Danielle Smith’s pension plan politics could backfire

“If it ain’t broke, don’t fix it.”

For Canadians, and even most Albertans, this clearly applies to the Canada Pension Plan, which is consistently rated one of the best public pension plans in the world. In just over two decades, it’s grown our shared retirement assets from $36 billion to $570 billion, and over the last decade, it’s delivered an average annual return of 10.9 per cent compared to an average of 7.4 per cent for other public pension funds. But Alberta Premier Danielle Smith seems determined to pull her province out of the CPP — and risk breaking it for millions of other Canadians in the process.

The fix is already in, too. Her case for withdrawing Alberta from the national pension plan is built around a long-awaited report her government released and the nearly delusional assumptions it makes. First and foremost, there’s its claim that Alberta is entitled to $334 billion of the CPP’s assets, 53 per cent of the plan’s total funds. This fantastical figure is based on an overly literal reading of 1965’s Canada Pension Plan Agreement Act, one that ignores subsequent changes to the way its funds were invested on behalf of Canadians. As University of Calgary economics professor Trevor Tombe noted, if that same wonky logic was applied to Ontario and British Columbia’s contributions as well as Alberta’s, it would produce a figure equivalent to 128 per cent of the CPP’s funds for just those three provinces. “The interpretation they use in this report is highly problematic,” he said.

Even so, it allows Smith to pretend Albertans can have their cake and eat it too here: lower annual premiums (an estimated $1,425 a year), higher benefits, and even a one-time cash bonus for retirees as high as $10,000. The public consultation being led by former finance minister Jim Dinning will be framed accordingly, with the government’s thumb visibly on the scale. The sign on the podium in front of Smith at Thursday’s announcement read, “Your pension, your choice,” but her mind is already made up. “I’m persuaded by the numbers,” she said. “I think you can probably tell that.”

As it happens, Tombe released his own report Thursday on the subject, and its numbers are decidedly different. It finds Alberta is entitled to approximately 25 per cent of the projected CPP assets in 2025, or $150 billion. Based on that initial figure, which Michel Leduc, senior managing director at CPP Investments, suggested was far more realistic and reasonable, the combined contribution rate required to keep an Alberta plan stable would be 8.2 per cent, not the 5.9 per cent suggested by the government’s analysis. Albertans, in other words, would have to contribute more to their pensions than Smith is trying to pretend.

And make no mistake: there are meaningful risks associated with Alberta divesting itself from the CPP. Smith isn’t trying to “steal” anyone’s pension, as NDP Leader Rachel Notley claimed on Twitter, but she is placing a potentially risky bet on Alberta’s demographics remaining the same as they’ve been for the last few decades. Those were heavily informed by an oil boom, and specifically an oilsands mine building boom, that hoovered up young workers from across the country. That’s a boom no rational person — including the authors of her own pension plan report — thinks will ever happen again.

Even pro-business advocates can see the downside in this glorified gamble. “There are risks for Alberta in creating its own pension plan,” Canadian Federation of Independent Business CEO Dan Kelly said. “Smaller plans may be challenged in turbulent economic times and even small investment or management mistakes can create significant deficits requiring higher premiums.” Alberta could, theoretically, leave its assets in the hands of the Canada Pension Plan Investment Board, assuming it is even willing to take them on post-separation. But that wouldn’t be in keeping with the “more Alberta, less Ottawa” slogan that’s explicitly part of Smith’s pitch here.

It’s far more likely that she’d prefer to see the assets in the hands of AIMCo, its inferior track record notwithstanding, or a private sector player in Alberta. Indeed, Dinning said as much in his comments to reporters on Thursday. "I think it could be a game-changer for the financial sector in this province to have that kind of weight in international investment markets both locally, nationally and internationally," he said. Sure, the government’s report suggests this approach could cost Alberta taxpayers as much as a billion dollars, but can you really put a price tag on getting one over on the federal government?

Ironically, this idea could end up being a lifeline for the Trudeau Liberals. After all, under the proposed terms and figures presented by Smith’s government, Canadians in the other non-Quebec provinces would need to increase their contribution rates in order to maintain their pension payouts. Trudeau could easily portray himself as the defender of the Canada Pension Plan and force CPC Leader Pierre Poilievre to choose between the pet project of a conservative premier of Alberta and the best interests of Canadians.

Oh, and if Smith wants to use the idea of withdrawing from the CPP as leverage against the federal government’s climate policies, as conservative insider and UCP economist-of-choice Jack Mintz suggested in a column last week? Well, that would give the Liberals an even stronger hand to play. So, too, would any sign that the UCP plans to use some of Alberta’s repatriated pension assets to prop up its oil and gas industry and shield it from the economic realities of the energy transition.

It’s not clear whether enough Albertans will actually support this silliness in a referendum, which is expected sometime in 2025, according to the government’s own timeline. Previous polls have consistently shown a large majority of Albertans opposed to the idea of a provincial pension plan, with a Leger poll in May putting support at just 21 per cent. But Smith’s artificially inflated estimate of how much Albertans would get out of the arrangement could end up breathing new life into the long-standing push for an Alberta pension plan — and the political fortunes of the political party she loves to hate.