Commentary
Alberta Premier Danielle Smith announced in late September that she was considering withdrawing her province from the Canada Pension Plan (CPP). This strategic decision would afford Albertans more economic independence and save contributors money in the process.
Smith’s proposal is based on Telus Health’s updated Lifeworks report of an Alberta Pension Plan (APP). Originally commissioned by then-premier Jason Kenney in 2020, it takes into consideration the economic feasibility of a provincial plan with pension benefits on par with the existing CPP.
“The report estimates that APP contribution rates for basic CPP benefits would fall from 9.9 to 5.91 per cent, split between employers and employees,” University of Calgary President’s Fellow and economist Jack Mintz wrote in the Financial Post on Sept. 20. “That amounts to yearly savings of $1,425 for each Alberta employer and employee and $2,850 for the self-employed.”
Introducing an APP would create huge savings for payroll contributors. It would also be an enormous political boon for Smith’s United Conservative government. “By cutting payroll taxes with no reduction in pension benefits,” Mintz wrote, “Alberta could both attract more investment and make life more affordable for working people.”
For Smith, who has touted a more economically independent Alberta during her tenure as premier, this is lightning in a bottle. Very few Albertans would be strongly opposed to contributing to a provincial pension plan that’s viable and less costly than the CPP. This is something she could use to her political advantage, and it’s understandable why she’s considering this option.
Here’s the problem. If Alberta ever opts to leave the CPP, Lifeworks has calculated the province would be entitled to $334 billion, or half the plan’s current net assets.
Why?
Alberta has been the most significant provincial contributor to the CPP since it was introduced by then-prime minister Lester Pearson in 1966. When you factor in various financial components such as total contributions, net benefits, and investment returns over close to six decades, Alberta’s net transfer is enormous.
For the eight provinces that would remain in the CPP if Alberta departs—the one exception is Quebec, which utilizes its own provincial pension plan—they would have to make up the economic shortfall. Individual contributions would be higher and more costly for Canadian workers, public sector employees, and seniors. Other provinces wouldn’t necessarily get the same economic benefits and financial protections if they stayed in the CPP, and certainly wouldn’t if they started their own provincial pension plans out of frustration.
Hence, the CPP could theoretically be maintained without Alberta. It would also lead to a scenario that affected provinces would want to avoid at all costs. That’s why B.C. and Ontario, which compose 65 percent of the nine-province population in the CPP, are pushing back against this. (Alberta only represents 17 percent.)
The federal Liberals have also pressed Smith and Alberta to stay in the CPP. There are ways they could potentially do it, including the removal of expensive, ineffective taxes and spending measures, along with more respect for Alberta’s economic concerns and natural resources. Very little has been done on those fronts to date.
Conservative Leader Pierre Poilievre recently acknowledged Smith’s frustration with Otawa’s dismal economic strategy of implementing “carbon taxes, unconstitutional anti-energy laws and other unfair wealth transfers.” He believes there’s a much better way to do it. “I encourage Albertans to stay in the CPP,” Poilievre said, adding he will “protect and secure the CPP for Albertans and all Canadians” as prime minister and will let Alberta “develop its resources to secure our future.”
Smith responded to Poilievre’s statement shortly thereafter. She agreed with his “tone and sentiment” about the “destructive policies the Liberal-NDP coalition have imposed on the Albertan and Canadian economies.”
With respect to the APP, “this is an opportunity Albertans are discussing that has potential to improve the lives of our seniors and workers without risk to the pensions of fellow Canadians,“ Smith said. ”After this broad consultation and discussion are complete, Albertans will ultimately decide whether or not to pursue this opportunity further.”
Is this a positive sign? Yes.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
