It will likely be two years before Albertans make their choice on the issue in a referendum. We have only seen the opening salvo of what’s sure to be a contentious issue across Canada for the next 24 months.
The report contends Alberta would be entitled to 52 percent of the CPP’s asset pool. That’s a starting point in negotiations that will extend for some years. The Alberta government realizes it’s an unreasonable ask, and they know the federal government would never concede in letting Alberta leave the plan with $334 billion of its assets. After having overcontributed into the plan since its inception, though, Alberta won’t be willing to settle for a share based just on the current population.
The legislation governing the CPP is vague, which invites broad interpretations of what a province may or may not be entitled to upon leaving the plan. There is no dispute that provinces have the right and the ability to leave the plan should they choose to, however, and they can take their share with them. But calculating that balance will be sticky. I suspect the federal government will be pursuing amendments to the legislation, clarifying it in the next year or so.
The reason Alberta has overcontributed such a large amount to the fund comes down to the provincial demographics. Alberta has the youngest population in Canada and has had the highest personal incomes. Albertan workers tend to max out their pension contributions while a relatively small portion of the population is retired and drawing from the fund. The fund has become dependent on Alberta’s overcontributions.
As far as the Alberta government is concerned, it doesn’t matter what the rest of Canada may think of their plans. They only need to make their case to Albertans, and it is a compelling one.
Assuming a referendum is held in Alberta on exiting the CPP in two years, that gives the government plenty of time to make its case to Alberta voters. The math is clear. Albertans don’t get a good deal under the CPP as it stands. Albertans could enjoy both higher benefits and lower contribution obligations if a provincial plan was created. Businesses would see substantial savings in contributions as well.
The question in the minds of Albertans as they consider whether to support forming a new pension plan will be whether the provincial government would be a responsible steward of the fund. It doesn’t matter how good the balance of numbers looks in a new plan if people don’t trust the government to manage it safely. The Smith government was narrowly elected and will need to build trust among Albertans. They will have to make it clear the assets will be protected from government misuse or mismanagement.
If the federal government dismisses Alberta’s aspirations to form a plan or negotiates in poor faith, it will only encourage Albertans to vote to form a new plan. Western alienation is real and Albertans could see the formation of a provincial plan not only as a good economic plan but as a step to distancing themselves from Ottawa’s control. Quebec has its own pension plan. Why is it unreasonable for Albertans to want the same?
Alberta and Ottawa have been locking horns over several issues, including the possibility of Ottawa imposing a punitive emissions cap on oil and gas production if Alberta can’t meet federal net zero targets by 2035. The war of words has reached an impasse between Premier Smith and Prime Minister Trudeau.
Alberta’s consideration of leaving the CPP gives the province substantial leverage in dealing with Ottawa. Eight provinces will feel the financial pinch if Alberta forms its own pension plan and they will take out their ire on the federal government.
The formation of an Alberta pension plan is a provincial issue with national implications. Canadians both within and outside of Alberta would be well advised to watch this closely.
