Jun 04, 2023

Braid: The UCP's Alberta pension drive is revived and forging ahead

Post-election, the drive for a provincial pension plan is fully revived

Do you like the idea of an Alberta pension plan yet?

Probably not. A poll early this year showed only 21 per cent of Albertans back the UCP’s pet project. Other reactions range from disinterest to terror.

When the election campaign came along, the UCP left the pension scheme out of their platform. The NDP happily used it as a scare trigger.

Post-election, the drive for a provincial pension plan is fully revived.

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Finance Minister Nate Horner’s mandate letter from Premier Danielle Smith charges him with “releasing the Alberta Pension Plan report and consulting with Albertans on its findings, to determine whether a referendum should be held to establish an Alberta Pension Plan that will increase pension benefits for seniors, reduce premiums for workers, and protect the pension interests and benefits of all Albertans.”

Government sources suggest that when the time comes for a referendum, probably in two years, there will be specific dollar amounts for each age at which retirees decide to start taking the pension.

The payments would be meaningfully higher than CPP maximums, now about $1,300 for people starting to collect at age 65.

That might convince some people. But why trade the safe, reliable Canada Pension Plan, backed by a population of 40 million, for an Alberta pension fund based on a population of only four million?

One key argument is that Alberta’s young, relatively high-earning populace already contributes massively to the CPP, while Alberta seniors are paid pensions on the same scale as other Canadians. The government feels there’s huge economic power behind this plan, and it should benefit Albertans directly.

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That’s probably true — for now. But what happens if the oil and gas sector shrinks and wealth creation can’t be replaced by green energy? There could come a day when the government has to raise contributions or freeze benefits, or both.

Also, Ottawa isn’t exactly a silent partner in this.

Alberta is within its constitutional rights as long as certain conditions are met and the Alberta plan is as good or better than the federal one.

The benefits would have to be portable across Canada and abroad, and indexed to inflation.

But Ottawa will decide if Alberta’s plan is adequate — and, most importantly, how much cash Alberta could take out of the federal fund.

The feds, as we know, have a long history of stalling moves that seem within provincial jurisdiction but don’t please them.

Also, it’s not clear whether current Alberta pensioners would be able to stay with the CPP, or be forced into the Alberta plan.

That’s one of many tricky problems for which Quebec’s example provides no answers.

Quebec has had its own pension plan since 1965. It began along with the Canada Pension Plan so there was no transition, just twin startups. Disentanglement by one province has never been contemplated.

Still, Alberta advocates often cite the Quebec Pension Plan as a positive example.

Quebec’s contribution rate is slightly higher than the CPP percentages. Payments to seniors are virtually identical.

The main benefit to Quebec, perhaps, is that the Caisse de depot, which manages investments, has become a financial powerhouse with more than C$400 billion under management.

With big money comes big risk. The Caisse lost $24 billion last year. That hit falls on Quebec alone.

So, who would manage Alberta’s fund? The obvious candidate is the Alberta Investment Management Corp. (AIMCo), wholly owned by the government, with $158 billion in assets.

But AIMCo’s reputation is shaky these days after pandemic-era losses that echoed around the world. Many people weren’t happy when the teacher’s pension plan was force-marched into its arms.

Surprisingly, the UCP might consider handing the job to the Canada Pension Plan Investment Board, the big hitter with nearly $600 billion under management.

In that case, Albertans’ pension money would be managed and invested by a federal Crown corporation.

Go figure.

Don Braid’s column appears regularly in the Herald.

Twitter: @DonBraid

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