According to local financial planners and seniors, Albertans should not be so eager to jump into a new Alberta Pension Plan.
The provincial government announced two weeks ago it will continue to pursue an Alberta Pension Plan (APP) after releasing a report on the issue that claimed it could mean $5 billion in savings in the first year.
Each province has the right to leave the CPP, given they can provide a pension plan with equal or better benefits, said financial advisor Michael Acheson from Cooperators Rockyview Insurance Services in Airdrie.
A change to the pension plan would not go ahead without a referendum, he noted.
Acheson said anyone currently receiving CPP would likely not be impacted by the change, but added that many people might be misinformed on where their benefits come from.
CPP is one of the benefits that a retired person gets, while the other two benefits are the old age security (OAS) program and the guaranteed income supplement (GIS). OAS and GIS come out of federal money, while CPP is money contributed by employees and employers managed by a separate entity from the federal government, Acheson explained.
“I believe this idea [of the APP] grew traction because there was the conception or idea that Albertans were paying more into the CPP than what they were collecting,” Acheson said. “If you look at our population that makes sense –we have a very young population inside Alberta, we also have a very engaged population, we don't have a high unemployment rate.”
With a higher number of the population working rather than retired, Acheson noted it makes sense that more money is going into CPP than coming out.
The report claims Alberta is entitled to $334 billion from the CPP.
A provincial pension plan could also result in higher payouts and lower premiums, the UCP government said in a press release. The report was created by LifeWorks, an independent consultant hired by the UCP government. It showed a $1,425 annual savings in pension payments under a provincial plan for workers and $2,850 for business owners.
Acheson believed the CPP is a very responsible, well managed, and well diversified plan and questioned whether a provincial plan could meet those standards.
“CPP is invested very well, it is actuarially able to sustain its current level of proposed benefits for more than 75 years. It's a very stable plan and it doesn't come out of government revenue,” he added.
The only negative from people contributing to CPP, Acheson said, is the increase of contributions from 4.95 per cent to nearly 6 per cent over the last 10 years.
The argument for a provincial plan is if it can do better than the Canadian Pension Plan. Acheson said it might –but at a higher risk.
“The nationalist in me hesitates to walk away from the ability to be able to participate inside the larger pool of resources and larger management of those resources in CPP,” he said. “Part of the advantage of the CPP is it doesn't just invest in one province, it [has] well diversified and well managed investments spread over top of global investments.”
From a personal standpoint, Acheson said he’s not in favour of the APP.
“Can the Alberta Pension Plan do better than the Canadian Pension Plan? I don't know, that's a really tough nut to crack without taking on more risk and in today's day and age, risk is real personal,” he said.
Speaking to local pensioners at a meeting of Seniors on the Bow shortly after Smith's announcement, there was a consensus that not many people were in favour of a provincial pension plan either.
"I've only lived in Cochrane in the west here for seven years. I come from Ontario originally and I believe in Canada and what we have in Canada," said Ken Tranter.
Tranter felt he could not trust the Alberta government, or any politician, to keep their hands out of his pension if taken out of the CPP.
"It's been well invested and I have now been collecting it for a number of years," he said. "My problem would be with Alberta and with most politicians. If they could get their hands on that kind of money, then all of their ethics go out the window. If you give your pension to the Alberta government in this particular case, they will, as we've seen in the past with the Heritage program, dip into it and eventually it will be dwindled down to nothing.
Another local senior, Joyce Post, said she didn't understand what the Alberta government was trying to achieve by this APP move.
"So, they want to follow the Quebec Pension Plan model which I find surprising because, you know, they consider Quebec anything, so," she said. "But my biggest concern for their investment strategies to perpetuate a pension plan in Alberta, right?"
Post also stated she worried about the sustainabililty of an Alberta only pension plan.
"The employers in Alberta are going to have to contribute, right?" she asked. "And how was that sustainable? I’m not that worried about it because it’s probably not going to happen in my lifetime, right? But younger people should be concerned about, you know, the perpetuity of any provincial plan."
“This report shows a made-in-Alberta pension plan could put more money in the pockets of hard-working families and business owners and improve retirement security for seniors,” said Premier Danielle Smith in comments made when she announced the province would be exploring the APP option.
However, critics have said the report grossly overestimates the amount of money Alberta will receive from the CPP if it leaves.
Alberta Federation of Labour (AFL) president Gil McGowan said in response to Smith's claim the province is owed more than half the CPP's assets, “With 13 per cent of the Canadian population, there's no way we're owed more than half. The UCP’s whole argument hinges on the share of CPP assets that Alberta would receive if we took our ball and left the sandbox. Premier Smith is trying to suggest that it’s a given that we’d get $334 billion. But that is far from guaranteed. In fact, it’s a fantasy number.”
The government has assembled an engagement panel to get feedback on an Alberta Pension plan until spring. The panel, led by former Progressive Conservative finance minister Jim Dinning, will submit a report on what they heard.
Smith said the issue will go to a referendum for Albertans to vote on.
-With files from Alberta Prime Times and Daniel Gonzalez, Great West Media
