The Government of Alberta has released a report detailing the province's potential exit from the Canada Pension Plan, September 21, 2023. (Photo: Government of Alberta)

By David Opinko

Province claims leaving Canada Pension Plan could save Albertans billions

Sep 21, 2023 | 11:05 AM

EDMONTON, AB – The Government of Alberta has released a new report detailing its potential exit from the Canada Pension Plan (CPP).

The report, from LifeWorks, suggests that by transitioning to a new Alberta Pension Plan (APP), significant amounts of money could be saved every year while maintaining or strengthening benefits.

Finance Minister Nate Horner said Alberta’s young population, high employment rates, and higher pensionable earnings have meant the province has contributed billions of dollars more into the CPP system than what has been required.

The current minimum contribution rate for the CPP is 9.54 per cent, but the proposed minimum for the APP would be 5.91 per cent. Horner said this would amount for a significant savings for Albertans.

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“According to the report, an APP could save Albertans $5 billion in the first year alone,” said Horner. “We have a responsibility to present these findings to Albertans and gather their feedback. Albertans will make the final decision on where we go from here. It’s your pension, your retirement and your future.”

Canadians have utilized the CPP since it was first introduced in 1966 and Premier Danielle Smith said the program is no longer working for Albertans in the way it is supposed to.

“This report shows a made-in-Alberta pension plan could put more money in the pockets of hardworking families and business owners and improve retirement security for seniors. We want to hear from you because it’s your pension, your choice. I’m so excited to hear what Albertans think about a provincial pension plan that could benefit Albertans now as well as our future generations.”

The province is legally bound to ensure that a new APP guarantees the same or lower contribution rates while providing the same or better benefits to seniors.

The report estimates that the transition from CPP to APP could be anywhere between $100 million and $1 billion, depending on whether existing CPP providers could be leveraged or if a new provider would have to be used.

However, according to the government, Alberta could receive a significant lump sum payment from the federal government.

“The report estimates that Alberta would be entitled to a $334 billion asset transfer from the CPP in 2027,” the Alberta Government said in a news release. “This total reflects the amount Albertans have contributed to the plan, minus benefits paid to Albertans since CPP’s creation in 1966, minus some administrative costs, plus investment returns on that amount. This total asset transfer would be the value of an APP if it had always existed from day one.”

The province highlighted a few other key findings from the report:

• $334 billion in assets – A more stable pension plan
  The report estimates that Alberta should be entitled to a $334-billion asset transfer from the CPP in 2027. This is how much Albertans have contributed to the CPP minus how much they have received in benefits since the start of the CPP in 1966, plus investment earnings on that amount. With this large pool of money, an Alberta Pension Plan would have a significant financial backstop to cover benefit payments into the future.
• Larger pension benefits for Alberta seniors
  An estimated $5 billion in savings in the first year alone could be used to boost the annual pension benefits for seniors. That could include a significant increase to each senior’s monthly pension payment, or even a $5,000 to $10,000 bonus payment at retirement.
• $1,425 per year – Bigger paycheques
  The Lifeworks report estimates the difference between the rate Alberta workers would pay in Canada Pension Plan premiums and Alberta Pension Plan premiums would save Alberta workers up to $1,425 every year ($2,850 for those self-employed) while maintaining the same level of benefits for seniors. That extra take-home pay for Alberta workers could be used to meet the needs and priorities of their families.
• $1,425 per year – Business savings
  An Alberta Pension Plan could reduce the premiums businesses pay by up to $1,425 per worker, per year. Businesses could invest that money to buy equipment or hire more employees.
• 10 provinces, three territories – Portability across Canada
  Alberta’s government would work with partners at the CPP to develop agreements that would allow individuals to move throughout Canada without disrupting or decreasing benefits.
• More Alberta, less Ottawa
  For decades, Alberta’s young working population, higher employment rates and higher pensionable earnings have resulted in Alberta workers and businesses contributing about $60 billion more into the CPP since inception than has been paid out to Albertans during the same period.

While Smith has expressed her support for transitioning from the CPP to APP in the past, she said the final decision will ultimately come down to the people of Alberta.

An engagement panel will be established and will consult with Albertans. The government said it plans to introduce legislation in the fall 2023 that, if passed, would require a referendum.

Full details on the LifeWorks report is available on the new Alberta Pension Plan website.

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