Which of the following is a potential disadvantage of an Individual Pension Plan (IPP) compared to an RRSP?

Question: Which of the following is a potential disadvantage of an Individual Pension Plan (IPP) compared to an RRSP?

Answer options:

• Contributions to an IPP are not tax-deductible for the corporation. ✅ IPPs typically have higher initial setup and ongoing administrative costs due to actuarial requirements and regulatory oversight.
• The assets within an IPP are not subject to creditor protection.
• Investment options are generally broader and less restrictive in an IPP than an RRSP.

Correct answer: IPPs typically have higher initial setup and ongoing administrative costs due to actuarial requirements and regulatory oversight.

Explanation: IPPs are complex registered pension plans that require actuarial valuations and ongoing administration, leading to significantly higher setup and annual maintenance fees compared to a self-directed RRSP, which is a key disadvantage.