Albertans’ retirement savings should pay for one thing and one thing only: their retirement pensions.
Today, the Alberta government released a report detailing just how Alberta plans to exit the Canada Pension Plan — which would have ripple effects on all Canadians. The proposal would amount to Alberta removing more than $330 billion — or almost sixty percent — of the Canada Pension Plan’s assets.
Since 1966, Canadians have confidently invested their retirement savings in the CPP. More than 650,000 Albertans are CPP beneficiaries, and Canada’s chief actuary reports that the CPP is sustainable for at least the next 75 years. The CPP invests sustainably and is protected from political interference, which can hurt the plan’s ability to pay pensions. The pension plan has helped lower poverty rates among seniors from 30 per cent in 1977 to two per cent in 2020.
But the Alberta government has proposed withdrawing from the Canada Pension Plan and setting up an Alberta pension plan. Proponents say it would enable investment in Alberta and cost less for Albertans because the province’s population is relatively young.
Danielle Smith, during the leadership campaign of the United Conservative Party (UCP), said of the CPP: “When you look at that program alone, that is clearly going to pay for whatever additional powers we take on board, whether it’s a new Alberta provincial police, which they say is another $170 million, or collecting our own personal income tax, which is $200 million.”
These estimates bely a fundamental misunderstanding of how the CPP works and the costs that would be associated with a new Alberta pension plan. It would take $525 million to administer each year. Alberta’s population is young because younger workers have migrated for oil and gas jobs, but that number has been shrinking over the past 10 years, which means the cost of an Alberta-only plan would increase over time. Today, adults over 65 make up the fastest-growing age group in Alberta, accounting for 15 per cent of the province’s total population or more than 725,000 Albertans. By 2040, that number is expected to nearly double, exceeding 1.1 million. By the mid-2040s, one in five Albertans will be over 65.
Finally, an Alberta pension plan could be susceptible to political pressure when it comes to investing. Large investments in projects with poor long-term prospects and returns would negatively impact the pension plans’ sustainability.
Pension plans are not a political bargaining chip. Albertans’ retirement savings should pay for one thing and one thing only: their retirement pensions.
The proposed Alberta pension plan is especially risk-laden for those nearing retirement who have spent their careers contributing to the CPP and depend on it for a significant portion of their retirement income.
An Alberta-only pension plan would mean high administration costs to set up and run as well as increasing costs for Albertans as the population ages, political interference in investments and uncertainty and risk for those who can least afford it.
Earlier this year, Federal Retirees CEO Anthony Pizzino penned an op-ed that appeared in the Globe and Mail. Pizzino begins by pointing out that a mere 21 per cent of Albertans feel the provinces should withdraw from the CPP, adding that the CPP continues to be well-funded and has always securely paid benefits.