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Alberta is considering starting its own pension program. Here’s why economists say that won’t be easy

The Toronto Star with Tammy Schirle 12 November 2019


Bowing out of the Canada Pension Plan wouldn’t save money for Albertans paying into an alternative provincial system, according to two economists — nor would it be all that different from what Ottawa currently offers.

The possibility of an Alberta pension plan is one of several proposals under consideration by the Fair Deal panel, a group convened by Alberta Premier Jason Kenney to find ways to secure more independence for the province within Canada. Kenney has suggested in the past that Albertans pay more into the CPP than they receive in return, pointing to Quebec — which never joined the CPP — as an example of a province with a functional pension system it controls.

Leaving CPP is within the realm of political possibility for Alberta. But experts said the province would be bound by several conditions within the Canada Pension Plan Act, including the creation of a provincial alternative that offers the same or better benefits. Altering the CPP Act itself would require the approval of two-thirds of Canada’s provinces.

“There are provisions. It is feasible. But it’s certainly not simple,” said Tammy Schirle, an economics professor at Wilfrid Laurier University.

Even the Quebec Pension Plan, established as an alternative to joining the CPP in 1965, functions very similarly to the CPP. The formulas used to calculate benefits for pensioners are nearly identical across both plans, Schirle said, although there are minor differences in how the QPP handles survivor and disability benefits.

Kevin Milligan, an economics professor at the University of British Columbia’s Vancouver School of Economics, added the QPP and CPP have only slightly different contribution rates and structures for disability-related payments.

“In large strokes, they’re very similar pensions,” he said.

Schirle said Alberta could set up a functioning pension fund management system on its own that is capable of matching the returns of the Canada Pension Plan Investment Board. However, she said, such a plan would require Albertans to pay in more because of the province’s traditional boom-bust economy.

During good years, she said, contributions to an Alberta pension plan wouldn’t be affected. But a major economic downturn would mean fewer Albertans are working and paying into the pension plan: therefore, the plan would need to have a higher contribution rate to offset bad years. Running a pension plan across the entire country helps to avoid these issues, Schirle said.