Your Plan has Value because it promises stable and secure income in your retirement, which you can rely on under all circumstances. Pension payments are set, they will grow each year with cost of living adjustments and they will be paid every month for the rest of your life. With a defined benefit (DB) plan like LAPP there will be no change to your pension based on market adjustments or downturns in the economy.
You won’t have to struggle with decisions on how much to pull out of your retirement savings funds one year to leave enough for an uncertain number of years to come. You also won’t live with regret that you paid far too much for annuities upon retirement, which you might have bought at a cheaper price in a year when interest rates had improved.
Your pension is stable and secure because it is backed by a large pooled investment fund, currently worth more than $45-billion dollars. LAPP is the 7th largest pension fund in Canada and the efficiencies that come with that kind of size result in much cheaper fees for investment and administration than you can generally get from a defined contribution (DC) plan or individual RRSPs (Registered Retirement Savings Plans).
The size of the fund also allows our investment experts to invest in types of private equity and infrastructure, such as large building and highway projects, that are not available to smaller fund managers. This, in turn, allows the LAPP Board to diversify its portfolio and provide the appropriate risk balance needed when investing money over the long term for its more than 260,000 members.
The most significant reason your DB pension can provide a stable and secure income in retirement is that the Plan is pre-funded and well managed. Every year when the Board sets contribution rates for the Plan, it estimates the current cost of its future pension payments. The goal is to fund the Plan today to cover those costs tomorrow. That means pricing the pension today based on what we will owe current Plan members over the next 70+ years.
You can learn more about how the Plan is funded, how the fund is invested and how we manage risk at LAPP in the section called Your Pension is Secure.