Debunking the Alberta Pension Plan

As they prepare to sit down for Thanksgiving dinner with their families, many Albertans are once again dreading the turkey-time talk about provincial politics.

Two years ago, the conversation was around Alberta’s referendum to remove the equalization principle from the Canadian Constitution. Surrounded by the fog of misinformation, most Albertans failed to answer basic questions about how equalization works. And fewer than one in four Albertans turned out in support of the government’s stunt.

That gambit was relatively harmless and hapless, based as it was in a faulty strategy to gain “leverage” rather than achieve real changes to the lives of Albertans.

This fall, it’s different as focus shifts to whether Alberta should leave the Canada Pension Plan.

Turkey with a side of deception

For the record, I’ve long been in favour of having an honest and thorough debate over the merits of an Alberta pension plan. Unfortunately, that’s not where this discussion is heading.

The government launched its multimillion-dollar push for a provincial pension plan last month. It is more of a marketing ploy than a genuine engagement. They’re not pretending anything different; the public survey doesn’t even ask Albertans whether they want to keep their CPP.

This is on purpose. Albertans and the United Conservative Party both know that public opinion is dead set against the deal. Poll after poll shows over two-thirds of Albertans oppose abandoning the Canada Pension Plan, with only one in five in support. So, why bother asking until they have to?

To win over hearts and minds in the hopes of a referendum, the government and its allies are pushing many half-truths about Albertans and their retirement savings.

A pensioner’s discussion guide

Let’s look at a few of the most pernicious deceptions, and how you might respond when your friends and family raise them at the Thanksgiving dinner table. I offer some short responses as well as a few followup questions designed to spur reflection, not deflection, on the real matters at stake in the pension debate.

Argument No. 1: ‘Alberta pays more into the CPP than we get back.’

Subtext: CPP is just another federal program that we need to shut down.

Reality: Alberta (as a province or government) doesn’t pay into CPP or receive anything in return. Alberta residents and businesses do.

Response: Albertans are treated the same as all other Canadians when it comes to the CPP.

Followup questions: Is it fair that people with higher incomes pay more into CPP than those with lower incomes? Is it fair that those folks get more out of CPP when they retire? And is it fair that Canadians should be treated the same way regardless of where they live? (Of course, and that’s how CPP works.)

Argument No. 2: ‘Albertans subsidize other Canadians’ CPP premiums. If we leave, they’ll finally pay their share.’

Subtext: It’s time for us to stop the gravy train.

Reality: Premium and benefit rates don’t vary by province. If any large province were to leave CPP, it would have an impact on everyone else’s premiums and benefits.

Response: As individuals and businesses, Albertans do not pay more into or receive less from CPP. We all pool risks and benefits. That’s actually the advantage of the CPP.

Followup questions: If Ontario or B.C. were to leave the CPP, would Albertans pay more? (Of course we would, and this doesn’t mean they’re subsidizing Albertans’ pensions.)

Argument No. 3: ‘Albertans will pay less and receive more under a provincial plan.’

Subtext: It’s about dollars and cents, and we can do better on our own.

Reality: This is not necessarily true. A lot depends on the outcome of asset negotiations with the rest of Canada. The amount transferred will go a long way to offsetting premiums and creating a sustainable benefit system.

Response: You might be right. Until the final negotiations with other governments are complete, no one knows what Albertans would pay in premiums or receive in benefits.

Followup questions: Why do the government’s ads use the word “could” when talking about the potential benefits of an Alberta pension plan? As in, an APP “could” result in lower premiums and higher benefits? (It’s because they can’t guarantee it will.)

Argument No. 4: ‘Alberta is entitled to half of the CPP assets if we leave.’

Subtext: It’s time we got our fair share.

Reality: Most observers have panned the LifeWorks report. Not even Jason Kenney was confident enough to release it. At the end of the day, the federal finance minister must sign off on the final number. The asset formula is not set in stone and will require as much political negotiation as legal interpretation to resolve.

Response: Using Alberta’s interpretation of the formula, if both we and Ontario left, the entire CPP fund would be empty. That simply doesn’t add up.

Followup questions: Why do Albertans deserve half the CPP assets when they’ve contributed only about 15 per cent towards the fund?

Argument No. 5: ‘It doesn’t matter how much we get out of the CPP.’

Subtext: Alberta is wealthy enough to run its own pension plan without help.

Reality: Not really. For an Alberta plan to be sufficient and sustainable at lower contribution and higher benefit rates, it will need a sizable chunk of the CPP’s assets. LifeWorks pegs that at nearly $350 billion. Any less and the advantages of an APP dwindle, unless the government dips into savings, like the Heritage Fund, to make up the difference.

Response: It’s hard to imagine paying lower premiums and receiving more benefits from a plan we start from scratch.

Followup questions: Without hundreds of billions out of the CPP asset fund, how would we ensure Albertans pay less and get more out of a new provincial plan?

Moving forward

I’m hopeful we can steer the conversation around pensions onto common factual ground. That doesn’t mean we can avoid important normative questions about Alberta’s place in Confederation. In fact, those deeper sorts of debates are really at the heart of the pension issue.

• What role should Alberta play in the future of Canada’s economic and social union?
• How confident should Albertans be when it comes to the future of their provincial economy?
• Would “going it alone” provide Albertans with the same sense of security that comes with being part of a larger national pool?
• How important is it that pension funds be invested by arm’s-length agencies as opposed to government?
• Should Albertans trust governments to negotiate a fair deal on exiting the CPP?
• Should Albertans know the full details of the new pension plan deal before voting in a referendum?
• What role should other Canadians play in deciding the future of their national pension plan?
• If the courts get involved, should we commit to respecting their decisions?

There is room for reasonable people to disagree on these questions (except perhaps the last one). We need to provide folks with space to express their opinions and listen to one another.

Whether that space exists at your Thanksgiving dinner table, that’s another story.