No one likes the idea of taking Alberta out of the Canada Pension Plan (CPP).
So it’s simply astounding that everyone – Alberta voters, the province’s professional commentators, and an Opposition party that had a real shot – let Premier Danielle Smith say she just didn’t want to talk about it until after the election.
One of the worst policy ideas that the United Conservative Party has ever advocated for has simmered quietly on the back burner throughout their campaign with barely an acknowledgment, let alone a peep of complaint.
The new pension policy
Well, the election is over, the UCP is still the government, and Smith is talking seriously about the policy again.
The Alberta pension scheme had its beginnings in the 2001 separatist musings of Stephen Harper and a small group of far-right leaders. It was then tossed out by premier Ralph Klein, who was not exactly a Marxist radical, along with the rest of the group’s notorious Firewall Letter. It was later forgotten by Harper too, at least temporarily, when he became prime minister.
The scheme was revived by Jason Kenney. Sneaky as Kenney was, though, it was quite possible he intended to use it as a bargaining chip to annoy Ottawa in the event of opportunities to slow down federal responses to the climate crisis.
On Thursday, the UCP published Smith’s mandate letter to Finance Minister Nate Horner. There it is, just as any sensible person who has paid attention to Smith and the UCP would have expected:
“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,” reads one of it’s mandates to Horner.
Months ago, then finance minister Travis Toews was said to be “tweaking” the consultant’s report. Government supporters were dropping hints that it favoured the idea of Alberta quitting the CPP.
We haven’t seen the report yet. But we can be reasonably confident that the UCP’s proposed plan will not increase pension benefits for seniors or reduce premiums for workers, at least not for long. Nor will it protect Albertans’ pension interests and benefits.
Financial instability forecasted
The flaws with this scheme are well-known and understood.
Notwithstanding the tendentious wording of Horner’s mandate letter, the CPP is robust and secure – and in pensions, as in some other things, size matters.
As pension governance expert Tom Fuller pointed out a week before the May 29 election, the CPP has delivered on its promise for almost 60 years.
Moreover, the Chief Actuary of Canada says its current structure is sustainable over the next 75 years, which gives some comfort to old geezers like myself, not to mention the generations that follow.
“Could an APP do the same thing more cheaply?” Fuller asked. “Well, it’s easy to cut contribution rates for any pension plan – if you’re prepared to put the benefits of future retirees at risk.”
Fuller noted that the APP might do this by assuming that population demographics will not change, or making riskier investments with plan assets.
“If that’s what the UCP has in mind, Albertans have reason to worry,” he said.
And, of course, that’s exactly what they have in mind – in addition to propping up the unsustainable fossil fuel industry for a few more years.
At the mercy of political whims
Likewise, Fuller warned, one of the great things about the CPP is that it’s insulated from political interference. Could the same be said of a UCP-run Alberta plan? Not a chance!
As Smith said in 2019, “if CPP starts bailing out of energy resources, we don’t want to be in a position where our money is being used to support solar and wind or other experiments.”
Anthony Pizzino, CEO of the National Association of Federal Retirees, said in the Globe and Mail the day after the election, “an Alberta pension plan could change at the whim of one government – maybe even the government that chose to enact it. Politicians, when seeking re-election, aren’t always looking at the long-term best interests of their constituents.”
That, of course, is a considerable understatement. If the UCP would seriously consider ending the polluter-pays principle with the RStar boondoggle – a scheme that Smith once lobbied for – it isn’t going to be able to keep its paws off a provincial pension plan, either.
As for the government’s argument that Alberta’s young population means workers can pay less for a secure pension, Pizzino noted that the opposite might actually happen.
“Quebec’s plan, which is separate from CPP, is now challenged by the province’s changing demographics,” he explained. “When it decided not to join the national plan, it was a young province. Now, the average age of its residents is significantly higher. Being in a national plan can hedge against that kind of demographic change.”
Friends of the UCP – like the Fraser Institute, which has already published a deeply-flawed “case study” claiming an Alberta pension could deliver the same benefits as the CPP for a lower contribution rate – stand ready to join the propaganda effort to sell the scheme. Of course, as the likely manager of an Alberta pension, the Alberta Investment Management Corp., better known as AIMCo, will pitch in to support the scheme as well.
“AIMCo’s record in investing is spotty at best,” Fuller observed. “If AIMCo has to expand its operations to handle new assets of an Alberta pension plan, that would probably increase both costs and risks to the plan.”
Smith, however, has latched onto it with enthusiasm and every indication she will push it forward as if it were a sensible policy.
This should surprise no one. After all, she is a former oil and gas industry lobbyist.
The denizens of Calgary and Houston’s corporate boardrooms will be elated at the prospect of a captured provincial government accessing millions of Albertans’ pension funds to keep fossil fuel companies afloat.
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