Alberta would get back a significant lump sum by exiting the CPP. The Chief Actuary in Ottawa has indicated our share would be at least $140 billion. That’s plenty to start and build a strong Alberta Pension Plan from day one.
Thanks to our young and productive population, an Alberta Pension Plan could result in Alberta workers paying lower pension premiums on their paycheques or seniors enjoying higher pension benefits – or a mix of both.
An Alberta Pension Plan would be managed right here at home, creating more jobs and growing Alberta’s financial sector. We would also be insulated from the economic and demographic decline in Canada. Our investment decisions could also be steered clear of ideological decision making, and instead remain focused on the long-term rate of return for Alberta pensioners.
The CPP exit rules aren’t clear in the federal legislation, and Ottawa is notoriously anti-Alberta with its decisions, so the size of the lump sum Alberta is offered could be lower than it should be. This could result in a lengthy court battle with the federal government, and it could lower our ability to increase benefit payments for seniors or lower premiums for workers.
As with any pension plan, if the plan is mismanaged or Alberta’s economy and demographics fall behind Canada, premiums would have to rise in the future in order to guarantee our seniors the same benefits they enjoy today under the CPP. Regardless, as with Quebec, Alberta’s government would still be able to guarantee that an Alberta Pension Plan provide the same or better benefits to Alberta seniors as they now enjoy under the CPP.
The Quebec Pension Plan and CPP have an agreement in place to ensure pensioners get the same single pension regardless of where they worked or lived in Canada during their career. Alberta would expect a similar arrangement with Ottawa, but it is not guaranteed.
Section 94A of the Constitution says no federal laws regarding pensions can override provincial ones. When the provinces (other than Quebec) agreed to join the CPP in 1966 they insisted on an exit clause with a formula for dividing assets, which is in the CPP Act.
Under the federal legislation, a referendum is not required, but Alberta’s government has introduced legislation to require one before enacting an APP. This legislation helps provide Albertans with confidence to know that they will get to have their say about an APP.
This is a legitimate perspective. It is worth keeping in mind that in addition to this $3 billion, Albertans annually send an additional $20 billion in federal taxes beyond what we get back in federal spending. The CPP is the only program we can unilaterally withdraw from.
You will not lose any CPP benefits you have already earned. You would continue to receive your pension from the CPP until an APP is set up and then receive the same or possibly better pension from an APP instead of the CPP.
The provincial government has introduced the Alberta Pension Protection Act. Among other things, that legislation would ensure that there cannot be a move to an APP unless it provides benefits that are as good as CPP. The CPP Act also legally requires this.
As is already the case in Quebec and the QPP, Alberta’s government would work to develop agreements which would ensure that you eventually receive one pension when you retire and apply for benefits – a pension that recognizes the contributions you have made during your life, no matter what pension plan you paid into.
These agreements would ensure that you contribute to the correct pension plan, depending on your work and living experience. Other agreements would coordinate the payment of the benefits between the CPP, QPP (Quebec Pension Plan), and an APP for people who move to Alberta, or for Albertans who leave Alberta to live, work, or retire.
And finally, international social security agreements would be developed for Albertans who are working and living abroad.
These agreements - often called reciprocal transfer agreements - are relatively common, particularly amongst public sector pension plans (including those in Alberta). Details of a transfer agreement between an APP and CPP would need to be negotiated.
It is possible the federal government would decide not to cooperate with us at all. If the APP offered higher benefits that may also affect their willingness to work with us on portability. In these cases you would get two pension cheques but you would get the same amount or more.
No, the CPP Act makes clear that no province can exit without maintaining all CPP-related benefits.
No, those are separate federal programs.
While the CPP Act is clear that provinces can opt out, the section on dividing assets is not clear. The Alberta government commissioned a report from a leading pension firm and their conclusion was that we would be eligible for roughly half of the CPP fund because so much of the interest that compounded is from our net contributions each year.
Dr. Trevor Tombe provided a different interpretation you can read here, estimating Alberta would get 20-25% of the fund. The Chief Actuary of Canada did not provide a hard number but endorsed his analysis. Given the CPP recently estimated the value of the fund at $700 billion, the low end would put us at $140 billion.
The Alberta government has not altered its position that the number should be higher. A court battle is possible.
At present, and even over the next few decades, an APP would be on a very strong footing given our relatively young and well-employed population. In recent years Alberta workers and businesses have been paying roughly $3 billion more per year in premiums than we need for CPP benefits in Alberta, and that would be staying in the APP.
There are a number of variables to consider, however, in looking past the next few decades. Alberta could drop below average in terms of the workers-to-seniors ratio. Alberta’s pension fund could generate lower returns. Alberta could get shortchanged on our initial lump sum. Future governments could decide to use part of the find for other purposes. One of these factors shouldn’t compromise an APP’s advantage but a combination of them could in the longer term.
In that scenario the likeliest outcome would be slightly higher premiums for workers to maintain pension benefits on par with CPP, as in Quebec today after decades of lower productivity and fewer young workers.
There are also risks in staying in the CPP – the rest of Canada’s productivity and population could stagnate and push premiums up even while Alberta grew and prospered.
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