Have you ever dreamed about winning the lottery?
So have we! And our plans of what we would do with our winnings are extraordinary!
Apparently, Premier Danielle Smith has, too. Her government is dreaming big about winning the CPP lottery. But instead of scribbling down the idea in a journal or telling a friend, she is trying to turn her dream into a reality.
Premier Smith claims the Canada Pension Plan (CPP) owes Alberta vast amounts of money if the province withdraws from the federal plan and creates its own Alberta Pension Plan (APP)… or at least that’s what a new report from the province says.
Alberta’s Lottery Claim to CPP Assets?
Armed with its report, Premier Danielle Smith boldly claims that Alberta is entitled to a staggering $334 billion from the CPP assets. This represents 53 percent of the CPP program’s current total assets. No small amount.
Smith’s argument is rooted in the belief that Alberta workers have overpaid their share to the CPP for years and that it is time for Alberta to get our money back. She’s saying, ‘Show us the money.’
However, Premier Smith’s extraordinary claim has been met with much skepticism.
Michel Leduc, senior managing director of the non-partisan Canadian Pension Plan Investment Board, labelled the $334 billion figure “impossible.”
He called Alberta’s math “magic” and pointed out that the CPP would be in an enormous deficit if other provinces demanded their shares based on the same math that Alberta used.
CPP would be out of cash if only Ontario and British Columbia joined Alberta in leaving the federal plan and made similar demands – leaving the other provinces with nothing! That doesn’t seem fair… or very neighbourly.
The Lifeworks report, which came up with the $334 billion estimate, attributes about 80 percent of Alberta’s claimed share to investment income. This is the profit from investing worker’s CPP contributions, primarily since the 1990s.
University of Calgary economist Trevor Tombe believes Alberta’s realistic share should be between one-fifth to one-quarter of CPP’s assets. To put that in perspective, Alberta contributed only about one-seventh of all contributions to CPP, so Alberta is claiming a higher portion of CPP assets than based on its contributions alone.
If somehow Premier Smith miraculously got $334 billion from CPP, what would she do with her CPP windfall?
- Bigger Pensions for Seniors:
- More Take-Home Pay:
- Reduced premiums for Businesses.
But of course, all these plans rely on $334 billion actually arriving in Alberta.
There is one big problem with Premier Smith’s magic math: the amount to be transferred is not up to her or anyone else in Alberta.
The federal government determines, in consultation with other provinces, the final amount of CPP money transferred to a province. It is highly unlikely the other provinces will let Alberta take over half of the CPP!
Public Opinion on Leaving CPP:
Recent polls indicate that many Albertans are against leaving the CPP. A Janet Brown poll from last year showed six-in-ten Albertans opposed withdrawing from CPP, while a Leger poll this spring indicated over half in Alberta are against the idea.
Despite these numbers, Premier Smith is determined to sway public opinion, emphasizing potential benefits like reduced premiums and higher payouts for Albertans, all based on pie-in-the-sky numbers.
In addition, Smith claims another benefit of withdrawing from the CPP would be that Alberta could make investments where it sees the most opportunities.
But that scares many Albertans, especially seniors on fixed incomes.
It begs the question: should we trust the UCP government to handle our retirement investments?
Susan on the Soapbox doesn’t think so. She quipped, “The UCP government’s track record when it comes to investment strategy is pitiful–$1.3B lost on Keystone XL, $3B lost by AIMCo, God knows how much money down the drain with the privatization and de-privatization of DynaLife.”
And who is to say that the UCP won’t double down and just heavily invest in oil and gas? With a smaller fund, odds are the APP will be less diversified in investing than the current CPP.
Eggs all in one basket? Risky, risky, risky!
Future Strategy and Consultations:
Premier Smith has announced consultations with Albertans regarding the potential exit from the CPP, with a possible referendum in 2025.
The government has also launched a survey on its website. However, the survey wording confirms that Smith’s government already assumes Alberta is exiting from the CPP and focuses on how to design the new pension plan.
The Alberta New Democrats strongly oppose the idea of withdrawing from the CPP.
Samir Kayande, the Opposition finance critic, stated that an NDP government would cancel any plans to exit the CPP, even if a referendum favoured such a move. He criticized the government for presenting unrealistic projections and believes any referendum based on the inflated $334 billion figure is deceptive.
Other critics believe Alberta is ‘selling’ the benefits of establishing an APP to win over voters and play on the feeling common in Alberta that the province pays far more into Canada than it receives in benefits.
While Smith has promised a referendum on the APP, it won’t likely happen until at least 2025.
Critics see the delay as another tactic for Smith to buy time, hoping to shift public sentiment to an APP and push the decision closer to the next election.
Dreams of easy money tend to turn reality into fantasy in short order.
Remember Conservative Party Leader Pierre Pollievre’s flirtation with cryptocurrency last year. We haven’t heard much about that lately.
Dangling the dream of big money is what sells lottery tickets… will the same strategy work for an Alberta Pension Plan?
What do you think?
Should Alberta take its ball and go home?
Or should we stick with our fellow Canadians?
