Combined, the maximum annual CPRSP benefit can add up to roughly $7,500 per year for those who qualify.
What is often much less familiar is the fact that contributions to a registered pension such as an Individual Pension Plan (IPP) will also qualify for the CPRSP benefit. For a more detailed look at the advantages of an IPP over an RRSP, please visit www.IndividualPensions.ca. In simple terms, an IPP allows the incorporated physician to super-size their RRSP and put away much more on a tax-deferred basis for their retirement.
CPRSP for RRSP vs. IPP
When saving through an RRSP, Doctors of BC will pay the applicable CPRSP benefit directly into the member’s RRSP. In the instance of an IPP, only the sponsoring professional corporation can make a contribution to the pension plan. Therefore, the physician’s corporation must first make the entire annual pension contribution to the plan before receiving the CPRSP benefit as a cash reimbursement to the corporation. This requires the sponsoring corporation to have the additional cash on hand ($~7,500). Generally, this should not pose a problem for those who are using an IPP, but it’s a subtle difference worth noting.