Contributions are payments collected from you and your employer to help pay for your pension. Your contributions are 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.
Your 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. To read about how pensions are funded see Your Pension is Secure.
From time to time, contribution rates need to be adjusted. LAPP's rates have remained steady since 2014. Your contributions to the LAPP pension plan are deducted from your paycheck. Contributions are calculated based on your pensionable salary if you work full-time, and on your annualized salary if you work part-time.
In this section, we talk about:
|Contribution Rates for 2017|
|Member Rate on annualized salary up to $55,300||10.39%|
|Member Rate on annualized salary over $55,300||14.84%|
|Employer Rate on annualized salary up to $55,300||11.39%|
|Employer Rate on annualized salary over $55,300||15.84%|
|Contribution Rates for 2018|
|Member Rate on annualized salary up to $55,900||9.39%|
|Member Rate on annualized salary over $55,900||13.84%|
|Employer Rate on annualized salary up to $55,900||10.39%|
|Employer Rate on annualized salary over $55,900||14.84%|
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 for 2017 is $55,300 and for 2018 it is set at $55,900.
An Example of a Member's Contributions
If Nancy makes $62,000 in 2017, her contribution to LAPP that year will be:
(10.39% of $55,300 [the YMPE] = $5,745.67)
(14.84% of $6,700 [over the YMPE] = $994.28)
Eligible Salary and the Salary Cap
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:
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 2017, members pay contributions on pensionable earnings up to $162,312. 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.
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.