Should Alberta withdraw from the Canada Pension Plan and create its own made-in-Alberta pension plan?
That’s one of the questions that the Alberta government is looking to answer through the “Fair Deal” panel, a newly-formed group to consider a range of reforms that Premier Jason Kenney hopes will help the province “secure a fair deal” in the Canadian federation.
“Alberta has been by far the biggest contributing province to Canada in recent decades, and a huge engine for jobs and growth. But governments that have profited from our resources, hard work, and generosity now seem determined to pin us down and block us in,” Kenney said in a statement released when the panel was announced.
“Albertans aren’t asking for a special deal. We’re just asking for a fair deal. And our government will do everything within our power to get it.”
Concerns about Western alienation appear to be on the rise in Alberta, particularly after Justin Trudeau’s Liberal Party was completely shut out of province in the October election, while the Conservatives swept it. The sentiment has even led to some calls for a “Wexit” – a Western separation from the Canadian federation that some say isn’t working for Alberta.
In an effort to address some of these concerns, Premier Kenney launched the Fair Deal panel which will consult Albertans on how best to advance the province’s economic interests. That includes taking a closer look at Alberta’s contribution to the CPP, and whether it’s worthwhile to launch its own provincial alternative, in some ways similar to what Quebec currently has.
Why is there debate?
While provinces are able to opt out of the CPP, as Quebec did when the pension plan was created in the mid-1960s, no province has done so since. There are many questions about exactly what a withdrawal process would look like and how complex it would be.
There are also questions about whether this would be the right move for Alberta in addressing the concerns about Western alienation, and what it would mean for the CPP and pensioners and contributors across the country.
A ‘compelling case’ or ‘negotiating chip’?
“I believe that a compelling case can be made for such a shift. We want to listen to Albertans first on this, but let me just say that with the youngest population in Canada, we are by far the largest contributors to the CPP. The federal government, against our government’s wishes, is imposing higher CPP payroll taxes which will decrease economic growth and kill jobs. Even though we, with this young Alberta population, do not need and cannot justify higher premiums.” – Alberta Premier Jason Kenney, in a Facebook Q&A
“The CPP could not proceed in a sustainable fashion based on the status quo if Alberta withdraws... It seems to me that the more important underlying issue is that there’s a give-and-take in federalist countries and the problem right now is it’s very hard to see how either the federal governments or provinces are trying to accommodate what is a very difficult economy in Alberta.” – Jason Clemens, executive director of the Fraser Institute, a right-leaning think tank
“People definitely didn’t vote to have their pensions blown up... None of this was in what Mr. Kenney campaigned on. He said he was going to focus on jobs, the economy and pipelines.” – Sarah Hoffman, NDP critic
“It’s one thing to say that we’re going to look at this because we think we’re not being treated fairly and we’re going to add it to the list of things that Confederation is doing to make life difficult for us... I think it’s more of a negotiating chip and basically a small part of a larger discussion.” – Malcolm Hamilton, senior fellow with the C.D. Howe Institute
“If growth in Alberta’s oil and gas industry slows down and the economic base of the province doesn’t become broader, population growth is likely to slow down and the population is likely to get older. With the passage of time, so would the compelling case for an Alberta Pension Plan.” – Bob Baldwin, consultant specializing in pension plans
Alberta’s contribution in the CPP
“There is little doubt that the CPP arguably has been a bad thing for Albertans, not that this was done deliberately... The way CPP works, you end up with a plan where mostly working people pay for retired people. That works really well for provinces that have had slow growth in the workforce and an older population. But it hasn’t worked well for Alberta.” – Hamilton
“The argument is that the 3 million Alberta members of the CPP are younger than the other 17 million members and therefore are paying more and drawing out less. This is true, but ignores the fact that younger Alberta members still ultimately have to be paid their pensions, so the extra money has to stay in the plan. It does not go into the Alberta economy.” – Keith Ambachtsheer, former director of the Rotman International Centre for Pension Management
What would opting out of the CPP look like?
“It is something for which there is no precedent and something that is, frankly, going to be very complicated and very difficult to do... You can’t do it unilaterally and I don’t think anybody knows exactly how you do it. I just think it’s going to be pretty hard.” – Malcolm Hamilton, senior fellow with the C.D. Howe Institute
“The CPP and Quebec Pension Plan were separate plans from the beginning. Unscrambling the CPP omelet to carve out an Alberta piece will be difficult and contentious. It is a very different proposition.” – Keith Ambachtsheer, former director of the Rotman International Centre for Pension Management
“It is complicated, but I don’t see these issues as insurmountable or inherently technical in a way that it would be so difficult and so complicated that we wouldn’t be able to get a solution. My hope is that that’s not where we’re heading. I think there are very clear questions about whether the CPP could survive if Alberta withdrew.” – Jason Clemens, executive director of the Fraser Institute, a right-leaning think tank
“The administrative apparatus that needs to be in place to operate a plan like the APP is substantial and includes: the collection of contributions, the maintenance of earnings, records of millions of people, calculating benefits and paying them, and handling appeals. It requires more policy and and research capacity than likely exists at present and an expanded role for AIMCO. The expenses involved will reduce, by degree, the potential advantage of a youthful population.” – Bob Baldwin, consultant specializing in pension plans