What Alberta can learn from other provinces' efforts at creating pension plans

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The example of Quebec is frequently cited for Albertans to ponder when considering a potential Alberta Pension Plan (APP).

The province is distinct in having chosen not to join the Canada Pension Plan (CPP) when it was created in 1965, instead establishing its own Quebec Pension Plan (QPP).

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Less remembered are efforts by Ontario and Saskatchewan to establish more modest pension schemes to supplement the CPP.

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Each of those initiatives emerged for different reasons and amid distinct political climates. Nonetheless, the history of those efforts is something Albertans should consider as they consider establishing an APP, said University of Concordia in Montreal pension scholar Patrik Marier.

Quebec: Changing demographics, complex negotiations

Comparisons with Quebec’s experience may offer some instruction for Alberta, but must take into account the realities of the present-day CPP, Marier said.

He said setting up a new pension plan is significantly easier than disentangling hundreds of billions in assets from an existing plan, as Alberta would have to do.

Marier believes negotiations to determine the dollar figure, process of transfer and pension portability would be “so much more complex and difficult” than those involving Quebec more than six decades ago.

“The more mature your plan is, the more difficult it is to actually change track and do something else.”

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A younger population base was among the arguments in both Quebec’s and Alberta’s provincial pension plan pitches, though Marier cautions Quebec’s history shows those demographics can change.

“After the baby boom, there was a baby bust,” he said, noting Quebec’s fertility rate fell by half by the start of the 1970s following the Quiet Revolution.

That demographic shift, coupled with greater migration out of the province, forced the QPP to change contribution rates which now exceed those of CPP — 12.8 per cent in 2023 compared with 11.9 per cent for the CPP.

Ontario: Beware the wrath of the feds

Ahead of the 2014 provincial election, Ontario Liberal Leader Kathleen Wynne included the creation of the Ontario Retirement Pension Plan (ORPP) as one of her campaign’s key promises.

The compulsory plan would have complemented, not replaced, the CPP in an effort to boost retirement savings.

It drew opposition from provincial Conservatives who dubbed it a “job-killing payroll tax.” Then-Conservative prime minister Stephen Harper’s government refused to cooperate with the Wynne Liberals when they pursued the plan in 2015, attacking it as the “Justin-Wynne Payroll Tax Hike.”

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Ottawa’s refusal saddled Ontario with extra costs and administrative headaches, including collection of contributions, tax issues and integration with existing retirement savings programs.

“They could not do the (ORPP) if the federal government refused to allow you to use the payroll tax,” said Marier.

The ORPP fizzled after the Harper Conservatives were defeated in the 2015 federal election and the CPP was expanded a year later by the Trudeau Liberals.

The cost of implementing Alberta’s proposal varies greatly depending on whether the government would have to set up a similar pension administration from scratch, or could rely on private providers or existing federal agencies as cheaper options.

Also, because Alberta withdrawing from the CPP would likely mean increased premiums in the remaining provinces, it would prompt federal politicians to carefully weigh the financial impacts and political consequences of an APP.

“The only province that it doesn’t really affect is Quebec,” Marier said. “All the other eight provinces have a stake and making sure that … the amount given from the CPP investment board would be as low as possible.”

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Saskatchewan: Augment the current system

Another option to boost benefits, but also contributions, is to provide a voluntary provincial pension to supplement the CPP.

In the 1980s, Saskatchewan wanted to see homemakers, and others who lacked access to private plans, included in the CPP as part of a series of reforms led by the Mulroney Progressive Conservative government.

The idea wasn’t popular among other provinces, but nonetheless became one of the founding principles of the Saskatchewan Pension Plan when it was created in 1986 without the complex negotiations involved with leaving the CPP.

“You could put in contributions which would actually provide some sort of a pension,” Marier said.

“It would lessen the penalty of raising children at the time if you were leaving the labour market.”

Over its lifetime, the plan claims to have an average return of 8.1 per cent to members, of which there are currently around 33,000.

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