It sounds great.
More money, more benefits, cheaper rates. “Strengthen the Alberta advantage,” as Premier Danielle Smith put it last week.
Sign me up for whatever that is because it sounds like a helluva deal. Sounds like there’s absolutely no downside!
The Government of Alberta’s sunshine and rainbows Alberta Pension Plan pitch last week is being met with a fair amount of skepticism – from political scientists, economists and everyday Albertans.
According to the government’s accounting, Alberta is entitled to half, yep you read that right, half of the Canadian Pension Plan assets, to the tune of $334 billion from the plan in 2027. According to the government report, the province landed on this figure because of Alberta’s younger workforce and higher pensionable earnings.
It also relies on a loose interpretation of the Canadian Pension Act, which is vague on the entitlements for provinces that no longer wish to participate in the fund. We’ll get to that in a second.
The report indicates that even in the first year the move would save $5 billion.
The Lifeworks report also estimates the difference between the rate Alberta workers would pay in Canada Pension Plan premiums and Alberta Pension Plan premiums would save Alberta workers up to $1,425 every year and maybe even offer a one-time cash bonus for retirees of up to $10,000.
Sounds wonderful doesn’t it?
Trevor Tombe, an economist with the University of Calgary has a decidedly different take on the payouts. He found that Alberta may only be entitled to 25 per cent of CPP assets in 2025, about $150 billion. That would mean Albertan’s contribution rate would be closer to 7.8 per cent, nearer to the current 9.5 per cent — much further away from the 5.9 per cent in the government’s analysis.
The Lifeworks report relies on the interpretation of the act that provinces would be put in the same situation had they never joined the act in the first place.
Tombe believes that won’t be the case.
“It may have been language suitable to a plan with minimal accumulated assets, invested only in non-negotiable provincial bonds, but it is ill-suited to the modern CPP,” he writes in his report.
Michel Leduc, senior managing director at CPP Investments, as you can probably guess, agrees.
“The amount the report says could be extracted from the CPP does not add up. References to how much a province might claim from the CPP Fund should be regarded with caution and a high degree of skepticism until many issues are resolved between the federal and provincial governments,” he said.
“Any idea of a withdrawal from the CPP would be complex, fiercely disputed and involve political posturing, and would result in risk for Albertans for years to come.”
To an extent, that’s Leduc protecting the returns of those who receive CPP, which are made valuable in part because of the contributions of Albertans. That does not mean that Albertans don’t get their fair share or that Alberta is propping up the fund. Every Canadian earns back equally what they’ve contributed.
While there is room for interpretation with all that, to get one thing out of the way, the premier isn’t trying to steal anybody’s pension.
Although the Canadian Pension Act is unclear about how much a province would be entitled to if they do pull out. It does clearly state that the Alberta-made plan would have to provide comparable benefits to the CPP if they did pull out.
It may be a risky bet to start a smaller fund than the national plan and it may not lend itself to the rosy figures that the province put out in their initial report, but the money that you have already contributed to a pension plan isn’t going anywhere. Smaller funds can face hardships in difficult economic times and small investment mistakes in those funds could also leave assets at great risk.
To correct those problems, higher premiums would need to be introduced.
All this posturing may become a moot point because Albertans haven’t shown any appetite for pulling out of the Canadian Pension Plan, which was named by Global SWF as one of the top-ranked pension funds in the world. (in an informal Advocate online poll this week, 76 per cent of respondents don’t think Alberta should establish its own pension plan).
A Leger poll in May said just 21 per cent of Albertans support replacing the CPP.
That’s why Smith didn’t run on the idea during the last provincial election.
The province then put out a survey last week, which doesn’t even ask whether or not Albertans want the plan.
It only asks what they would want done with the money if the hypothetical plan was put in place. The survey is a complete farce and will only inform the government of the results that they want to see. While most Albertans want a simple answer to the question of whether this is a desire of the population or not.
There is a final thoughts section, where you are given the opportunity to say that you don’t want to change plans, but it’s not an explicit question. Which again, is completely counterintuitive to the one thing most Albertans care about at this point and time.
From this survey, it sure doesn’t sound like “your pension, your choice.” It sounds like the government has already decided on a path forward and they just want to know how best to execute it.
But that’s not entirely fair, because the province has committed to a referendum on the APP, which likely won’t come until sometime in 2025.
Even this, from the government’s release, doesn’t exactly sound like a “choice.”
“The government also plans to introduce legislation in the fall 2023 session that, if passed, would require a referendum before the province could withdraw assets from the CPP to establish an APP.”
Even the introduction of a potential plan has Albertans riled up.
Older Albertans want a secure future for their pension, they don’t want it meddled with or risked in a potential showdown with the federal government. At least the ones I’ve heard from anyway.
If it goes to a referendum, I, at the very least hope Albertans turn up and have their say about which direction they want their pension to go.
- Byron Hackett is the managing editor of the Red Deer Advocate and a regional editor from Black Press Media.