Alberta eyes more than half of CPP’s assets in report on provincial plan

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Update: Alberta to move ahead with plans to leave CPP, set up its own pension plan

Alberta contends it is entitled to $334-billion from the Canada Pension Plan – more than half of the fund in its entirety – according to a report that is intended to bolster the case that the province should establish a pension plan of its own, according to multiple sources.

As part of Premier Danielle Smith’s bid to see resource-rich Alberta assert its provincial power over pensions, the controversial analysis set to be released on Thursday could mark the beginning of a new standoff and rift with the federal government and other provinces.

The document envisions a difficult and complex separation of $575-billion in CPP assets. The potential financial impact of such a momentous withdrawal – if it were actually to proceed – would be felt across the country in the form of a much-diminished CPP pool. And that could lead to higher premiums or lower benefits for other Canadians.

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According to a senior Alberta government source, the average pension contribution by Canadians outside of Alberta – excluding Quebec – could increase by about $175 a year under such a scenario.

The topic could be subject to a provincial referendum as early as 2024, depending on what former provincial treasurer Jim Dinning, heading a Pension Plan Report engagement panel, finds in consultations with Albertans.

The long-awaited, third-party report was commissioned by Jason Kenney’s United Conservative Party government three years ago to study the viability of creating a stand-alone pension plan.

The idea of a separate pension for Alberta is a political flashpoint even within the province, with polls suggesting it’s not widely supported.

The contentious report is based on the fact that Alberta – with per-capita higher incomes and labour-participation rates, and a younger population – has contributed more to the plan over the decades than it has received. Albertans, it argues, would reap financial rewards with a stand-alone pension.

The idea is deeply political, connected to a widely held sentiment that the province’s economic contributions to Canada over the decades – especially from Alberta’s export-focused oil industry – are not recognized by Ottawa, or other parts of the country.

Yet the financial assumptions in the report from Telus Health, which acquired human-resources company LifeWorks in 2022, are likely to draw sharp criticism. It will raise questions about whether that would be fair to pensioners in other provinces, and the soundness of the methods used to calculate Alberta’s potential entitlement to CPP assets.

The report, which has not yet been made public, relies on information that is publicly available but makes assumptions based on the authors’ interpretation of provisions set out decades ago in the Canada Pension Plan Act, according to multiple sources. It estimates that Alberta could claim about 53 per cent of CPP’s projected base assets as of 2027, sources said.

The Alberta government says the report’s information is up to date.

The idea of a stand-alone pension has some Albertans worrying about potential shifts in the province’s demographics or economic standing, or the plan being a disincentive to labour mobility and Alberta’s ability to attract newcomers. The Official Opposition NDP is already calling the report “a fantasy” that underplays the risks involved.

“You’re not picking a fight with the federal government when you’re picking a fight with the CPP. You’re picking a fight with Premiers Doug Ford, Scott Moe and Blaine Higgs,” Alberta NDP finance critic Shannon Phillips said in an interview.

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“You’re picking a fight with our fellow citizens, who also want to be able to move to Alberta for a little while and work and have the same portable pension. You’re picking a fight with a person who wants to go live in Toronto for a couple of years, and come back.”

The Canada Pension Plan was first introduced in 1965. According to the Library of Parliament, provinces are entitled to reject the federal government’s plan and establish their own contribution-based pension system. However, only Quebec – which has its own plan – has ever done so.

The federal Finance Department has told The Canadian Press that a province that wants to exit the Canada Pension Plan must give three years’ written notice, pass comparable pension legislation and assume all of the obligations and liabilities of CPP benefits because of employment or self-employment in the province.

The CPP Investment Board (CPPIB), which invests CPP funds on behalf of working Canadians to meet future pension obligations, had $575-billion of assets as of June 30, according to public filings. In its current format, CPPIB is expected to surpass $1-trillion in assets by 2031, through a combination of new contributions and investment returns.

A CPPIB spokesperson declined to comment.

It remains unclear how the province would plan to manage the funds carved out from CPP if it went ahead with a provincial plan. Alberta already has the Alberta Investment Management Corp. (AIMCo), a Crown corporation that invests $146-billion for 17 pension, endowment and government funds on behalf of the province.

The idea of the province going it alone on pensions has been discussed by Alberta conservatives for decades, but has been particularly embraced by the governing UCP.

The prospect of a separate pension plan was a key part of Mr. Kenney’s Fair Deal push, which concluded with a 2020 report urging the province to explore the possibility. In March, 2021, the then-premier said the LifeWorks analysis was almost done.

However, the UCP government has delayed release of the analysis saying that new data needed to be incorporated. Both Ms. Smith, and one of her closest advisers, Rob Anderson, are long-time proponents of the idea.

But her party barely mentioned the idea of an Alberta pension plan during the election campaign.

University of Calgary economist Trevor Tombe will be releasing his own academic report on the idea of an Alberta pension plan on Thursday. He said in an interview Wednesday that the financial viability of any provincial pension plan would depend on the amount of assets it receives from the CPP upfront, and there will be vastly different interpretations of what that amount should be.

He said if the Canada Pension Plan Act is interpreted as meaning that any separating province would be placed in the same situation as if it had never joined the CPP, then he estimates the amount of assets a separate Alberta pension plan would receive would be about $300-billion.

However, his own estimate is that the amount should be $120-billion to $150-billion.

“Given the size of the financial asset involved here, there is no reasonable way that anything proceeds without the Supreme Court weighing in,” he said.