Articles & Guides

Best private pension plans in Canada

The Top 5 Private Pension Plans in Canada in 2023

More and more Canadians are realizing the importance of saving for retirement through private pension plans. With rising life expectancies and increasing healthcare costs, relying solely on government pensions like CPP may not provide enough income in retirement years. Private pension plans can serve as a critical supplement to ensure financial security after you stop working.

But with so many options out there, how do you know which private pension plan is right for you? This guide examines the top 5 private pension plans available in Canada today, outlining the key features and benefits of each. Read on to discover which plan aligns best with your retirement goals and needs.

1. Defined Benefit Pension Plans

Defined benefit (DB) pension plans remain one of the most sought after plans in Canada. Here’s why they stand out:

  • Guaranteed Income – DB plans provide a predetermined, guaranteed income amount during retirement. This makes financial planning straightforward. The employer bears the investment risk.
  • Lifetime Payments – Income continues for life, ensuring you never outlive your retirement savings. Payments often include survivor benefits for a spouse after death.
  • Large Employers – DB plans are commonly offered by government, unions, and large companies. The organizations fund the plans.
  • Tax Savings – Contributions are tax deductible for employers and employees pay no tax until receiving income.

The main downsides are limited portability between jobs and potential for underfunding if the employer has financial issues. Overall, DB pensions provide reliable, fixed retirement income few other plans can match.

2. Defined Contribution Pension Plans

In defined contribution (DC) plans, employees and employers contribute fixed amounts to the pension fund. The retirement income depends on the investment returns earned on those contributions. Key features include:

  • Employee Control – Workers choose how much to contribute and make investment selections. This empowers greater involvement in retirement planning.
  • Portable – Unlike DB plans, DC plan balances are fully portable between employers. This flexibility provides continuity.
  • Tax Advantages – Contributions lower taxable income now and investment earnings grow tax-deferred.
  • Employer Matching – Many employers choose to match a percentage of employee contributions. This amplifies retirement savings.

The variability of retirement income is the main drawback of DC plans. But for many, the flexibility and lower cost to employers makes DC plans an attractive choice.

3. Individual Pension Plans (IPPs)

IPPs are defined benefit plans created for owner-managers of incorporated small and medium-sized businesses. Here are the highlights:

  • Higher Contributions – IPPs allow significantly higher annual contributions compared to RRSP limits. This accelerates retirement savings.
  • Creditor Protection – IPP assets are creditor proof to protect savings from business-related lawsuits or bankruptcies.
  • Tax Deferral – Contributions are tax deductible for corporations and assets grow tax-deferred.
  • Flexible Payments – Plans can provide lifetime payments, lump-sum payouts, or combinations of both.
  • Spousal Benefits – Many IPPs are structured to continue providing income to a surviving spouse.

IPPs come with higher setup and administration costs compared to group plans. But for business owners seeking enhanced retirement savings and creditor protection, IPPs are an option worth exploring.

4. Pooled Registered Pension Plans (PRPPs)

PRPPs are a newer option that small businesses and self-employed Canadians can access. Key PRPP features include:

  • Low Cost – By pooling assets, PRPPs achieve lower investment management fees compared to group RRSPs.
  • Portable – You can take your PRPP account balance with you when changing employers.
  • Flexible Contributions – Choose how much and when to contribute according to your cash flow needs.
  • Tax-Deferred Growth – Investment earnings grow tax-free until you make withdrawals.
  • Optional Employer Contributions – Employers can contribute and match employee contributions if they choose.

The main disadvantage is variability of retirement income depending on investment returns. But PRPPs offer an affordable, accessible workplace pension option for thousands of small businesses.

5. Group Registered Retirement Savings Plans (GRRSPs)

For small companies unable to administer a formal pension plan, GRRSPs offer a straightforward group retirement savings option:

  • Low Cost – By pooling member assets into a single plan, investment management fees are reduced.
  • Flexible Contributions – Employees can contribute as much as RRSP limits allow. Employers often match a percentage.
  • Tax Benefits – Contributions reduce taxable income and investment earnings grow tax-deferred.
  • Easy Administration – GRRSPs avoid the complex reporting and disclosures required of registered pension plans.

A key downside is limited portability when leaving the employer compared to PRPPs. But GRRSPs remain a popular workplace retirement savings vehicle for smaller companies.

Key Factors in Choosing a Private Pension Plan

When reviewing private pension plans, keep these key factors in mind:

  • Employer Fit – Assess whether the pension plan aligns with your company’s size, industry, and objectives.
  • Employee Needs – Understand which plan features and benefits your workforce values most.
  • Cost – Carefully estimate both initial setup costs and ongoing administration expenses.
  • Governance – Determine who makes plan decisions, oversees investments, and manages administration.
  • Regulatory Requirements – Know which government pension regulations apply to registration, reporting, etc.
  • Retirement Income – Compare the projected income each plan may realistically provide participants.

Taking the time to carefully weigh these factors against your specific needs will lead to the ideal pension plan choice for your situation.

Integrating Private and Public Pensions

One key retirement strategy is to integrate your private pension with government pensions to create an optimized overall income plan.

CPP provides a lifetime pension worth 25% of your average career earnings up to age 65. Old Age Security also provides a basic level of retirement income.

Private pensions then supplement CPP and OAS benefits to replace your desired level of pre-retirement income. This integrated approach leverages the strengths of both public and private pensions for a confident retirement.

Get Started Securing Your Retirement Future

The decisions you make today directly impact how comfortably you will live in retirement. Take proactive steps now to map out your retirement plan and put the necessary savings vehicles in place.

Whichever private pension option you choose, harness the power of tax-deferred compound growth. Starting early, making consistent contributions, and giving your money decades to grow is the surest path to reaching your retirement goals.

There is still time to take control and invest in your most important asset – your financial future. The top private pension plans outlined above give you the ability to build the retirement income your life deserves. Choose wisely and get started on a more secure tomorrow today.


Q1. What are the main types of private pension plans in Canada?

The most common private pension plan types in Canada include defined benefit (DB) plans, defined contribution (DC) plans, individual pension plans (IPPs), pooled registered pension plans (PRPPs), and group registered retirement savings plans (GRRSPs).

Q2. How do defined benefit pension plans work?

Defined benefit plans provide guaranteed, preset retirement income for life. The employer manages the plan and bears the investment risk. Income is based on a formula, often using years of service and salary.

Q3. What are the advantages of defined contribution pension plans?

Defined contribution plans offer more flexibility and portability than DB plans. Employees choose contribution amounts and investments. But retirement income varies based on investment returns.

Q4. Who can establish an individual pension plan (IPP)?

IPPs are a type of defined benefit pension plan for owner-managers of incorporated small and medium-sized businesses. They allow higher tax-deductible contributions than RRSPs.

Q5. How do PRPPs help small businesses offer a pension plan?

PRPPs are a low-cost pension option for small businesses to offer. By pooling assets, investment fees are reduced. Employers can choose to contribute/match.

Q5. What are group RRSPs?

Group RRSPs allow small businesses to offer retirement savings by pooling employee funds in a single plan. Employers can match contributions to boost savings.

Q6. How are private pensions integrated with CPP?

Canadians can combine CPP, OAS, and private pensions for an optimized overall retirement income plan. Private plans supplement government pensions.

Q7. What are key factors in choosing a private pension plan?

Assess employer fit, employee needs, costs, governance, regulations, and projected retirement income when comparing private pension plans.

Q8. When should you start contributing to a private pension?

The sooner you start saving in private pensions, the more your retirement funds can benefit from tax-deferred compound growth over time.

Q9. Are private pension contributions tax deductible?

Yes, contributions to private pensions like DB, DC, IPPs, PRPPs, and group RRSPs are tax deductible, lowering your taxable income now.