Alberta Investigates Provincial Pension Plan Potential

Alberta Investigates Provincial Pension Plan Potential
Information regarding the Canadian Pension Plan is displayed on the Service Canada website. Sean Kilpatrick/The Canadian Press
Doug Lett
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The government of Alberta is once again considering the possibility of withdrawing from the Canada Pension Plan (CPP) and setting up its own provincial version.

Instructions were sent in a mandate letter to Alberta Finance Minister Nate Horner on July 13. In the letter, Alberta Premier Danielle Smith instructs Mr. Horner to release the government’s report on the Alberta Pension Plan and to discuss the results with Albertans.

The finance minister is tasked with “releasing the Alberta Pension Plan report and consulting with Albertans on its findings to determine whether a referendum should be held to establish an Alberta Pension Plan.” The mandate intends also to “increase pension benefits for seniors, reduce premiums for workers, and protect the pension interests and benefits of all Albertans.”

In June 2020, under former Premier Jason Kenney, the Fair Deal Panel for Alberta released its recommendations, one of which was a proposal to set up a provincial pension plan and withdraw from the CPP.

University of Calgary economics professor Trevor Tombe said the idea has come up in Alberta politics since 1982. He said it would not be a simple undertaking.

“I think it'd be pretty messy, in particular, legally and politically, of course, but in principle, it’s possible for provinces to operate their own separate fund,” Mr. Tombe told The Epoch Times. “Quebec, for example, never joined CPP and has its own provincial plan.”

“The devil is definitely in the details,” he said, adding that the CPP will have a fund of around $600 billion by 2025.

“How do you divide that fund between a province that is separating [from the CPP and] the rest of the country?” he asked.

“The Act that governs the division of assets is unfortunately very vague,” he said. “And so there would be … probably a pretty intense back-and-forth, maybe some legal fights, as well, as a province was trying to move out, because a lot will depend on how much of that fund a separate plan is initially endowed with—and at the moment, it’s impossible to say.”

He added there are potential benefits. He pointed out the median age in Alberta is about three years younger than the national median. That means premiums—what a worker pays into the plan—could be a little lower for an Alberta-only plan.

Mr. Tombe added there are trade-offs, such as migration, for example.

“Many individuals move into and out of Alberta, as they do every province. And it’s really more difficult to project the future demographics of a province than it is [to do it for] the country as a whole, just because of those migration flows. So there would be a little bit more risk in a separate provincial plan than a national one,” he said.

One recent poll indicated Albertans are divided about a provincial pension plan.

A Leger poll conducted last spring during the Alberta provincial election found 54 percent of those surveyed were not in favour of a provincial pension plan and only 21 percent liked the idea.

The poll found that among United Conservative Party (UCP) voters—Premier Danielle Smith’s party—only 33 percent were in favour, while 39 percent were against.

The poll touched on a variety of issues and questioned 1,000 people. The NDP, the province’s Official Opposition party, has sounded the alarm.

“The UCP’s risky gamble to pull Alberta out of the CPP could cost us hundreds of millions in administration and could lose us billions in transfers and lower returns,” said a post on the Alberta NDP’s website. “In the long run, we’re risking higher contributions and lower benefits, just when you need them the most.”

At this point, the plan is in the early stages of consideration. Mr. Tombe pointed out that it’s difficult to fully evaluate the idea until more information is released.

“A pension plan is going to come with all sorts of specific decisions around contribution rates and benefit levels, and so on and so forth, that are not yet known. So it’s hard to evaluate … because so much does depend on those details,” he said adding he expects a fuller debate once the government releases its report on the idea.

“I suspect that’s when the conversation might ratchet up into a higher gear,” he said.

Doug Lett
Doug Lett
Author
Doug Lett is a former news manager with both Global News and CTV, and has held a variety of other positions in the news industry.
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