The Calgary Chamber of Commerce says it has some concerns about a proposed Alberta pension plan after the province released its proposal last week.
While the chamber said it respects the decision to begin the consultations led by former finance minister Jim Dinning, the city’s business community has concerns about an “APP” in four areas: labour mobility, risk pooling, investor confidence and stability.
“This is a far-reaching proposal,” chamber president and CEO Deborah Yedlin told Global News. “It will have significant implications for businesses and investors, not just in Alberta, but in Canada as well.”
The chamber said removing all barriers to labour mobility is “critical” and says questions around portability of the Canada Pension Plan to an APP would impact the efforts of attracting talent to the province at a time of labour shortages. In light of a record year of migration to the province, the chamber said it welcomes newcomers but recognized increased citizens means increased liabilities for an APP without an immediate, commensurate increase in assets.
Calgary’s investment community said withdrawing from the CPP would reduce the pension’s portfolio size, thereby reducing returns, while increasing investment risk and cost, and possibly higher premiums for Alberta businesses.
Yedlin said since it was restructured in 1997, the CPP has been a “gold standard” of pension plans, producing very strong returns since that restructuring.
“A lot of countries look at the CPP and are envious of its performance, of its governance structure and its ability to generate returns for it on behalf of Canadians,” the chamber president said Friday.
The chamber said the CPP is already a major investor in several Canadian companies and attracts local and foreign capital to co-invest.
“The CPP, for example, can invest around the world with a big pool of capital that has better cost and with better returns,” Yedlin said. “It is an established, recognized investor.
“When you enter onto the stage as a newer, smaller pool of capital, you don’t automatically get included in opportunities. You have to prove yourself.”
Yedlin stressed the need for a governance structure that is “entirely arms-length from the government.”
“That is the strength of the CPP. And if there is a decision to move forward on an APP, that same governance needs to be in place: entirely arm’s length,” she said. “If there is occasion to invest, it must be on parameters that are applied to opportunities to invest anywhere else. If those parameters are compromised in any way because of intent or mandate, that’s that could be problematic.”
Yedlin said Alberta and Canada have grown by drawing in foreign capital, and an APP could put that trend at risk.
Stability provides a competitive advantage for any economy to attract investment and is beneficial for businesses operating within an economy, the chamber said.
Stability of pensions and having firm confidence in those pensions helps attract talent, Calgary’s business community said. It recognized that Alberta won’t necessarily remain a younger-than-average population, pointing to Quebec as a “cautionary tale” in demographic change which left that province with the highest contribution rates in the country.
The Alberta government’s argument, as outlined in the report it commissioned from Lifeworks, says businesses could save on CPP contributions if a provincial alternative is created.
The province also argues Albertans could receive higher benefits than currently promised under the CPP.
That argument is based on Alberta receiving 53 per cent – or $334 billion – of CPP funds.
The CPP Investment Board said that sum “does not add up” and “should be regarded with caution and a high degree of skepticism” until the details have been worked out.
The Canada Pension Plan Act requires any provincial pension plan to have comparable benefits in order to qualify for withdrawal.
“Just because it looks good right now doesn’t mean that environment and that certainty extends into the future,” Yedlin said. “We know nothing is certain, and especially now we are in such volatile times across the board. We need stability, not volatility.”
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