Montreal professor breaks down what Alberta should consider before leaving CPP

Alberta is considering dropping the Canadian Pension Plan in favour of establishing its own provincial pension plan.

Last week, the provincial government released a report exploring the possibility of such a plan. Assets would be transferred out of the Canada Pension Plan and used to backstop a provincial plan.

It isn't a done deal. Next steps will include an engagement panel to gather feedback from Albertans and new legislation that, if passed, would require a referendum before the province could withdraw billions of dollars in assets from the CPP.

Currently, the only Canadian province that operates its own pension plan outside the CPP is Quebec. Quebec's plan came into effect in 1966, the same year the CPP started.

On Monday, Edmonton AM host Mark Connolly spoke with Patrik Marier, a professor of political science at Concordia University in Montreal.

This interview has been edited for length and clarity. 

Q. How does the pension plan in Quebec compare to the CPP?

They are both very similar. The [QPP] was constructed that way in the 1960s to ensure it will not impact, for instance, labour mobility. The key issue at the time was Quebec wanted to use its excess contribution to actually launch an investment board, which the CPP ended up doing in the late 1990s.

Q. Why did Quebec go its own way right from the start?

There were a few reasons; one of them for the investment board. You have to think about that. We're in the early 1960s, Quebec is in the midst of the Quiet Revolution. There's also a nationalist movement. So Quebec wanted to do its own thing.

So as a result, the province was building more capacity. And the third reason has a lot in common with the current plan from the Alberta government — the fact that our fertility rate was much, much higher than the rest of the country. 

Q. Alberta has a lot of young people and fewer old people, so it would be a better deal for everybody from that point of view, right?

This is why Quebec is very interesting, because the demographic landscape has shifted drastically since the mid-1960s. Now Quebec has a higher contribution rate than the CPP because we had a massive baby bust, and we also had negative interprovincial migration.

When you're thinking about pensions, you have to be very careful. You're talking about long-term projections ... there's a lot of risks involved with this.

In the case of Alberta [right now] there's very few barriers to move from one province to another, and you could also have other economic risks — especially when you're in a province that depends very heavily on other primary resources. 

Q. How has Quebec benefited from having its own pension plan?

It has benefited in the sense that it creates a stronger attachment to the social policy core of the province. So it's part of the Quebec model, and has helped with the investment board to actually spearhead projects within the province, and to help finance small and medium enterprises that might not otherwise see the light of day.

The key distinction is that this was done in 1964 when CPP was constructed at the same time. Now, we're talking about [Alberta] joining this path much later, which is a lot more complicated. 

Q. Breaking off from the CPP to form your own pension has a whole bunch of different issues than starting from scratch, I would think?

Yes, definitely. If we look back at the 10 years ago at the Ontario Retirement Pension Plan, the federal government was not on board. As a result, the federal government threatened to make it difficult for the plan to actually collect the contributions into the plan.

Since Alberta does not have its own income-tax regime, it could be subject to the same kind of difficulty.

Q. Would one of the difficulties be that you're basically dealing with a smaller fund, even though it's still in the billions and even hundreds of billions of dollars, and therefore you have more risk?

Yes, you do. The key is it's going to be very difficult to actually break away from the CPP because there's going to be other provinces involved, you have the federal government involved.

There are also other issues with regards to support, stability of this Alberta pension plan. In order to make portability feasible, it has to be very close in terms of the rules and how the benefits work to the CPP.

The QPP is almost a mirror image to the CPP. So that's why you can move from Quebec and go to B.C., work for a few years, come back. However, if you end up with a very different set of rules and benefits, then portability becomes quite an issue.

As anybody who's migrated from a country and come back [knows], even though you have some mechanism in place to get back your pension value, you never get full value if the rules are not adjusted as tightly.