A Proposed Alberta Pension Plan: What would be the impact on the business community

By many measurements, Edmonton is set to have a good year. Inflation is easing, migration to the city is up, and the city’s Gross Domestic Product (GDP) is expected to grow by about 2 per cent. Of course, it’s all relative.

The economy is not expected to grow as much as last year or the year before. But we’re looking pretty good in Edmonton compared to the Canadian economy which is expected to grow by about 0.7 per cent, according to the Conference Board of Canada.

I’ll have more to say in future columns on what we can expect for businesses in 2024 and how the Chamber of Commerce can help our members.

Needless to say, all of us will be facing uncertainties. But what we don’t need are unnecessary uncertainties.

That’s why I’d like to talk about one of the pressing issues facing not just Edmontonians but the entire province: the possibility of an Alberta Pension Plan (APP).

The introduction of a provincial pension plan isn’t going to happen this year. Alberta would have to give a three-years notice it wants to leave the Canada Pension Plan (CPP). The government has already paused its public consultation process, further delaying a decision on whether to push ahead.

But by raising the serious possibility of withdrawing from the CPP to set up an APP – a prospect promoted by a $7.5 million public awareness campaign – the government has captured the attention not just of Albertans but the entire country. It is an idea that is, to put it mildly, controversial.

The government is now awaiting word from the federal government’s Chief Actuary on how much money Alberta could expect to get from the Canada Pension Plan should the province decide to set up its own plan.

That number will be crucial. The government-commissioned report from Lifeworks says the province should receive $334 billion, or about 53 percent of the CPP’s assets.

According to Lifeworks, with that much money, the contribution rates would fall from 9.9 percent under the CPP to 5.91 percent under an APP. In financial terms, that would amount to an annual savings of $2,850 split 50/50 between employer and employees.

I am, naturally, in favour of cutting costs to businesses and workers. And the Lifeworks figures are enticing. However, the Lifeworks’ conclusions have been dismissed as unrealistically high by experts such as Calgary economist Trevor Tombe. He has written his own report that points out under the CPP Act there is no clear exit formula for how much a province will receive. He suggests Alberta might receive $120 billion at most from the CPP, making the risk-reward tradeoff for an APP “far worse” than the Lifeworks’ projections.

I don’t want to get lost in arguments over how much money Alberta might, or might not, receive.

There are many other issues at stake here, not least is the irony of a government that has done so much admirable work to cut red tape, possibly creating so much red tape under an APP that it becomes a barrier to businesses and investment entering our province. Then there are the crucial issues of labour mobility and pension portability.

One reason why the future looks good for Edmonton is we have thousands of people moving to the city each year. That’s in part thanks to the provincial government’s “Alberta is Calling” campaign. However, the introduction of a provincial pension plan might undermine that migration by raising questions about the portability of moving CPP contributions to a provincial plan.

Will we need one set of premiums for long-term Albertans and another for newcomers? Will businesses face additional costs managing the paperwork under an APP?

How will the Alberta government manage a provincial plan? Will it be like Quebec’s (a province, by the way, that was never part of the CPP and now has the highest pension contribution rates in the country) where part of its mandate is to bolster the provincial economy?

In other words, might we end up putting too many of our eggs in the province’s economic basket as opposed to the CPP that operates at arm’s length and free from political interference from the federal government?

The CPP, it is worth mentioning, is not only one of the world’s largest pension funds, it is one of the most successful.

Even though an APP might look attractive now because we have a young, well-paid workforce, who knows what the future will bring?

A Dec. 4 article in the digital publication Policy Options points to a valid and troubling concern:

“Currently, Alberta has the benefit of a relatively young population and a buoyant economy. The real question for Albertans is whether those conditions, and the long-term investment success of the potential new Alberta new plan, can be presumed across the span of contributors’ working lives and retirement years. If not, the prospects of an APP providing a better and cheaper alternative to the CPP for Albertans remain highly questionable.”

There’s also a reputational risk to Alberta if it pushes ahead with an APP over the objections of every other province in Canada that is part of the CPP. Premier Danielle Smith announced her proposal for an Alberta plan in September. That was before I became president of the Edmonton Chamber of Commerce.

But I would like to acknowledge the sentiments of Deborah Yedlin, president of the Calgary Chamber, who wrote a cautionary statement on Sept. 29 saying while she respects the government’s decision to review the idea of an Alberta Pension Plan, she has some major concerns: “Dismantling existing systems and altering our pension system could compromise labour mobility from other provinces, the benefits of risk pooling that comes with a larger pension fund, and investor confidence. We urge the government to strongly consider - and prioritize - stability across all public policy decisions.”

In these uncertain times, we need more clarity and reliabiilty, not needless worry and uncertainty.

Doug Griffiths
President and CEO,
Edmonton Chamber of Commerce