For many Ontario physicians, the path to a secure retirement has grown more complex and, for some, offers new opportunities. The ability for medical professional corporations to participate in the Healthcare of Ontario Pension Plan (HOOPP) presents a pivotal choice that requires careful consideration.
While both HOOPP and an Individual Pension Plan (IPP) are powerful tools for building wealth, understanding their unique structures and implications is essential for making an informed decision about your financial future. This comparison isn’t about declaring a single “better” option, but about providing the clarity you need to align your retirement planning strategy with your personal and professional goals.
Understanding the Fundamentals of Each Pension
At its core, a pension is a promise of future income. Both HOOPP and an IPP fall under the category of defined benefit (DB) pensions, which means they’re designed to provide a predetermined income in retirement. However, their fundamental structures are vastly different.
HOOPP is a multi-employer pension plan, one of Canada’s largest and most successful. It provides lifetime income based on a formula tied to both your salary and your years of service. For those who value predictability and minimal administrative burden, HOOPP is an attractive option. Its massive scale and professional management team mean costs are low, and investment risk is carried by the plan itself, not the individual member.
An IPP, on the other hand, offers a high degree of flexibility and control. You can work with your wealth planner and accountant to determine optimal contribution levels, adjust your investment strategy based on your risk tolerance, and potentially make additional catch-up contributions. This level of autonomy can be particularly appealing for those who want to be more hands-on with their retirement planning strategy.
Key Differences: Eligibility, Contributions, and Control
Eligibility for HOOPP is contingent on your medical professional corporation joining the Ontario Hospital Association. This membership brings additional obligations, particularly for funding employee pensions. IPP can be set up exclusively for you, the incorporated physician, without the need to include employees, thus reducing liability.
Contributions for HOOPP are split between employee and employer contributions, with the employee contributing 6.9% up to their Year’s Maximum Pensionable Earnings (YMPE) and 9.2% on each dollar over YMPE. The employer pays into the plan at 1.26x the employee portion. For doctors with an MPC, they pay both employee and employer. On the other hand, IPP contributions are more flexible, with larger tax-deductible limits for older physicians and the ability to make catch-up contributions as retirement nears.
A Holistic Approach to a Critical Decision
Choosing the right pension plan is rarely a simple choice and should never be made in isolation. It’s a decision best made within the context of your overall financial and tax plan. The right option for you depends entirely on your unique circumstances, including your age, income structure, risk tolerance, and long-term estate planning goals.
Your financial planner, in close consultation with your accountant, can provide the detailed analysis needed to determine how each pension option would impact your wealth accumulation, tax efficiency, and estate. They can model different scenarios to illustrate the differences between HOOPP vs. IPP and help you choose the right approach to achieve your desired retirement lifestyle.
Planning for What’s Next
Making the right choice between HOOPP and an IPP is a defining moment that requires a deep understanding of your personal and professional circumstances. While this overview provides a basic foundation, our white paper goes into greater detail on key aspects, including eligibility, contribution mechanics, and investment nuances. It’s an invaluable resource for any Ontario physician looking to make a confident decision.
For a more comprehensive look at these two powerful retirement planning options, you can download the full white paper.
Ultimately, your decision shouldn’t be made in isolation. The most effective retirement plan is one that’s tailored to your unique financial situation and future aspirations. We invite you to explore our approach to retirement planning by booking a discovery call, where we can discuss your unique situation in detail.