In recent years, the idea of Alberta withdrawing from the Canada Pension Plan (CPP) and establishing its own provincial pension plan has stirred considerable debate and discussions. Proponents argue that this move would give Alberta more control over its retirement savings, while critics highlight potential risks and challenges.
One of the primary arguments in favour of creating an Alberta Pension Plan (APP) is the desire for greater economic independence. Advocates argue that by managing their own pension plan, Albertans could have more control over the investment and utilization of pension funds. They suggest that this autonomy would allow the province to make decisions tailored to its unique economic conditions and demographics.
Supporters of the APP also argue that creating a provincial pension plan could potentially lead to cost savings. By managing its own pension system, Alberta might reduce administrative costs associated with the CPP, as well as have a say in the investment strategies and fees related to the plan.
One of the main concerns raised by opponents of the APP is the risk and uncertainty associated with managing a pension plan independently. The CPP benefits from a broader and more diversified pool of contributors and investments, which can help mitigate risks. A provincial plan could be more susceptible to economic downturns or demographic shifts.
Critics argue that establishing and maintaining a separate pension plan could actually lead to higher administrative costs for Alberta. They point out that the CPP’s well-established infrastructure is more cost-effective due to economies of scale.
Withdrawing from the CPP and creating a provincial plan could have implications for Alberta’s economic relationships with the rest of Canada. Critics suggest it might lead to tensions and complications in interprovincial trade and cooperation, as the CPP is a nationally coordinated program.
Alberta Treasury Board and Finance contracted LifeWorks to develop an analysis of the benefits, costs and structure of a possible APP in 2021. Lifeworks completed its report on this analysis in August of this year, and it was subsequently released to the public by the provincial government on September 21. The report claims a potential APP would be entitled to $334 billion of CPP assets. This figure is based on calculations of the amount Albertans have contributed to the CPP after the amount of benefit payments to Albertans and expenses associated with net investment earnings have been subtracted. This sum is roughly 53% of the current estimated Base CPP assets.
The LifeWorks report estimates Albertans could save over $5 billion in the first year alone. With the projected lower APP premiums, individuals could save up to $1,425 a year.
While the picture painted by the LifeWorks report looks rosy, critics charge that the calculations used and assumptions relied on in the creation of this paper are not realistic. Some point to Quebec, a province that created its own provincial pension plan and now pays higher contribution rates than those of the CPP. There is also some contention about the provincial government’s current ad campaign pushing for an APP to the tune of $7.5 million of taxpayer money.
Whichever way this issue plays out, Alberta will not be pulling out of the CPP any time soon. The LifeWorks report states that according to the Canada Pension Plan Act, a province leaving the CPP must provide written notice of its intention and would begin to accept contributions starting in the third year after the notice’s submission. The provincial government has also committed to not moving forward with any plans for an APP unless Albertans vote for it in a referendum.
The Government of Alberta is currently seeking engagement with Albertans on this topic to gain input on where they stand in this matter. Three telephone town halls are coming up in November: the 9th for the Calgary region, the 16th for the Edmonton region, and the 22nd for the Central Alberta region. While the sessions are listed by region, any Albertan is invited to join, regardless of where they live. Two sessions have already concluded for the Northern and Southern Alberta regions, but the recordings are available online. Visit albertapensionplan.ca/engagement for information on how to join the upcoming sessions or to listen to past sessions.
The albertapensionplan.ca website also has a link in the upper right-hand corner (listed as “Have Your Say”) that will bring you to a survey about a potential APP. This survey has received some criticism as the questions tend to be more around what the respondent’s preferences and/or priorities for an APP would be rather than if they would even support moving to a provincial pension plan in the first place.
The LifeWorks report is available at open.alberta.ca/publications/app-analysis-lifeworks-report for those who would like to read it for themselves.
The proposition of Alberta withdrawing from the CPP and establishing its own provincial pension plan has sparked a vigorous debate. Still, any decision regarding the APP would require careful consideration, public input, and a potential referendum to ensure that Alberta’s residents have their say in shaping the future of their pension system.
By Dean LaBerge, Local Journalism Initiative Reporter
Original Published on Nov 01, 2023 at 14:42