LAPP is a secure pension plan that offers tremendous value to all members including you. This section is designed to help you better understand how you and your employer contribute to LAPP so that it's funded in a way that guarantees your lifetime pension.
There's a lot of misinformation out there, and this will help you explain to others how your pension is funded and the many ways having a Defined Benefit (DB) pension supports and helps you achieve your retirement dreams.
Watch our LAPP members confront common myths about the Plan and inform others of the facts.
You owe it to yourself to skip the watercooler advice about important topics like your pension.
Bob has opinions about Jerry's LAPP pension that aren't based on facts. Watch as Jerry clears things up and explains how his pension is funded.
Myth: Alberta taxpayers are on the hook for LAPP pensions.
Fact: Your LAPP pension is not guaranteed by government. It's backed by a pension fund in excess of $60 billion, directly owned by LAPP members like you and invested on your behalf.
Myth: The Government of Alberta holds the risk for LAPP pensions.
Fact: Government amended pension legislation in the 1990s, absolving itself of all funding responsibility for LAPP. In exchange, it promised to turn control of the Plan over to LAPP sponsors (the employers and employees like you who pay for it), who had been waiting 30 years for this governance reform.
Myth: Public sector workers have gold-plated pension plans.
Fact: The average annual pension paid out by LAPP in 2022 was $24,244. Your LAPP pension is based on years of service (the number of years you contribute to your pension) and your highest average salary (the five years in a row where your average salary was the highest). The longer you pay into the Plan, the higher your lifetime pension.
Myth: Taxpayers pay for LAPP member pensions.
Fact: You pay for your own pension. Members like you contribute between 7% and 12% of your income, depending on your salary, every month throughout your entire career with a LAPP employer. Your LAPP employer also contribute to your pension, at a rate 1% higher than employees. The employer contribution is part of the employee’s total compensation package. Benefit packages — which also include things like health benefits, dental benefits, and life insurance — are offered by employers to improve workforce recruitment and retention.
Myth: Defined benefit (DB) pension plans are pyramid schemes where people working today are contributing to cover the cost of pensions owed to those who've already retired.
Fact: For every dollar paid out in pensions in 2022, about 90 cents came from investment revenues.
Myth: When LAPP members retire, they receive their contributions and their employer contributions with interest.
Fact: Your LAPP pension is paid based on a formula that takes into account your highest average salary and your number of years of pensionable service in the Plan. All contributions are pooled into a large investment fund that earns income used to pay out your lifetime retirement benefits.
Myth: DB plans benefit only public sector workers and are a drain on others.
Fact: Large Defined Benefit plans like LAPP help fuel Alberta's economy through billions of dollars in investment activity on an annual basis, directly supporting local businesses, creating jobs, and providing retirement incomes to seniors so they don't have to live off government programs. See our Advocacy page for some of the independent research you can use to verify this.
Myth: When LAPP contribution rates go down, it will affect my future pension benefit.
Fact: This is not true. The rate reduction means it will cost your and your employer less for the same level of pension benefit because a LAPP pension is based on a set DB formula that's always been used to calculate your lifetime pension. The LAPP Board conducts an actuarial valuation each year to monitor the financial condition of the Plan and whether the contribution rates are higher or lower than what is needed to ensure the long-term funding of the Plan, recommending adjustments to the contribution rates when necessary.
Myth: If I leave my employer, I'll lose my LAPP pension.
Fact: Not true. If you're vested and leave your employer, you'll have the option to keep the pension benefit you've earned in the Plan and become a deferred member. At age 55, you're then eligible to receive the LAPP pension for the rest of your life. If you later take a job with one of the 437 LAPP employers who participate in the Plan, you'll become an active member again and be able to add new pensionable service to what you've already earned and increase your lifetime pension.
Myth: My pension will be lost if I die before retirement.
Fact: LAPP has very specific rules around what happens to your pension in this circumstance. If you're vested and pass away before retirement, and if you have a spouse or partner, they will have the choice of immediately starting a monthly LAPP pension for life or receiving a one-time lump-sum payment based on the commuted value of the pension. If you don't have a spouse or partner, or your spouse or partner has signed a waiver, your chosen beneficiaries will be entitled to receive the one-time lump-sum payment of the commuted value of the pension.