Alberta Deliberates Withdrawal From Canada’s Pension Plan

Photo Credit: Jeff McIntosh/The Canadian Press via The Globe and Mail

During a public online consultation in late September, Alberta Premier Danielle Smith made a proposition to withdraw Alberta from the Canadian Pension Plan (CPP). Smith has expressed interest in transferring $334 billion, or 53 per cent of the CPP’s assets, into a 2027 provincial pension scheme that she predicts will result in bigger payments in retirement and lower premiums.

Founded in the 1960s, the CPP is a monthly retirement benefit that compensates for the income of retired Canadian citizens. As of 2023, Reuters reported the CPP to have control over $575 billion for more than 21 million Canadians. The tax consists of 11.4 per cent of employers’ and employees’ combined salaries and results in pensions available to those aged 60 and above.

With three years of notice, provinces within Canada can legally remove themselves from the CPP once the federal government has evaluated and approved their request. The province's alternative proposal must be relatively proportionate to the current national scheme.

Alberta’s government has insisted that withdrawing from the CPP could save $5 billion for the province and contribute to seniors' pension benefits. Telus Health, which assembled Alberta’s pension report, claims to have estimated the $334 billion based on Alberta’s total CPP contributions and its associated investment returns, fewer benefits paid in Alberta, and a share of the CPP’s administrative costs. The Globe and Mail has reported this to be part of Alberta’s United Conservative Party (UCP) government’s broader argument that Canada has taken advantage of Alberta’s citizens due to the province’s economic success. 

Many Canadians, such as University of Calgary professor Trevor Tombe, have raised their financial concerns. Tombe suspected that providing Alberta with more than 22.5 per cent of assets would require a higher CPP input from across the rest of the country. In addition, he believes that if both Alberta and Ontario were to hypothetically withdraw from the CPP, they would remove more money than exists in the plan.

Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland, as well as CPP Investments, both agreed that allocating 53 per cent of the assets to Alberta would be unreasonable. Freeland also warned that Alberta would have to consider how Canadians working abroad would be able to ensure the security of their retirement. Edmonton lawyer Dennis Buchanan believes Alberta will be litigated in the courts if it does not adjust its proposal.  

In response to the pressing opposition, Smith agreed to put a pause on the proposal until confronted by the governments or courts with a solid number for the withdrawal. Freeland has requested the Office of the Chief Actuary provide a value for the asset transfer rooted in a “reasonable interpretation of the provisions,” as quoted by The Globe and Mail. In mid-May of 2024, an online survey and town hall discussions will provide Smith with suggestions. If she does not come to a decision on the distribution of assets before a possible 2025 referendum held by the UCP, the calculations will have to be handled in the courts or through negotiation.