The question of whether Alberta should create its own provincial pension plan or remain part of the Canada Pension Plan (CPP) has resurfaced, fueled by a recent report.
The topic was previously raised by a 2023 report commissioned by the Alberta government, which sparked debate about the province’s financial contributions to the CPP.
Key Findings of the Report: Alberta’s Significant Contribution
A 2023 report from the Fraser Institute has emphasized that Alberta has contributed significantly more to the Canada Pension Plan than it has received in benefits over the years.
Specifically, from 1981 to 2022, Alberta’s net contribution reached a staggering $53.6 billion, far surpassing any other province.
Alberta’s Contribution vs. Benefits Received
Over the five-year period from 2018 to 2023, Albertans accounted for 14.4% of the total CPP contributions, while they only received 10% of the benefits.
This discrepancy is primarily due to Alberta’s high employment rate, above-average wages, and a younger population. In contrast, British Columbia was the only other province that contributed more than it received, but Alberta’s contributions were six times higher.
Implications of Alberta Withdrawing from CPP
The idea of Alberta leaving the CPP has been proposed in light of its disproportionate contributions. If Alberta were to exit the CPP, the province could establish its own provincial pension plan, potentially lowering its contribution rates while other provinces might face higher payroll taxes to sustain the program.
According to Tegan Hill, the director of Alberta policy at the Fraser Institute, Alberta would likely continue to pay more into the CPP than its retirees would receive, especially with the province’s robust economic growth and demographic trends.
The LifeWorks Report: Alberta’s Entitlement in Case of Withdrawal
A separate LifeWorks report commissioned by the Alberta government in 2023 suggested that Alberta would be entitled to 53% of the federal pension assets, which amounts to approximately $334 billion, if it were to withdraw from the CPP. This report raised the stakes in the debate, highlighting Alberta’s contributions to the fund.
However, Canada’s chief actuary contested these figures, claiming that Alberta’s entitlement would be lower based on how the calculation should be made. The actuary did not provide a precise dollar amount or formula, leaving room for further discussion.
Counterarguments: The Portability of the CPP
While Alberta’s financial contributions have been scrutinized, counterarguments have also been raised regarding the fairness of this analysis.
In 2023, the National Association of Federal Retirees pointed out the portability of the CPP, meaning that people who contribute to the federal pension plan in one province may not retire there. This complicates the discussion about what constitutes fair contribution versus benefit.
Additionally, in early 2024, Trevor Tombe, a professor at the University of Calgary, published an article in the CD Howe Institute, examining the costs and risks associated with Alberta’s potential exit from the CPP.
He called for a more informed and balanced policy debate, emphasizing the need for careful consideration of the implications of a breakaway pension plan.
Alberta’s Long-Term Economic Trends
According to Hill, Alberta’s continued economic dominance and higher-than-average wages will likely ensure that the province continues to contribute more to the Canada Pension Plan than it receives.
Demographic projections and historical trends suggest that Alberta’s workers will continue to support the system, benefiting Canadians across the country.
The discussion surrounding Alberta’s role in the Canada Pension Plan is far from settled. While Alberta has undeniably contributed a substantial amount to the fund, the question remains whether it would be more beneficial for the province to create its own pension plan or continue to support the national program.
As the LifeWorks report and the Fraser Institute have shown, Alberta’s contributions are far above what it receives in benefits, and the province’s growing economic strength and demographic trends will likely lead to continued disparity. However, the portability of the CPP and the risks associated with a separate provincial plan must also be carefully weighed.
FAQs
How much has Alberta contributed to the CPP over the years?
Alberta has contributed a total of $53.6 billion more to the Canada Pension Plan from 1981 to 2022 than it has received in benefits.
What are the main factors driving Alberta’s high contribution to the CPP?
Alberta’s high employment rates, higher-than-average wages, and younger population are key factors contributing to the province’s outsized role in funding the Canada Pension Plan.
What did the LifeWorks report say about Alberta’s entitlement if it leaves the CPP?
The LifeWorks report suggested that Alberta would be entitled to 53% of the CPP assets, approximately $334 billion, if it were to withdraw from the plan.
How does Alberta’s contribution compare to other provinces?
Alberta’s contributions to the CPP are six times higher than those of British Columbia, the only other province that has contributed more than it received.