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Alberta

Debate continues over an Alberta pension plan—but here’s a key fact

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From the Fraser Institute

By Tegan Hill

According to documents recently obtained by Postmedia, bureaucrats in Ontario’s Ministry of Finance believe the Smith government’s report released last year on an Alberta pension plan overstates what Alberta could withdraw from the Canada Pension Plan (CPP) to start its own plan. The report estimates that the province’s share of CPP assets is worth $334 billion, which is equal to 53 per cent of the CPP.

It’s not surprising that Ontario civil servants are debating this issue. If Alberta leaves the CPP and creates a provincial pension plan, the savings for Albertans would essentially cost workers in the rest of Canada (excluding Quebec, which already has its own standalone provincial pension). Given that Ontario is the second-largest net contributor to the CPP (behind only Alberta), those costs would fall heavily on Ontarians.

Albertans, like all workers outside Quebec, pay a basic mandatory CPP contribution rate of 9.9 per cent, typically every payday. According to the Smith government’s report, that rate would fall to 5.91 per cent for a new CPP-like provincial program for Albertans, which means each Albertan would save up to $2,850 in 2027 (the first year of the hypothetical Alberta plan). Critically, this lower contribution rate (i.e. tax) delivers the same benefit levels as the CPP.

Meanwhile, the basic CPP contribution rate for the rest of Canada (excluding Quebec) would increase to 10.36 per cent. In other words, smaller take-home paycheques for workers in the rest of Canada.

Currently, Albertans contribute disproportionately to the CPP and other national programs because the province has more workers (and less retirees) as a share of its population, higher employment rates and higher average earnings compared to the rest of Canada. In 2020, the latest year of available data, Albertans contributed about 16 per cent of total CPP contributions but received only 12 per cent of total CPP benefits.

And the federal legislation (Section 113(2) of the CPP Act), which governs the withdrawal of any province from the CPP and the asset distribution calculation, focuses on the amount paid into the fund by Albertans and the benefits paid out (taking into account investment returns and administrative costs).

Bureaucrats in Ontario, however, argue there are issues with the report’s interpretation of the formula. They claim, for example, that the asset distribution calculation fails to account for individuals who worked in Alberta but retired elsewhere. And regardless, they feel the formula should be updated. The Smith government has asked the federal government and investment board to respond to the report with its own interpretation and calculations.

While the debate about Alberta’s share of the CPP assets is sure to continue, it should not distract from the key fact that any reasonable split of CPP assets would result in lower contribution rates for Albertans and likely higher rates for the rest of Canada (excluding Quebec). If Alberta’s share of assets were less than half of what the government report estimates ($150 billion) in 2025, the contribution rate in Alberta would drop to 7.8 per cent, equal to an estimated $1,086 in savings annually per Albertan. Even if Alberta’s share of assets were just $120 billion in 2025, Alberta’s contribution rate would drop to 8.2 per cent and save approximately $836 annually per Albertan.

Clearly, Alberta’s withdrawal from the CPP would come with big savings in the province and increased costs in the rest of Canada.

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Alberta

CPP another example of Albertans’ outsized contribution to Canada

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From the Fraser Institute

By Tegan Hill

Amid the economic uncertainty fuelled by Trump’s trade war, its perhaps more important than ever to understand Alberta’s crucial role in the federation and its outsized contribution to programs such as the Canada Pension Plan (CPP).

From 1981 to 2022, Albertan’s net contribution to the CPP—meaning the amount Albertans paid into the program over and above what retirees in Alberta received in CPP payments—was $53.6 billion. In 2022 (the latest year of available data), Albertans’ net contribution to the CPP was $3.0 billion.

During that same period (1981 to 2022), British Columbia was the only other province where residents paid more into the CPP than retirees received in benefits—and Alberta’s contribution was six times greater than B.C.’s contribution. Put differently, residents in seven out of the nine provinces that participate in the CPP (Quebec has its own plan) receive more back in benefits than they contribute to the program.

Albertans pay an outsized contribution to federal and national programs, including the CPP because of the province’s relatively high rates of employment, higher average incomes and younger population (i.e. more workers pay into the CPP and less retirees take from it).

Put simply, Albertan workers have been helping fund the retirement of Canadians from coast to coast for decades, and without Alberta, the CPP would look much different.

How different?

If Alberta withdrew from the CPP and established its own standalone provincial pension plan, Alberta workers would receive the same retirement benefits but at a lower cost (i.e. lower CPP contribution rate deducted from our paycheques) than other Canadians, while the contribution rate—essentially the CPP tax rate—to fund the program would likely need to increase for the rest of the country to maintain the same benefits.

And given current demographic projections, immigration patterns and Alberta’s long history of leading the provinces in economic growth, Albertan workers will likely continue to pay more into the CPP than Albertan retirees get back from it.

Therefore, considering Alberta’s crucial role in national programs, the next federal government—whoever that may be—should undo and prevent policies that negatively impact the province and Albertans ability to contribute to Canada. Think of Bill C-69 (which imposes complex, uncertain and onerous review requirements on major energy projects), Bill C-48 (which bans large oil tankers off B.C.’s northern coast and limits access to Asian markets), an arbitrary cap on oil and gas emissions, numerous other “net-zero” targets, and so on.

Canada faces serious economic challenges, including a trade war with the United States. In times like this, it’s important to remember Alberta’s crucial role in the federation and the outsized contributions of Alberta workers to the wellbeing of Canadians across the country.

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Alberta

Made in Alberta! Province makes it easier to support local products with Buy Local program

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Show your Alberta side. Buy Local.

When the going gets tough, Albertans stick together. That’s why Alberta’s government is launching a new campaign to benefit hard-working Albertans.

Global uncertainty is threatening the livelihoods of hard-working Alberta farmers, ranchers, processors and their families. The ‘Buy Local’ campaign, recently launched by Alberta’s government, encourages consumers to eat, drink and buy local to show our unified support for the province’s agriculture and food industry.

The government’s ‘Buy Local’ campaign encourages consumers to buy products from Alberta’s hard-working farmers, ranchers and food processors that produce safe, nutritious food for Albertans, Canadians and the world.

“It’s time to let these hard-working Albertans know we have their back. Now, more than ever, we need to shop local and buy made-in-Alberta products. The next time you are grocery shopping or go out for dinner or a drink with your friends or family, support local to demonstrate your Alberta pride. We are pleased tariffs don’t impact the ag industry right now and will keep advocating for our ag industry.”

RJ Sigurdson, Minister of Agriculture and Irrigation

Alberta’s government supports consumer choice. We are providing tools to help folks easily identify Alberta- and Canadian-made foods and products. Choosing local products keeps Albertans’ hard-earned dollars in our province. Whether it is farm-fresh vegetables, potatoes, honey, craft beer, frozen food or our world-renowned beef, Alberta has an abundance of fresh foods produced right on our doorstep.

Quick facts

  • This summer, Albertans can support local at more than 150 farmers’ markets across the province and meet the folks who make, bake and grow our food.
  • In March 2023, the Alberta government launched the ‘Made in Alberta’ voluntary food and beverage labelling program to support local agriculture and food sectors.
  • Through direct connections with processors, the program has created the momentum to continue expanding consumer awareness about the ‘Made in Alberta’ label to help shoppers quickly identify foods and beverages produced in our province.
  • Made in Alberta product catalogue website

 

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