Alberta’s premier fired the starter’s pistol Thursday for a provincewide consultation on whether to quit the Canada Pension Plan while releasing a report that estimates the province deserves more than half CPP’s assets.
The third-party report says Alberta should get $334 billion, or 53 per cent of the CPP, if it leaves the program in 2027 following the required three-year notification period.
Danielle Smith says the report found Albertans could save up to $5 billion in the first year of an Alberta Pension Plan.
Such a withdrawal could lead to “quite modest” contribution hikes in other provinces, the premier said, but the goal is to help Albertans and to send a message to Ottawa to stop taking for granted Alberta’s outsized, disproportionate contribution to the national purse.
“We want to have a better, constructive relationship with the rest of the country, and this begins the conversation,” Smith said in Calgary.
“I would hope people would develop an understanding of how difficult it is when you’ve got a small-population province like Alberta being asked to subsidize the rest of the country, as we do on so many programs.
“Many of these federal programs are stacked against us, and this one, I think, shows how dramatically stacked against Albertans it is.”
Smith said she personally favours a provincially run nest-egg fund and promised legislation this fall that “derisks” it.
“Your pension is safe. It will be the same or higher. Your premiums will be the same or lower,” said Smith.
If Alberta leaves, it would be the first province to quit the national retirement savings program. All provinces and territories are part of it except Quebec, which didn’t join after it was set up in 1965.
The report, compiled by pension analyst firm Lifeworks, notes its 53 per cent calculation is “significantly higher than Alberta’s representative population in the CPP, which is about 15 per cent.”
“(But) due to Alberta’s younger population, higher pensionable earnings, and higher employment rates, contributions by Albertans to the CPP have historically exceeded the benefits paid to Albertans.”
The figures and formulas are expected to be challenged, given the CPP funding rules were overhauled in 1997 and again in 2016, leading to questions over how best to piece together who put in what and who deserves how much.
The CPPIB, the corporation established in 1997 to oversee and invest the CPP funds, questioned the validity of the report.
“We respect the right of Albertans to consider withdrawing from the Canada Pension Plan, however the amount the report says could be extracted from the CPP does not add up,” Michel Leduc, senior managing director and global head of public affairs and communications, said in a statement.
“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 federal and provincial governments. Any idea of a withdrawal from the CPP would be complex, fiercely disputed, involve political posturing, and would result in risk for Albertans for years to come.
“The best way to protect the financial security of Albertans during one of the most vulnerable times of their lives is to preserve a national fund.”
University of Calgary economist Trevor Tome said the Lifeworks model is based on a hypothetical payout tied to one interpretation of the funding formula. He said his calculations come in at 20 to 25 per cent of the total CPP pool due Alberta.
The report’s promise of big benefits and lower contributions hinges on getting that $334 billion, Tombe said, but it isn’t realistic.
If its formula is applied to Alberta and Ontario, for example, those two provinces would be entitled to 113 per cent of the funds.
“It’s a formula that isn’t practical. It’s not a reasonable interpretation. It’s not implementable,” said Tombe.
The report estimates the price of setting up the Alberta plan to be between $100 million and $1 billion, depending on how much the province piggybacks on the CPP mechanisms.
The cost of implementing the investment arm of the Alberta plan would be another $75 million to $1.2 billion, again depending on how much the province taps into existing structures and expertise.
The future, says the report, suggests short-term windfalls tapering off as the Alberta population ages and reverts closer to the national mean.
It provides options and suggestions on how to proceed, but says there is a lot of work, a lot of questions and a lot of moving parts.
The province would have to amend legislation, amend employment laws that touch on the CPP and negotiate pension agreements for Albertans working in other provinces or abroad.
It would have to decide who runs the Alberta plan and what its goals would be: strict return on investment or, as in Quebec, whether investment managers would also have to consider investments “contributing to Quebec’s economic development.”
And then there is Alberta’s roller-coaster economy and its comparatively small population of 4.4 million.
For decades, the only constant in Alberta has been wide swings in budgets, with years of eye-popping multibillion-dollar surpluses, punctuated by years of staggering multibillion-dollar deficits, all linked to the vicissitudes of oil and gas prices.
Alberta has emerged in recent years from a deep trough of red ink back into big-ticket surpluses, and the report acknowledges the future is tough to predict.
Three weeks ago, Finance Minister Nate Horner said the province still projects a $2.4-billion surplus by the end of the current fiscal year, despite slightly lower oil prices and about $800 million to fight and help evacuees from wildfires.
A government pension panel led by former provincial finance minister Jim Dinning is to hold information sessions and solicit feedback through the spring to hear from Albertans.
The panel would then deliver a report about whether it believes Albertans want the issue put to a vote.
If so, Smith said there will be a referendum and a majority of Albertans would have to give the OK.
The Lifeworks report has been promised for years by the United Conservative Party government. Its Fair Deal panel toured the province and in 2020 recommended pursuing an Alberta plan.
Opinion polls, and even the poll that accompanied the Fair Deal panel report, have suggested a majority of Albertans want to stay with the CPP.
Smith has made friction with Prime Minister Justin Trudeau’s government the leitmotif of her administration. She won the UCP leadership last fall on the strength of promising to fight what she calls unconstitutional federal intrusions in Alberta’s energy development.
–with files from Adam Toy, Global News
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