Alberta eyes more than half of CPP’s assets in report on provincial plan

Open this photo in gallery:

Reports say Alberta is entitled to $334 billion from the Canada Pension Plan, more than half of the total fund, but the report argues the province should set up its own pension plan. The purpose is to strengthen it. Multiple sources.

The controversial analysis, scheduled to be released Thursday, comes as part of Premier Daniel Smith’s efforts to assert provincial authority over pensions in resource-rich Alberta, which will lead to new negotiations with the federal government and other provinces. It could signal the beginning of conflict and rifts.

The document envisions a difficult and complex separation of $575 billion in CPP assets. If such a significant withdrawal were to proceed, there would be potential economic consequences across the country in the form of a significant reduction in the CPP pool. And that could lead to higher premiums and reduced benefits for other Canadians.

In fact, under such a scenario, average pension contributions for Canadians outside of Alberta, excluding Quebec, could increase by about $175 a year, according to Alberta government officials.

The topic could be put to a provincial referendum as early as 2024, depending on what former provincial treasurer Jim Dining, who heads the pension plan report engagement committee, decides in consultation with Albertans. There is sex.

The long-awaited independent report was commissioned by Jason Kenney’s United Conservative government three years ago to examine the feasibility of creating a stand-alone pension system.

The idea of ​​a separate pension for Albertans has become a political flashpoint in the province, with opinion polls showing it lacks widespread support.

The controversial report is based on the fact that Alberta, with its high per capita income, high labor force participation rate and young population, has contributed more to the plan than it has taken for decades. . They argue that Albertans would benefit financially from a standalone pension.

This idea is highly political, with widespread belief that the province’s economic contributions to Canada over the decades, particularly those of Alberta’s export-focused oil industry, are not recognized in Ottawa or other parts of the country. It is tied to the feelings you have.

However, the financial assumptions in the report from Telus Health, which acquired the human resources services company LifeWorks in 2022, are likely to attract harsh criticism. Questions will arise about whether that is fair to pensioners in other provinces and the soundness of the methodology used to calculate Alberta’s potential entitlement to CPP assets.

The report, which has not yet been published, relies on publicly available information. However, multiple sources say the assumptions are based on the authors’ interpretation of a decades-old provision in the Canada Pension Plan Act. Officials estimate that Alberta could claim about 53 per cent of the CPP’s projected underlying assets by 2027.

The Alberta government says the information in the report is up-to-date.

The idea of ​​a stand-alone pension raises concerns for some Albertans about the potential for changes in the province’s demographics and economic status, or whether the plan would hinder workforce mobility or Alberta’s ability to attract new entrants. I am concerned that this will happen. The government’s opposition NDP has already called the report a “fantasy” that downplays the risks involved.

“When you’re picking a fight with the CPP, you’re not picking a fight with the federal government. You’re picking a fight with premiers Doug Ford, Scott Moe, and Blaine Higgs,” Alberta said. provincial NDP finance critic Shannon Phillips said in an interview.

“You’re picking a fight with our fellow citizens who want to move to Alberta for a while to work and receive the same mobile pension. You live in Toronto for a few years and want to come back. You are picking a fight with someone who is there.”

The Canada Pension Plan was first introduced in 1965. According to the Library of Congress, each state has the right to reject the federal plan and establish its own contribution-based pension system. But only Quebec, which has its own plan, has ever done so.

Federal Ministry of Finance told the Canadian Press A province wishing to withdraw from the Canada Pension Plan must provide three years’ written notice, pass an equivalent pension law, and assume all CPP benefit obligations and liabilities resulting from employment or self-employment within the province. Must be.

The CPP Investment Board (CPPIB), which invests CPP funds to meet future pension obligations on behalf of working Canadians, had $575 billion in assets as of June 30, according to public filings. In its current form, CPPIB is expected to have assets in excess of $1 trillion by 2031 through a combination of new contributions and investment income.

A CPPIB spokesperson declined to comment.

It remains unclear how the state plans to manage the funds carved out of the CPP if it moves forward with the state plan. Alberta already has the Alberta Investment Management Corporation (AIMCo), a Crown corporation that invests $146 billion in 17 pension, endowment and government funds on behalf of the province.

The idea of ​​Alberta funding pensions alone has been debated by Alberta’s Conservatives for decades, but has been particularly embraced by Alberta’s governing UCP.

The outlook for Alberta’s pension system was a key part of Kenney’s Fair Deal push, which concluded with a 2020 report urging the province to explore the possibility. In March 2021, the then Prime Minister said the analysis of LifeWorks was almost complete.

However, the UCP government postponed publication of the analysis, citing the need to incorporate new data. Smith and one of her top advisers, Rob Anderson, have long supported the idea.

But her party barely mentioned the Alberta Pension Plan idea during the campaign.

University of Calgary economist Trevor Tombe is scheduled to release his academic report on the idea for an Alberta pension system on Thursday. He said in an interview Wednesday that the financial viability of the state’s pension system will depend on the amount of assets it receives upfront from the CPP, and there will be widely differing interpretations of what that amount should be. .

He said if the Canada Pension Plan Act is interpreted to mean that the breakaway province would be placed in a situation as if it had never joined the CPP, the amount of assets that Alberta’s independent pension plan would receive would be approximately $300. He said he estimates that it will be. -a billion.

But according to his own estimates, the amount should be between $120 billion and $150 billion.

“Given the scale of the financial assets involved here, there is no reasonable way for anything to proceed without the involvement of the Supreme Court,” he said.