Anthony Pizzino is chief executive officer of the National Association of Federal Retirees.
Alberta Premier Danielle Smith, who made a point of not campaigning on taking her province out of the Canada Pension Plan and yet is now moving ahead with this, figures the province is entitled to 53 per cent of the CPP’s assets, or $334-billion. And the province’s Treasury Board and Finance department commissioned a report by Telus Corp.’s LifeWorks consultancy saying as much. Now the Premier is telling Albertans that transferring the CPP assets to their province would translate into larger paycheques and more comfortable retirements for them.
There is a lot to quibble about over the assertion that Alberta should get $334-billion in assets from the current CPP Investment Board when the province is only responsible for 16 per cent of all contributions to the CPP. Findings in the LifeWorks report on the potential Alberta Pension Plan are based on what it calls an “alternative interpretation” of the asset transfer provisions in the CPP Act.
But if the formula were applied to other provinces, such as Ontario, and it decided to leave the national plan first, its portion and Alberta’s would be more than the entire fund the CPPIB manages. The flawed formula, therefore, invalidates most of the report’s findings.
The “alternative interpretation” is based on assumptions that have no basis in legislation, nor in the context of the modern-day CPP. That said, coming up with any formula illustrates several problems with the legislation that created the plan in 1965. First, the language that allowed provinces to withdraw was drawn up when the plan only had minimal assets, and it is therefore not suited to the substantial CPP fund of today. Second, the legislation is vague and there is no legally clear interpretation that leads to a suitable allocation of the assets in practical terms.
Ultimately, the legislation says the federal Finance Minister at the time will decide. And if Alberta leaves the CPP, the federal government would pay an amount calculated on how Ottawa interprets the legislation. One can imagine the protracted arguments, lawsuits and serious objections by other provinces, with Canadian unity as one of many casualties.
At the National Association of Federal Retirees, we advocate for all of our members’ pensions and for secure pensions for all Canadians, including the CPP. Losing their CPP, after contributing to it for their entire careers, could be disastrous for our members and Canadians, many of whom depend on it.
A quick e-mail poll our association conducted last Thursday received 8,100 responses from our 170,000 members in the first few hours, with 95 per cent saying they opposed Alberta’s plan to exit the CPP. Many respondents said the CPP is a vital part of their retirement income, and losing any of it will change their ability to pay their bills. All Canadians deserve retirement income security, and weakening the CPP for all of them is unacceptable.
Fortunately, Ms. Smith said Alberta would hold a referendum before it applies to withdraw from the CPP. A Leger poll conducted prior to the May provincial election found that only 21 per cent of Albertans support this switch, and even among the Premier’s United Conservative Party, just 33 per cent gave it a nod.
While Ms. Smith, bolstered by the report’s findings, argues that an APP will be more robust than the CPP, and might even result in “bonus payments” of between $5,000 and $10,000 for Albertans upon retirement, the truth is it could make their pensions less sustainable and more costly in the long run.
The case of Quebec is a cautionary tale. It chose to go it alone and create the Quebec Pension Plan in the 1960s, thinking its population would remain young. But it didn’t. Now, Quebeckers pay the highest contribution rates in Canada. Alberta demographic projections suggest the same thing could happen to contribution rates for a new APP.
It’s surprising that Ms. Smith, a supposed lover of small government, would find creating a new plan attractive as LifeWorks’ own estimate for setting up a new plan for Alberta alone puts the initial administrative costs at $2-billion, and more money each year to maintain it.
Finally, Alberta leaving would have a negative effect on the CPP and financial impacts on workers and retirees outside of Alberta. Destabilizing and weakening a solid retirement vehicle such as the CPP is not what retired Canadians or people working toward retirement bargained for or deserve.