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Alberta Pension Plan - an idea whose
time has come
www.app.ca
There is growing demand in Alberta
for the provincial government to opt out of the Canada Pension Plan
and create an Alberta Pension Plan.
The idea is not new. People in politics
and government have been talking about it for over 10 years. Most
recently, former Alberta Treasurer Stockwell Day was seriously considering
it when he left Alberta for federal politics in 2000.
Since then, many of Alberta's civic,
business and municipal groups have started pressing the provincial
government to proceed. The sooner Albertans start to invest in their
own provincial plan, the better off we will be, thus creating a
multi-billion dollar Alberta Pension Fund.
Why opt out of the Canada
Pension Plan?
- With the last (2003) round of CPP premium
increases, the Canada Pension Plan now takes some $4 billion annually
from working Albertans. Little more than half of that comes back
to the province in the form of pension and other benefits.
- The remainder stays under federal control,
partly to pay benefits in other provinces, and partly to be invested
by a federally-appointed board.
- Still, even at the present high rate of contribution
(9.9% of earnings), the CPP will carry a permanent unfunded liability.
- The CPP is a "one-size-fits-all"
plan that doesn't respond to regional needs and priorities. Moreover,
it parallels provincial disability programs.
- Because of the CPP's flawed design, it seriously
penalizes younger Albertans who pay far more into the scheme than
they will ever get back in benefits.
- Albertans are proportionally the highest net
contributors to the CPP. For instance, in 2001 (the last year
for which complete numbers are available) Albertans paid 57% more
into the plan than they received in benefits, by far the widest
discrepancy in the country.
Why an Alberta Pension Plan would work
better (see www.app.ca)
- Social programs are a provincial
responsibility under the Canadian Constitution, and the CPP
Act allows provinces to opt out of the federal plan on three years'
notice (as Quebec did right at the beginning).
- Billions of dollars now sent to Ottawa would
be managed in Alberta, by Albertans.
- Alberta would reduce its exposure to federal
mismanagement, and re-establish the historic distinction between
federal and provincial constitutional responsibilities.
Questions and answers
Would people who paid into
the CPP lose their benefits?
No, there would be no interruption or reduction in benefits. Benefits
would remain the same under the Alberta Pension Plan as under the
Canada Pension Plan. This is required by law as well by common decency.
Could people move around
the country, working and retiring where they wish, without losing
their benefits?
Yes. Transferring pension benefits in and out of Quebec has never
been difficult, even though the plans are completely separate. The
same rules would apply to Alberta.
Doesn't this open up a huge
new financial liability for Albertans?
No. Albertans are already contributing more than their fair share
to the enormous unfunded liability of the federal plan. By transferring
their share of the liability from the federal to the provincial
government, along with their premium contributions, Albertans can
handle the problem themselves, as they did the provincial debt that
built up in the 1980s and early 1990s.
Isn't a national plan safer?
What happens if Alberta's economy falls apart?
Even in a worst-case scenario, with the economy permanently as weak
as it was after Trudeau imposed the National Energy Program, Albertans
would still come out ahead with their own pension plan. Alberta
has a high natural birth rate, high workforce participation and
low reliance on immigration. And just as Quebec uses the QPP to
help preserve its culture, so should Alberta. (www.app.ca)
Wouldn't a smaller provincial
plan cost proportionately more to administer than a large national
one?
According to the best research, the increased cost of management
is more than offset by the advantage of keeping Alberta contributions
in a separate plan. The net savings, with all factors considered,
would have amounted to $530 million in 2001, according to William
Robson of the C.D. Howe Institute.
Can we trust the provincial
government to do this right?
Yes. As with the Canada and Quebec plans, politicians will not use
the pension funds of the electorate for short-term political gain.
Even Chretien didn't do that with the new CPP Investment Fund.
Isn't this a move toward
separatism?
No. It's a way of restoring the autonomy the founders of our country
intended all provinces to have when they wrote the Canadian constitution
in 1867.
How would this affect premiums
in the rest of the country?
The effect in Quebec will be nil, because it operates its own plan.
Premiums elsewhere in English Canada might have to rise slightly
above 10% (from the present 9.9%) to compensate for Alberta's departure.
For more information go to: www.app.ca
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