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Despite a new report from Canada’s chief actuary about Alberta’s potential plan to leave the Canada Pension Plan (CPP) and start its own separate provincial pension plan, Albertans still don’t have an official estimate from Ottawa about Alberta’s share of CPP assets.
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The actuary analyzed how the division of assets might be calculated, but did not provide specific numbers. Yet according to a report commissioned by the Smith government and released last year, Alberta’s share of CPP assets totalled an estimated $334 billion — more than half the value of total CPP assets. Based on that number, if Alberta left the CPP, Albertans would pay a contribution rate of 5.91% for a new CPP-like provincial program (a significant reduction from the current 9.9% CPP rate deducted from their paycheques). As a result, each Albertan would save up to $2,850 in 2027 — the first year of the hypothetical Alberta plan — while retaining the same benefits as the CPP. Meanwhile, the basic CPP contribution rate for the rest of Canada would increase to 10.36%.
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Why would Albertans pay less under a provincial plan?
Because Alberta has a comparatively younger population (i.e. more workers vs. retirees), higher average incomes and higher levels of employment (i.e. higher level of premiums paid into the fund). As such, Albertans collectively pay significantly more into the CPP than retirees in Alberta receive in benefits. Simply put, under a provincial plan, Albertans would pay less and receive the same benefits. Some critics, however, dispute the estimated share of Alberta’s CPP assets (again, $334 billion — more than half the value of total CPP assets) in the Smith government’s report, and claim the estimate understates the report’s contribution rate for a new Alberta pension plan and overestimates the new CPP rate without Alberta.
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Which takes us back to the new report from Canada’s chief actuary, which was supposed to provide its own estimate of Alberta’s share of the assets. Unfortunately, it did not.
But there are other rate estimates out there, based on various assumptions. According to a 2019 analysis published by the Fraser Institute, the contribution rate for a new separate CPP-like program in Alberta could be as low as 5.85%, while AIMCo’s 2019 estimate was 7.21% (and possibly as low as 6.85%). And University of Calgary economist Trevor Tombe has pegged Alberta’s hypothetical rate at 8.2%.
While the actuary in Ottawa failed to provide any numbers, one thing’s for certain — according to the available estimates, Albertans would pay a lower contribution rate in a separate provincial pension plan while CPP contributions for the rest of Canada (excluding Quebec) would likely increase.
Tegan Hill is director of Alberta Policy at the Fraser Institute.
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