{"id":18735,"date":"2020-06-19T09:10:09","date_gmt":"2020-06-19T13:10:09","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/alberta-panel-recommending-province-withdraws-from-cpp-create-alberta-pension-plan-147200"},"modified":"2020-06-19T09:10:09","modified_gmt":"2020-06-19T13:10:09","slug":"alberta-panel-recommending-province-withdraws-from-cpp-creates-alberta-pension-plan","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2020\/06\/19\/alberta-panel-recommending-province-withdraws-from-cpp-creates-alberta-pension-plan\/","title":{"rendered":"Alberta panel recommending province withdraws from CPP, creates Alberta Pension Plan"},"content":{"rendered":"
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Kelsey Rolfe<\/span> | June 19, 2020 <\/p>\n

Alberta\u2019s Fair Deal panel is recommending that the provincial government withdraws from the Canada Pension Plan and creates its own, subject to a referendum.<\/p>\n

\u201cThe panel recommends vigorously exploring this option and conducting the due diligence needed to assure Albertans that benefits and risks are understood and can be positively managed,\u201d wrote the panel. \u201cAlbertans will want to be assured that the [Alberta Pension Plan] would be managed independently in an arms-length manner by an experienced manager using best governance and practices for pension plan management.\u201d<\/p>\n

The panel was launched by Premier Jason Kenney to consult with Albertans on how to advance the province\u2019s economic interests and increase provincial powers. It came in the wake of a federal election that saw the Liberal party fail to capture any seats in the province, highlighting Albertans\u2019 frustration with Prime Minister Justin Trudeau\u2019s government.<\/p>\n

Read: Alberta will study already \u2018compelling case\u2019 for its exit from CPP: Kenney<\/a><\/strong><\/p>\n

In its response to the panel, the provincial government said it would conduct further analysis on the proposal. \u201cIf that analysis concludes that an Alberta Pension Plan would be a net benefit to Albertans, we would then proceed to give Alberta voters the final say on the proposal in a province-wide referendum,\u201d said Kenney during a news conference.<\/p>\n

In its proposal, the panel referenced research from the Fraser Institute that said Alberta\u2019s younger population, higher incomes and historically higher rates of employment<\/a> means its workers contribute \u201cdisproportionately\u201d to CPP. While workers represented 16.5 per cent of total contributions to the CPP in 2017, provincial retirees represented 10.6 per cent of CPP payouts, creating a $2.9-billion contribution gap. The institute hypothesized that an APP would allow Alberta\u2019s contribution rate to decrease from its current 9.9 per cent to as low as 5.85 per cent while maintaining base benefits at a comparable level to the CPP.<\/p>\n

A January report by Keith Ambachtscheer, founder of KPA Advisory Services Ltd. and adjunct professor at the University of Toronto\u2019s Rotman School of Management, took issue with those conclusions<\/a>. He noted that, while the influx of young workers moving to Alberta from across Canada to work in the oil and gas industry over the last 25 years and the higher wages have contributed to the province\u2019s current contributor status, workers have started to leave the province as the fossil fuel sector has been hit by climate change policies, reduced oil and gas demand and a lack of pipelines to get those products to market.<\/p>\n

Read: Proposed Alberta Pension Plan has underwriting, political risks: report<\/a><\/strong><\/p>\n

If these trends continued for the next 25 years, he wrote, the base contribution rate for the APP would need to be higher for the plan to be sustainable, similar to the Quebec Pension Plan, which currently has a base contribution rate of 10.8 per cent.<\/p>\n

\u201cDropping the APP\u2019s starting contribution rate two to four percentage points below the base CPP\u2019s 9.9 per cent rate would expose APP members to underwriting risk in the form of potential benefit reductions, higher contribution rates or some combination of the two sometime in the decades ahead.\u201d<\/p>\n

If the province were to go ahead with an APP, Alberta\u2019s portion of the CPP\u2019s $400-billion reserve fund \u2014 which is estimated by the Fraser Institute to be between $40 billion and $70 billion \u2014 could be transferred to an APP reserve fund to partially cover the accrued payment obligations a provincial pension would assume from the CPP, said the panel. The province could choose to keep these funds under the Canada Pension Plan Investment Board\u2019s management or transfer them to the Alberta Investment Management Corp. or another fund manager after a risk and benefit analysis.<\/p>\n

Read: The Alberta Pension Plan is no slam dunk: memo<\/a><\/strong><\/p>\n

\u201cAny fund manager(s) selected for the APP fund would be guided by a clear governance and accountability mandate to deter political interference,\u201d wrote the panel.<\/p>\n

It noted it received \u201csubstantial\u201d feedback on the proposal, both for and against. Those who supported creating an APP felt Alberta was contributing disproportionately to the CPP, given its younger workforce, and pointed to Quebec\u2019s successful management of its own pension plan as proof that Alberta could do the same.<\/p>\n

However, several people also expressed concerns with the security of their pension if it was taken out of the CPP, saying APP funds would need to be invested using global best practices for pension plan management. \u201cAn Alberta Pension Plan would be an unnecessary and devastating decision that has no potential value and would be wide open to favouritism and mismanagement,\u201d said one Albertan, quoted in the report.<\/p>\n

The panel noted that the portability of Alberta\u2019s pension funds wouldn\u2019t be an issue, as the CPP has established procedures in place to deal with the QPP. However, under the Canada Pension Plan Act, a province must give three years\u2019 written notice to be able to exit the CPP.<\/p>\n

Read: AIMCo calls reports of losses on volatility strategy \u2018dramatically\u2019 overstated<\/a><\/strong><\/p>\n

Alberta New Democratic Party leader Rachel Notley called the report a \u201cdistraction technique and a cynical one at that\u201d in a video statement, taking particular aim at the APP proposal.<\/p>\n

\u201cThis report is a harbinger of higher costs, lower returns and it threatens the security of every Albertan hoping to retire comfortably after a lifetime of hard work,\u201d she said. \u201cLet me be clear: the last thing Albertans want is this premier\u2019s hands anywhere near their retirement savings.\u201d<\/p>\n

Christina Gray, the party\u2019s labour and immigration critic, tabled a bill<\/a> last week to reverse the provincial government\u2019s plan to transfer teachers\u2019 pensions to the AIMCo and to prevent Alberta from withdrawing from the CPP. If passed, Bill 203 would require current or future provincial governments to consult with pension holders before making any changes to the plans\u2019 administration.<\/p>\n

Read: Alberta NDP introduces bill to reverse teachers\u2019 pension transfer to AIMCo<\/a><\/strong><\/p>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Kelsey Rolfe | June 19, 2020 Alberta\u2019s Fair Deal panel is recommending that the provincial government withdraws from the Canada Pension Plan and creates its own, subject to a referendum. \u201cThe panel recommends vigorously exploring this option...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18735"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=18735"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18735\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=18735"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=18735"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=18735"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}