By Stephanie Levett
Alberta’s ongoing negotiations with the Canadian federal government to leave the Canadian Pension Plan (CPP) to create a provincial plan (APP) will have negative effects on hardworking Canadians contributing to the national program.
Recent calls for separation were initiated on the basis of the province’s higher rates of contribution. With supporters claiming it is an “obligation” for Alberta to opt out for higher benefits.
The current perceived benefits proposed by Premier Smith are unrealistic and brings to question the deficits this amendment would make, if approved.
But regardless of the debatable benefits or drawbacks, there is a looming issue that needs to be addressed first.
Vague Guidelines for Withdraw
The CPP Act does allow provinces to apply to withdraw from the national program if two requirements are met. The provincial government must provide 3 years’ written notice and arrangement for comparable benefits in lieu.
However, it is not that simple.
Given Alberta’s nearly 60 years of ‘marriage’ to the program, there are many considerations including the province’s entitlement of assets and the consequential deficits.
Consultation with Albertans and other Canadian provinces currently contributing to the program should not be overlooked. With the recent polls displaying a highly divided public opinion, it is clear that not everyone is enthusiastic about the APP.
Premier Smith’s Multi-Billion Dollar Promise
In a recent report, the Alberta government claims they are entitled to an astonishing $334 billion of the program’s net assets by January of 2027. This translates to over 50% of the fund’s total assets.
Alberta’s Premier Danielle Smith, a highly motivated, long-standing supporter of the separation, has proudly shared this estimated entitlement. In an effort to further convince Albertans of the perceived benefits, she has gone on to say that the APP would save Albertans $1400/year (5.91%), while other Canadians would see their annual contributions increase by $175/year (10.6%).
However, the feasibility of these estimations has become a subject of widespread skepticism.
Calculations conducted by outside organizations and individuals have resulted in lower estimations of entitlement. Trevor Tombe, an economist from the University of Calgary, concludes Alberta’s entitled is 20-25% of the CPP’s present assets. A dramatic difference to the suggested entitlements being shared by Smith’s government.
And there is danger in continuing to spread these conflicting estimations. With a tentatively referendum set for 2025, we cannot expect the public to make an informed vote on the issue without a clear numeric figure to vote on.
The Difference Between QPP and APP
Quebec’s pension plan (QPP) has been used as leverage to try and demonstrate that an agreement with the federal government is feasible and that the APP could be sustainable.
However, this comparison is far from realistic.
As Quebec opted out of the CPP at its point of introduction, in 1966. They have only ever contributed to their provincial plan, in comparison to Alberta who has been contributing to the CPP for nearly 60 years.
The idea behind the national program is that working Canadians contribute to the fund so when they retire, they have a financial safeguard. However, if Alberta ditches the CPP, taking their proposed entitlements, it will leave fellow Canadians with a deficit to fill.
Addressing the Elephant in the Room
Due to the vague requirements outlined in the CPP Act, Alberta’s case for leaving the national program must be considered by the federal government. However, underneath the debates of asset entitlement and the sustainability of the APP is a looming issue that cannot be overlooked.
The original initiative for the APP was introduced in “The Firewall Letter” by a group of Albertans in 2001 and was based on feelings of Western alienation. This is “the elephant in the room.”
This longstanding perception of Ottawa’s favouritism towards the Central provinces while punishing the West with “damaging federal policies” surfaces time and time again.
And now is the time to address it.
Given the unanimous distrust of Alberta’s claims of entitlement being “an impossible figure”, it is unlikely that the federal government will determine their entitlement to be anything close to the 53% which they proposed. Which will only further the frustrations between Alberta and Ottawa.
Therefore, the federal government must first address Alberta’s calls to renegotiate policies putting harmful restrictions on their economy and begin building better relations. Separation from the CPP will only create further divide and cause economy uncertainty for other Canadians.