As a PSPP member, you make regular contributions to the defined benefit plan. These pension contributions are automatically deducted from your regular pay and combined with your employer's contributions for investment into the PSPP fund by the investment manager, Alberta Investment Management Corporation (AIMCo).
You contribute to the Canada Pension Plan (CPP) only up to the Year's Maximum Pensionable Earnings (YMPE), which is an amount set by the Government of Canada every year. The YMPE for 2021 is $61,600. PSPP is an integrated plan, designed to work with CPP. This is why there is a different PSPP contribution rate for salary where you have already contributed to CPP.
Example of Members Contributions
Based on 2021 contribution rates, if Jason makes $62,000, his contributions to PSPP that year will follow this calculation:
Jason's employer makes contributions at the same rate as Jason. Therefore his employer will also be contributing $6,509.32 in 2021.
Members can only contribute on pensionable salary up to $180,758. That's the 2021 salary cap set by Plan rules so your future benefit stays within the limits set by the federal Income Tax Act.
Pensionable salary is the portion of your earnings on which pension contributions are made. Pensionable salary in PSPP includes your gross basic pay for the performance of your regular duties. Subject to your employer’s salary policy, pensionable salary may also include weekend pay, shift differential, and additional pay you receive while covering another position (sometimes called acting pay).
There are some other types of pay that are not considered pensionable salary:
If you have questions about whether a type of pay is pensionable, you may want to ask your employer.
One component of the pension calculation is pensionable service. The Plan's maximum pensionable service is 35 years, or 35 years between PSPP and the Management Employees Pension Plan (MEPP) or the Universities Academic Pension Plan (UAPP) if you have Combined Pensionable Service (CPS).
After reaching this maximum, you stop contributing to PSPP, but your participation will continue. Increases to your salary will be considered in your pension calculation. So, if your salary goes up after 35 years, your pension payments can also increase.
Your PSPP 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.