Two or More Years of LAPP Membership

If you have two or more years of LAPP membership or service you are considered vested, which means you are entitled to a lifetime LAPP pension at retirement.

If you leave the Plan, LAPP will send you a Termination Statement with your options. You will have 90 days to make a decision and let us know. If you do not, your funds will be left with LAPP until you decide what you want to do with them.

You can request a new Termination Statement later as long as you have not rejoined LAPP.
 

 

If You Are Under Age 55

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You Can Leave Your Pension Benefit With LAPP
When you turn 55, you will be eligible to receive a pension for the rest of your life.

There are good reasons for leaving your money in the plan, especially because it is pretty rare these days to belong to a pension plan that will pay benefits for life, no matter how long you live.

Also, if there is ever a chance you will take another job with a LAPP employer, by leaving your money in the Plan you can add new pensionable service to what you have earned and increase the lifetime pension you will receive. When you leave your money in LAPP until retirement, you become what is called a deferred member.


You Can Transfer Your Pension Benefit to Another Pension Plan
LAPP has transfer agreements with several other provincial and federal public sector pension plans. If you start working for a new employer who participates in one of those plans, you may be able to transfer your LAPP service to that new plan.


You Can Transfer Your Pension as a Lump Sum to a Locked-In Retirement Account (LIRA)
The lump sum of your pension is known as a commuted value or CV. One way to think of commuted value is as the amount of money that must be set aside today, based on current interest rates, to provide you with your future pension. In most cases these funds must be transferred to a LIRA, which is a special type of registered retirement savings account designed to hold locked-in pension funds to be used to provide you with retirement income.

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Your Commuted Value Transfer Options Are:

  • Transfer your commuted value to your LIRA and have any non-locked funds transferred to your Registered Retirement Savings Plan (RRSP).
     
  • Transfer your commuted value to your LIRA and have any non-locked funds paid as a taxable cash lump sum payment.

Because there are limits to the amount of funds from a pension payout that you are allowed to tax shelter, your payout may also contain some funds known as tax rule excess that you have to take as taxable cash.

How much income tax is withheld from my payout?

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If you live in Canada, the amount withheld is based on this table:

Lump Sum Amount

Federal Income Tax Rate

Up to $5,000 10%
More than $5,000 up to $15,000 20%
More than $15,000 30%

A T4A will be issued with your payment to show how much additional income you have received and how much tax you have paid. The amount of tax withheld will be based only on the value of this payment. When added to your employment income for the year, you may be required to pay additional tax when you file your income tax return the following year. 

If you are living outside of Canada when you receive funds from the Plan, the amount withheld will depend on that country's income tax rates.

LIRAs have strict rules about how and when the funds within them can be accessed. Normally, money cannot be taken from a LIRA until the owner reaches age 50, but you can get more details about converting LIRA funds from the Government of Alberta Private Sector Pensions Information for Individuals website.

If you transfer your commuted value out of LAPP, you are no longer entitled to a lifetime LAPP pension. Once the transfer to the LIRA is made, you will not be able to change your mind.

I'd Like to Read More About How to Transfer to a LIRA, What the Unlocking Rules Are, and Other Features About Them.

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How to Transfer to a LIRA

  • Before the commuted value can be transferred, you will need a LIRA with a bank or financial institution. Your bank or financial institution can assist you with this.
     
  • LAPP can only transfer locked-in funds to a financial institution that appears on the Alberta Superintendent of Pensions' list.
     
  • LAPP will only send the locked-in funds directly to the approved financial institution, and not to a third party company (such as an investment broker or related company of the financial institution).
     
  • There is no tax withheld from a transfer to a LIRA. All funds transferred to a LIRA and the investment earnings on those funds are typically used to purchase an annuity, such as a Life Income Fund (LIF) or Locked-In Retirement Income Fund (LRIF) that will provide monthly payments from pension commencement to the end of the life of the LIRA holder.
     
  • Normally, the earliest a LIRA can be converted to an annuity, LIF or LRIF is the 50th birthday of the LIRA holder. The LIRA must be converted to an annuity before the end of the year in which the LIRA holder reaches age 71.

 

 

If You Are Over Age 55

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You Can Start an Immediate LAPP Pension
You are eligible to start your lifetime LAPP pension if you have two or more years of membership or service and are age 55 or older.


You Can Start Your Pension at a Later Date
You can wait and start your pension after you turn 55. You have to start it before the end of the year in which you turn 71.


You Can Transfer Your Pension Benefit to Another Pension Plan
LAPP has transfer agreements with several provincial and federal public sector pension plans in Canada. If you start working for a new employer who participates in one of those pension plans, you may be able to transfer your LAPP service into a new plan.