LAPP is a defined benefit pension plan. Your pension is based on a formula that looks at your salary and your years of service, and not how much you've paid into the Plan. The longer you're contributing to the Plan, and the higher your salary gets, the larger your pension will be.
A quick way to calculate your pension is to use one of the estimator tools provided by LAPP:
A member has a highest average salary of $68,000 and has worked full-time for 25 years.
Here is how that information works in the pension formula.
A full-time member is normally expected to earn one year of service per calendar year.
A part-time employee will earn less service based on what percentage of full-time hours he or she works. You might even work in multiple positions, or for more than one LAPP employer, but you can't earn more than one year of service per year.
If you work part‐time for a LAPP employer, your service and salary are still the basis of your pension formula, but you will not build up your pensionable service as fast as if you worked full-time.
For this example, Nancy works part-time at a hospital and her hours worked are half as many hours (sometimes called a 0.5 position) as someone who works full-time. That means she works 50% of what a full-time employee would, so over 25 years she will earn 12.5 years of pensionable service.
For this example, Nancy's highest average salary in a part-time (0.5) position is $34,000. The pension calculation is based on what her salary would be if she worked full-time. So, if Nancy had worked full-time over the same period, her average salary would have been twice as much: $68,000 per year. We use this figure when calculating her pension, and not her actual salary. This is what we call her annualized salary. You can see an example of how this is calculated below.
If you're interested in seeing the formula and reading about about how all the parts of the formula work together, you can do so below:
The salary we use in the formula is called your highest average salary, which uses the five years in a row where your average salary was the highest. Those are often, but not always, the last five years of a LAPP member's career.
The maximum annual salary that can be used in your pension calculation for 2024 is $201,050.00. This is called the salary cap.
The service we use in the formula is your pensionable service in LAPP, to a maximum of 35 years.
In the pension formula, salary above the Year's Maximum Pensionable Earnings (YMPE) is separated from the salary below the YMPE. In 2024, the YMPE is $68,500.
What is the Year's Maximum Pensionable Earnings?
LAPP is an integrated pension plan because it's designed to work with the Canada Pension Plan (CPP). This is why the LAPP formula uses the CPP’s Year’s Maximum Pensionable Earnings.
You only pay into the CPP up to the YMPE, which is an amount set by the Government of Canada every year. The 2024 YMPE is $68,500.
This is what the formula looks like:
Salary up to the YMPE x 1.4% x Service = $_______
Salary over the YMPE x 2% x Service = $_______
(Remember, we're using an average of five years for your salary, and the average of the YMPEs for the matching years.)
The two totals are added together to give you an estimated annual unreduced pension.