Contributions

Your Contributions

Contributions are payments collected from you and your employer to help pay for your pension. Your contributions are deducted from your paycheck and added to everyone else's and placed in an investment fund to earn more money. Over time, the fund grows and is used to pay pensions to members.

Contribution rates are set by the LAPP Board and are based on the estimated cost of current and future pensions. Your employer always contributes 1 % more than you. You can read about how pensions are funded in the section Your Pension is Secure.

  Contribution
Rates for 2020
Member rate up to the YMPE* 8.39%
on pensionable salary up to $58,700
Member rate over the YMPE 12.84%
on portion of pensionable salary over $58,700
Employer rate up to the YMPE 9.39%
on pensionable salary up to $58,700
Employer rate over the YMPE 13.84%
on portion of pensionable salary over $58,700

 

 

*YMPE (Years Maximum Pensionable Earnings)

The maximum pensionable salary amount that you can earn pension benefits on is called the salary cap.

Integration with CPP

You might be wondering why the contribution rate increases on salary above $57,400 for 2019 and $58,700 for 2020. LAPP is an integrated pension plan that is designed to work with CPP. When added together, your LAPP pension and the CPP should be roughly a 2% pension benefit.

You only pay into the CPP up to the Year's Maximum Pensionable Earnings (YMPE), which is an amount set by the Government of Canada every year. The YMPE is set at $57,400 for 2019 and $58,700 for 2020.

Example of Member Contribution Calculations

If Nancy works full-time and makes $62,000 in 2020, her contribution to LAPP that year will be:

 

 

$4,924.93 

(8.39% of $58,700 [salary up to the YMPE] = $4,924.93)
+
$423.72 

(12.84% of $3,300 [salary over the YMPE] = $423.72)
=
$5,348.65

 

Nancy's employer will also be required to contribute at rates that are 1% higher (the employer contribution rates are 9.39% and 13.84%).

So her employer will contribute $5,968.65 on her behalf.

Eligible Salary

Sometimes an employer pays an employee money which is in addition to regular pay. Not everything you see on your T4 statement is considered to be pensionable salary.

Pensionable salary might include:

There are some types of pay that are not pensionable, though:

  • Overtime pay
  • Expense claims

If you have questions about whether a type of pay is considered pensionable or not, you may want to ask your employer as some will vary based on employer policy.

In 2020, members pay contributions on pensionable earnings up to $172,221. This salary cap is designed to stay within limits set by Canada's federal Income Tax Act.

Maximum Amount of Service

The amount of time you have worked for a LAPP employer — your years of pensionable service — is one of the things we use to calculate the amount of your pension. The most service you can earn in the plan is 35 years, so you will not need to make any more pension contributions after you reach this point.

Changes to your salary after this are still part of the pension calculation. So, if your salary goes up after 35 years, your pension payments might also increase.

Income Taxes

Your LAPP pension contributions are tax deductible. That means they reduce the income you pay taxes on.

Visit the Canada Revenue Agency's website for more information.