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Alberta Premier Danielle Smith speaks to media in Winnipeg in July.JOHN WOODS/The Canadian Press

The Canada Pension Plan’s investment arm said Alberta’s claim that it could withdraw more than half of the national pension fund’s assets is based on “an invented formula” that is divorced from reality, sharply criticizing the math behind Premier Danielle Smith’s push to set up an alternative provincial pension system.

The Canada Pension Plan Investment Board (CPPIB), which invests assets from the CPP on behalf of working Canadians, questioned the credibility of a report released Thursday that estimates Alberta would be entitled to withdraw $334-billion from the CPP – about 53 per cent of its projected assets in 2027, which currently stand at $575-billion.

Ms. Smith promoted a potential Alberta pension plan as an attractive alternative on Thursday, citing estimates from the report to suggest that the province could save billions of dollars a year on its own plan and offer lower contribution rates to workers and more stable benefits to pensioners.

But critics immediately attacked the report that underpins those promises.

CPPIB estimates that any transfer amount owed to Alberta if it withdrew from the CPP would be closer to the share of contributions the province has made since the plan’s inception – around 16 per cent of assets, or about $100-billion.

“That entire document, all the benefits that are proposed, hinges on a very simple thing: a transfer amount from the CPP that appears to be impossible,” Michel Leduc, CPPIB’s global head of public affairs, said in an interview.

“A province that accounts for only 16 per cent of total contributions can’t legally, realistically or morally be allowed to claim more than half the assets.”

He added: “It’s a formula that does not seem to connect with any reality.”

While any province has the right to withdraw from the Canada Pension Plan, it is expected that if Alberta does pull out it would likely set off a years-long battle in the courts over the terms of that withdrawal.

Danielle Smith defended the proposal and touted the benefits of a homegrown Alberta Pension Plan – a huge potential upheaval to the national retirement system that she chose not to campaign on during the provincial election race this spring.

“I believe that an Alberta pension plan would be fairer and could make life more affordable for all Albertans,” she said during a press conference on Thursday morning. “It could bring more benefits for seniors, higher take-home pay for workers and strengthen the Alberta advantage to attract business. I believe it’s the right decision for our province.”

Alberta’s government will introduce legislation this fall that would require a referendum before the province could move ahead with establishing an Alberta plan. Ms. Smith said it would guarantee the same or lower contributions and equal or enhanced benefits, but she did not indicate how the government would underwrite such a pledge.

She also said a provincial pension would be portable, and would negotiate terms with CPPIB and other provincial governments for Albertans who leave the province. But it is not clear how co-operative those partners might be.

CPPIB has a “strong relationship” with Alberta’s government, Mr. Leduc said, and “we support and respect the right of any province to consider setting up their own plan,” but the province “can’t unilaterally set the terms.”

The report released Thursday to bolster Alberta’s claims was prepared in 2021 by human-resources consultancy LifeWorks, which has since been acquired by Telus Health, and was recently updated with newer data.

It dispenses with a literal reading of the Canada Pension Plan Act’s provision for withdrawal, finding it impractical. Instead, it applies an “alternate and reasonable interpretation” that takes Alberta’s contributions to CPP, adds its share of investment returns, then subtracts benefits paid to Albertans and its share of administrative costs.

The report, first commissioned three years ago under then-premier Jason Kenney, calculates that employees and employers in Alberta would save $5-billion in the first year alone owing to lower contributions. This, the provincial government said, could be used to increase monthly benefits or provide a “bonus payment” of between $5,000 and $10,000 at retirement.

“LifeWorks does not start off in the best possible way by essentially using what we believe to be an invented formula,” CPPIB’s Mr. Leduc said. “We truly can’t connect it to anything that we believe has any legal or actuarial reasons.”

The proposal as outlined in the report could seriously undermine the retirement safety net enjoyed by much of the rest of the country, excluding Quebec, which has long operated its own compulsory pension plan.

And it raises issues of fairness if other large provinces such as Ontario or B.C. were to try to withdraw from CPP using the same formula, which could decimate the fund and leave smaller provinces to manage the consequences.

Rachel Notley, leader of the Official Opposition New Democratic Party, called the figures in the LifeWorks report wildly misleading and a ploy to manipulate public opinion in favour of a provincial pension plan. She said an Alberta pension is not only a “major threat” to retirement security but would ignite a lengthy fight with Ottawa and other provinces.

“Should we – heaven forbid – get to a point where the government is able to browbeat Albertans with their own taxpayer dollars into a particular outcome, it’s not good news for Canadians. It’s not good news for Albertans. It’s not good news for our economy,” Ms. Notley said at a press conference in Calgary. If Alberta was actually owed $334-billion, she added, the Canada Pension Plan would crumble as a result.

Alberta’s pitch to its citizens is based in part on the notion that the province, which has a younger population with more working-age people and higher wages on average, is “being asked to subsidize the country” under the current CPP, as Ms. Smith said on Thursday. The LifeWorks report notes that “contributions by Albertans to the CPP have historically exceeded the benefits paid to Albertans.”

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The report estimated that Alberta workers and businesses could save up to $1,425 in contributions using the minimum contribution rate estimated for an Alberta Pension Plan, though it acknowledges that the real rate would likely be higher to create a buffer for the fund.

Some experts said the notion that Alberta is overpaying does not withstand scrutiny, noting that over time, Alberta’s younger population will age and collect CPP benefits that are calculated using the same contribution formula applied to all Canadians.

In addition, the LifeWorks report says that “over the long term, the Alberta population is projected to eventually become comparable to the general CPP population with the benefit of Alberta’s current younger demographic being dampened.”

“They can’t support the argument that they’ve been overpaying because a pension plan looks out 70 years,” said Jim Leech, the former chief executive of Ontario Teachers’ Pension Plan. “You can’t stop the merry-go-round and say, ‘Okay, freeze tag, everybody stop.’ Pension plans don’t work that way. … They’re very dynamic and they follow age groups as they age and move through.”

This fall and into spring, an engagement panel chaired by former provincial treasurer Jim Dinning will gather feedback from Albertans that will be compiled into a report. Mr. Dinning, at the press conference, said he views an Alberta pension as a potential “game-changer” for the province’s financial sector, and “an intriguing opportunity for Albertans.”

“A big issue like this never is simple. We expect our conversations will be complex, and at times perhaps a little heated and most assuredly fiery,” Mr. Dinning said. “But people engaged in debate remind all of us how important sound public policy is for our society and for our prosperity.”

Alberta’s Premier has made challenging Ottawa central to her political strategy, often with support from other conservative leaders, such as Saskatchewan Premier Scott Moe and Ontario Premier Doug Ford. But with a pillar of the pension system at stake, Canada’s other premiers will almost certainly dispute Alberta’s math.

Mr. Ford said Thursday that “we live in a country that everyone shares responsibilities,” when asked about Alberta’s proposal, but said he hasn’t yet had a chance to discuss it with Ms. Smith.

With reports from James Keller and Kelly Cryderman

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