The Decibel - The drama over Alberta’s plan to exit the Canada Pension Plan

Episode Date: October 27, 2023

Alberta has a controversial idea that is causing a stir with other provinces and the federal government: exiting the Canada Pension Plan. Alberta says if they exit, they’re entitled to more $330-billion of the assets that are collected from every worker and employer in the country outside of Quebec. Ontario’s finance minister says the plan risks “serious harm” for retirees across the country. Deputy Prime Minister and finance minister Chrystia Freeland has agreed to meet with provincial and territorial counterparts to discuss the CPP’s future. Kelly Cryderman is a Globe reporter and columnist based in Calgary and she’s on the show to explain why Alberta wants out, the political ramifications and what it could mean for the rest of Canada. Questions? Comments? Ideas? Email us at [e-mail]

On Wednesday, Ontario's Minister of Finance, Peter Bethlenfalvy, called out Alberta's proposal to exit the CPP, the Canada Pension Plan. This is a plan that every working Canadian and employer outside of Quebec pays into. And Alberta says that if they leave the CPP, they're entitled to more than half of the entire fund. Alberta's proposal is causing a rift between them and the other provinces, as well as the federal government. And according to some polls, a majority of Albertans don't think it's a good idea. Kelly Kreiderman is a Globe reporter and columnist based in Calgary. She's been writing about

Canadian politics and all things Alberta for more than two decades. Today, Kelly's on the show to talk about Alberta's controversial pension proposal. I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Kelly, thanks so much for being here. Thanks for asking me to be here. Before we get into what Alberta is actually proposing and why, I think we should really just talk about the CPP. And let's just start with the basics here. What exactly is the CPP?

What is CPP? CPP is the national system we have for pension savings. It's paid into by workers and employers. It stands alone. It's a separate fund. It is not funded by governments per se, even though it was created by the federal government in the mid 60s. 1966, it came into existence. And all the provinces joined in at that time, except for Quebec, which opted to establish its own pension system. And what's the purpose of it? Purpose of it is to make sure that Canadians have pension savings when they retire, that there's some minimum level. It's mandatory. You can start

collecting it as young as 60. You get more if you opt to start collecting it a little later. The Globe has done some analysis of, you know, what people are getting right now. It's, you know, the average person is getting somewhere around $800 a month or $1,000 a month. So it's not probably what you're going to live on for retirement, but it certainly helps. To date, the plan is worth about $575 billion in total assets. This program is run by the federal government, but there is legislation that allows provinces to withdraw from it. And that's what Alberta is now proposing to do. So what is Alberta's argument for wanting to leave the CPP? So yeah, the federal legislation around the CPP allows for any province to opt out if it establishes a comparable system,

which of course Quebec did from the beginning. What we have never had ever in Canada is a province talking about leaving CPP, right? Once being a part of it. And that is what Alberta is talking about now. And you know, to be clear, this it. And that is what Alberta is talking about now. And, you know, to be clear, this is an idea that has been talked about in Alberta for decades. It is a long part of an autonomy push. And, you know, I say autonomy, I think, you know, it's sometimes the discussion of sovereignty is confusing, but I think there's a range of opinions and a scale that governments have long talked about in Alberta about truly seizing the provincial powers that are available to the province.

So those are some, I guess, bigger ideas really about independence, you know, independence for the province. What about financial reasons? Why does the Alberta government say financially this is something they want to do? So Alberta has a very high working population. It has higher employment than other provinces. It has a younger population and it has higher incomes. For all those reasons, the individuals in the plan, the employees and the employers pay more into the plan on average than do other parts of Canada. The argument being made, that is, if Alberta were to break off and establish its own fund, Albertans could have lower premiums and potentially higher benefits because of the demographics

of the province, basically. And has the Alberta government said anything about, I guess, the potential savings for people here then? Yeah, part of the argument is that there could be billions of dollars of savings. People could pay lower premiums. The government even talks about the potential of seniors getting a bonus when they retire because there would be more money available to Alberta pensioners at some point. I guess I wonder then, Kelly, is there something to this argument that Alberta is being treated unfairly here with the current CPP?

I think it depends on your definition of unfairly. You could make an argument that anybody who spends their whole life working and has a higher income is paying more into CPP, no matter where they are in Canada. You do not get more or less benefits depending on where you are. But the Alberta government's argument is, based on layers of argument, that Alberta contributes more to Canada than it gets back. That is the long standing concern and beef from a lot of people, especially in the conservative movement in Alberta, that Alberta has long contributed more than its share. And I think that has been the case for many decades. You also have to look at the other fights that Alberta has with Ottawa on environment and climate policy. Jason Kenney has articulated this and Premier Daniel Smith has

articulated this, that there would be more willingness in the province to not raise these issues if there wasn't the feeling that there's a pushback on the oil and gas industry, which is a major, you know, is the biggest export industry in Canada. The energy sector is the biggest export sector in Canada. And this is all comes back to that. Can you, I guess, elaborate a little bit on this, Kelly? Like when you're talking about all of these issues, it seems to be kind of this a bit of a fight between the Alberta government and the federal government. Is that kind of what something like this comes down to in a lot of ways? Yeah, I think it's hard to keep track of all the fights between the Alberta government and the federal government. I cover it and it's hard for me to keep track of sometimes. But, you know, you heard Pierre Polyev's statement on this last week, which I think was

very indicative of how some Albertans feel that, you know, he's encouraging Albertans to stay in the pension plan. But he's also saying this wouldn't be the case if there wasn't these other fights on climate and energy policy, on electricity, that where Alberta feels like it's being treated unfairly. All right, let's talk about some of the implications here. What would happen if Alberta did leave the CPP? What are the implications for the rest of Canada? Well, the short answer is higher premium implications for the rest of Canada? Well, the short answer is

higher premiums for the rest of Canada and everywhere except for Quebec and less benefits. And the question of how that works out are a big debate. But the fact is that Alberta, because of the demographics, if Alberta were to withdraw, there would be an impact on the collective CPP fund. And that would mean there would be an impact for other parts of the country. We'll be right back. An important part of Alberta's argument of wanting to leave the CPP has to do with a report. This came out last month and it studied the viability of this plan.

So let's get into this report, Kelly, because this is a really important part of this. What did that report say? The Alberta government, in examining a separate pension fund, commissioned a report from a consultancy. This report was commissioned in Jason Kenney's era. We thought this report was going to come out in 2021. Now, of course, we had the pandemic. We had a lot of other things going on. But there is a big question about why this report didn't come out more quickly. That, you know, is one of the mysteries of Alberta politics. We went through a election in May this year where the pension wasn't discussed. Albertans didn't have access to this report. So fast forward

to this fall and Daniel Smith, the premier, says the report is done. She releases the report and the report is a bombshell. The report says that Alberta, if it withdrew from CPP, would be owed 53% of the fund, or is entitled to 53% of the fund. Of the entire Canadian pension plan fund? Correct. Okay. More than half of the fund? Yes, more than half of the fund. Just to be clear, Alberta does not have more than half of the fund? Yes, more than half of the fund. Just to be clear, Alberta does not have more than half of the population of the country. It does not. Now, we are talking about a fund that is supported by provinces outside of Quebec. So you've got to take Quebec's population out of the equation. We are talking about a province that, again, has more workers, has higher incomes, has contributed more, and also takes less because it has less pensioners, right? Because it has more

young people. So the government's argument is that it has overpaid, and I put that in quotation marks, to the tune of $60 billion. And if you look at that and compound interest, that's how you get to this number, $334 billion, which would be more than half of the CPP IB as of 2027, which is the earliest Alberta could withdraw. And there is the idea and the law established back in the 1960s was that any province that withdrew from CPP would get the money it would have if it had established its own independent fund from the beginning. Okay, so it would be entitled to take out whatever it was entitled to out of the whole pot. Correct. And so the problem is, since then, the fund has evolved, the law has evolved, and it is not as clear cut as what people would like to say

it is in terms of what you would get from the fund if you withdraw from the fund. There is a debate about this. Alberta is framing it in a way of saying there is no debate about the money. But people have taken that to task because even within the report itself, it talks about a different interpretation of the law. And under that interpretation, Alberta would get even more money. But highly regarded University of Calgary economist Trevor Toome, who's written about this a lot, written for us about this, believes the argument is full of holes, is not fully understanding the statutory changes of CPP. He believes the number would be closer to 120 billion or 150 billion. And I think the federal

government is signaling that too in the discussion of, you know, we've heard the government say this is, it's a one way ticket. There's been a discussion of whether the federal government makes the final call in determining the number. Does the federal government have the final call on what how much they can withdraw? That question is not fully answered yet, but since they control the legislation that controls the CPP, it would stand to reason. So, and I think the federal government needs to be more clear on that as well. We are just seeing the beginning of clarity from Ottawa on where it stands in all this. And that is definitely a question that needs to be answered as well. So what do we know so far about this, Kelly?

Like, how has the federal government reacted to the prospect of Alberta exiting the CPP and also the other provinces who would be affected by this? What's the response? Well, we've seen a lot of response even this week. And I feel like, you know, the whole country is just kind of waking up to the debate and the significance of it. Maybe in Alberta, we've been because we've been talking about it a little longer, people have been more aware. So I think you saw that play out. You saw the Ontario finance minister request a meeting of finance ministers this week. And then you saw Deputy Prime Minister Chrystia Freeland, also the finance minister, follow up speaking in Calgary. We don't think that number is right. And I would note that the Ontario Finance Minister, Peter, in his letter focused on the need for rigorous analysis. And I agree with that.

She agrees with the Ontario Finance Minister. There needs to be a meeting. The Nova Scotia Finance Minister agrees. Nova Scotia right now is the Premier's chair of the Council of the Federationeration so it sounds like there could be a meeting Alberta's finance minister is open to talking about this and wants to have a meeting right away but there is really an awakening to this being a huge issue and of all the fair deal or Alberta first, this one in a way has the biggest effect on almost everybody in Canada. You're talking about a pipeline and you're talking about climate policy or you're talking about carbon pricing in the oil sands or carbon capture in the oil sands doesn't necessarily have an effect on your life if you live in another part of Canada. This does. This is meaningful for everybody in Canada,

except for Quebec. I got to ask you about how Albertans feel about this, because we've talked about the provincial government of Alberta a lot here. But how do how do Albertans feel about this? Are they on board? So the limited polling that we have on this shows that most Albertans are not in favor of this. There was an abacus poll that was released earlier this month, and it talked about the numbers for Alberta and all Canadians, and 36% of Albertans said it was a very bad idea. 16% said it was a bad idea, with the remaining being kind of it's okay or it's a good idea.

But the very good idea numbers are pretty small. That fits with what I've seen from other polls even a year ago, that the support is not high at all. There are these public consultations going on as well. And right now the feedback that the public consultation panel, headed by former Treasurer Jim Dinning, what they're hearing, a lot of what I heard is negative feedback on this, a lot of concern about the number. To me, it doesn't make sense that when we have roughly 12% of the population,

that Alberta expects that we're going to get half of the Canada pension. So considering the entire premise of an Alberta plan, pension plan is a complete fabrication of anything that would even resemble reality. What is the provincial government going to do? Should it somehow convince Albertans to pull out of the CPP? And some concern also about Alberta's relationship with the rest of Canada. So it's interesting because this doesn't seem to be a very popular idea amongst people in Alberta. I guess, why is the Alberta government picking this as the issue? Like, why is this in particular something that they want to do? I think it goes back to a fair deal panel that was established

by former Premier Jason Kenney and where they did hear from Albertans who are concerned about the encroaching federal government and saw this as a good way to hit back a bit because we are talking about significant money. I think besides the fair deal panel and push, this is also an issue that speaks to the fraught internal politics of the United Conservative Party. You know, a party that had a leadership race last year after booting Jason Kenney out saw Daniel Smith become the leader and then the premier. A lot of her support came from people who thought the Kenney government wasn't tough enough with Ottawa. She needs to prove her credentials constantly on making sure she is bringing it to Ottawa

in a lot of ways. And she will face her party next month at an annual general meeting in Calgary, where there will be a large number of party members who want her to continue in the tough stance with Ottawa, even if that isn't necessarily representative of the larger Alberta public. And we are also talking about an issue where Alberta has power in this regard. Even if there's a disagreement with the numbers, Alberta knows it is a major contributor to CPP and that its leaving will have an effect, an effect that could also benefit Albertans, right? It is the most kind of weighty to me of the Alberta first fair deal issues.

So just lastly here, Kelly, I mean, it's maybe hard to know at this point in time, but I guess I wonder, is there a chance that Alberta doesn't go through with this? If it's not a particularly popular initiative, if there's still quite a lot of hurdles to go through in terms of the process here? Yeah. Is there a chance that this doesn't happen? Yes, I think so. I don't know how that plays out. I don't know exactly how the Alberta government walks back from this. But, you know, even this week, Premier Daniel Smith was asked about the numbers. And she said, we are not going to go to a referendum if people don't have the information that they need in order to make a decision. You know, Alberta could say they want

to leave and not have the numbers for how much of the fund they're going to get. I don't think that sits well with anybody in Alberta, certainly even if they were positive on the idea of a standalone Alberta pension plan. So I think you're seeing an evolution of discussion on this from the Alberta government getting into the nuances

and the difficulties of the plan. And it is possible this doesn't go ahead. It is possible it fizzles out. The opposite is also possible, of course. Kelly, it's great to talk to you. Thank you so much for being here. Thank you. That's it for today. I'm Maina Karaman-Wilms. Jay Coburn helped produce and edit this episode. Our producers are Madeline White, Cheryl Sutherland,

and Rachel Levy-McLaughlin. David Crosby edits the show. Adrienne Chung is our senior producer, and Angela Pachenza is our executive editor. Thanks so much for listening, and I'll talk to you soon.