By Frank McKenna 

The debate over Alberta’s proposal to create a new provincial pension plan to replace the Canada Pension Plan must not be confined to Alberta. It has potentially catastrophic consequences for the rest of Canada and other provinces will be forced to fight it tooth and nail. 

The CPP, founded in the 1960s, is one of the great achievements of Canadian public policy and an example of our federation at its best. It has supported millions of Canadians and helped to significantly decrease poverty amongst seniors.

As someone who helped steward the fund through its considerable changes in 1997 to place it on sure financial footing, I’m often asked about the CPP. It is a source of international envy.  Other nations, including our southern neighbour, admire its governance, desire its financial sustainability and covet its contribution to retirement security for Canadians. 

The investment manager of the CPP fund, CPP Investments, has approximately $600 billion under management. In the pension world, scale matters and its size and sophistication allow it to obtain superior returns, spreading risk over geographies and asset classes. But most importantly for this debate, its obligation to all provinces ensures that checks and balances are in place that would simply not be the case if one province was in control of the governance and assets for its citizens. 

While Albertans’ frustration with the current state of fiscal affairs in Ottawa is understandable, viewing the national pension as a regional balance sheet issue could generate unprecedented national friction that could pit Alberta against all other provinces.

In implementing a provincial plan, we can expect a national debate of epic proportions. Three issues come to mind: quantum, plan administration and portability. 

If Alberta was to follow through in making its claim, other provinces could follow suit and attempt to withdraw their “fair share” before the fund dries up, leading to intense negotiations and potential dissolution of the CPP.

Secondly, Ontario’s previous attempt to set up its own supplementary pension plan led to a costly and complicated administration process and was ultimately abandoned. You can expect that Alberta’s hope of having federal co-operation in the collection of contributions and disbursement of benefits will draw even more resistance from Ottawa and the rest of Canada. 

Similarly, the portability of an APP with the CPP is not guaranteed and could hinder Alberta’s ability to attract external workers for its large, labour-intensive resource projects.

There would be other corrosive debates within Alberta’s interior should a provincial plan be established. Some might argue that if Alberta could withdraw from the CPP, then cities should be able to withdraw from a provincial pension plan. There is no doubt that the demographics of Calgary and Edmonton are more favourable than the province at large, leaving rural Albertans to bear a larger share of the burden.

Another contentious point among Albertans may be the instructions provided to its investment manager about where assets should be invested. There is currently a thoughtful debate taking place within the country as to whether Canadian pension plans should be required to add to their already overweight position in Canada. The CPP’s approach of using its scale to support global investments across a multitude of asset classes has yielded strong results. Albertans might face a tough debate about the allocation of risks, considering their already significant exposure to the resource sector.

The experience of the Alberta Heritage Fund does not give reason for optimism. Do Albertans really want pension funds to be a piggy bank subject to the political calculus of the government of the day?

Beyond these practical considerations, a fundamental question emerges about what it means to be a country. Canada is a vast country with a rich heritage and diverse cultures. Its ability to reach accommodations is globally admired, and this requires strong symbols of unity. 

Canada has several national institutions and infrastructure that bind the country together — the Trans-Canada Highway, national childcare, a publicly funded healthcare system and the CPP. Canadians are proud of these institutions and would resist any attempts to fragment them based on regional self-interest. They do not want Canada to be an à la carte menu where you simply pick and choose according to self-interest.

One can imagine Prince Edward Island attacking the $35-billion Trans Mountain pipeline, claiming that it is of no benefit to islanders and wanting its share of the money back. Manitoba could similarly decide that it receives no benefit from the tens of billions of dollars being invested in electric vehicle and battery plants in Ontario. Others may challenge the $10-billion in tax concessions to the Pathways project in the oilsands. The truth is that all Canadians benefit from these projects and all Canadians should share in the cost.