A new LifeWorks study commissioned by the Alberta government says the province could be entitled to take $334 billion — more than half of assets in the Canada Pension Plan — were it to exit the national plan entirely and start its own fund. The figure has raised eyebrows in pension circles and big questions across the rest of the country: Can Alberta really walk off with half the CPP? And what happens to everyone else if they do? The Financial Post’s Ian Vandaelle breaks down what you need to know about the issue.
Prince Charles and his wife, Camilla, are set to begin a three-day tour of Canada this week that will focus on Indigenous reconciliation and climate change — and on connecting with a Canadian public that is increasingly skeptical of the monarchy.
The Prince of Wales and the Duchess of Cornwall will stop in St. John’s, N.L., Ottawa and the Yellowknife area during a visit that “will highlight an emphasis on learning from Indigenous Peoples in Canada as well as a focus on working with businesses to find a more sustainable way of living with global warming,” according to Clarence House, the couple’s official London residence.
In line with those priorities, they will attend a reconciliation event in St. John’s and will visit the First Nation community of Dettah in Yellowknife. There will also be a visit to the Dettah ice road as well as discussions on the importance of sustainable finance in building an economy with net-zero carbon emissions.
The visit, which begins Tuesday, will be the 19th trip to Canada for Prince Charles and the fifth for Camilla.
It is a joyful occasion for royal fans, who are looking forward to the couple’s first visit to Canada since 2017. Robert Finch, the head of the Monarchist League of Canada, believes the tour in honour of the Queen’s Platinum Jubilee — her 70 years on the throne — couldn’t come at a better time.
“We’re just coming out of a pandemic that’s taken its toll on all of us, and we’re in the midst of more uncertainty economically, geopolitically, what have you,” he said in a phone interview. “So it’s nice to get those things that are kind of positives and the things that celebrate and bring people together.”
Besides the more serious meetings, the trip involves plenty of pomp and photo ops, including visits to local businesses, ceremonies to celebrate the Jubilee and a viewing of the RCMP musical ride — a performance on horseback.
Both supporters and critics of the monarchy say the visit will be a test of Charles’s ability to win over the Canadian public at a time of increasing scrutiny of the monarchy.
Opinion polls have suggested that support for the monarchy in Canada has been steadily dropping in recent years.
An online poll from Angus Reid released in late April that surveyed a representative sample of 1,607 Canadian adults found that just over half — 51 per cent — felt the country should not remain a monarchy in coming generations, compared with 26 per cent who thought it should.
While the Queen was still viewed favourably by a majority of respondents, only 29 per cent viewed Charles that way, and only 34 per cent supported keeping a constitutional monarchy under his rule.
There is no margin of error for online polls, but Angus Reid said that for comparison purposes, a probability sample of this size would be accurate within 2.5 percentage points, 19 times out of 20.
Finch doesn’t put much stock in the results of polls that suggest Canadians are ready to ditch the monarchy, due in part to the way the questions are framed. “Republicanism is just not, in my view, a winning proposition, and if it were, one of the major political parties in the country would have adopted it,” he said.
But he did say this tour could be one of the most important royal visits ever — partly because of the focus on Indigenous reconciliation but also because of the chance for Charles to cement his role as future king at a time when his aging mother is stepping back.
He admitted Charles “has work to do” to appeal to the Canadian public, largely because his mother is so beloved. “She’s going to be a tough act to follow,” he said.
Patrick Taillon, a law professor at Université Laval in Quebec City who once challenged the laws of British succession in court, said the visit comes as both Canada and the United Kingdom are preparing for an eventual transition to Charles as king.
That moment, he said, “is likely to put the conversation on the nature of our institutions, and the choice of being a monarchy, to the forefront” in Canada.
Taillon said that while Canadians once saw the monarchy as a part of their identity — one that differentiated them from Americans — that’s increasingly no longer the case.
He said the recent royal tour of the Caribbean by Prince William and his wife, Kate, which drew criticism for perpetuating images of Britain’s colonial rule, as well as the allegations of mistreatment described by Meghan Markle, who along with her husband, Prince Harry, stepped back from royal duties in 2020, show the institution has failed to evolve with the times.
While he acknowledges that Canada’s Constitution is notoriously difficult to alter, he said change is inevitable, sooner or later. Quebec, where anti-Crown sentiment is fiercest, has been ready to move on for a long time, he added.
This report by The Canadian Press was first published May 15, 2022.
Morgan Lowrie, The Canadian Press
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Albertans dread a Canada Pension Plan exit. Will Danielle Smith’s $334B claim fix that?
Premier Danielle Smith may have wanted Alberta to go it alone on pensions for more than two decades, but to fulfil her dreams she’ll have to convert a wary Alberta public.
Polls have shown Albertans clearly don’t dream her dream with her. Pick your pollster: it was opposed by a margin of 31 per cent to 60 in a Janet Brown poll last October, or 21 per cent to 54 in Leger this spring.
With numbers like that, it’s a heftier turnaround task than persuading a majority of Quebecers to separate from Canada after decades of unwillingness. Or, for a local example, getting rural and small-town Albertans to suddenly prefer NDP over UCP.
Smith has the benefit of the premier’s bully pulpit to tilt public opinion in her favour on this one, to persuade people as she’s been arguing since at least 2003 that Alberta has “the obligation” to opt out of the Canada Pension Plan, and pay much lower premiums for equal or higher benefits.
She has now also armed herself with some of the biggest, rosiest numbers ever wielded in all the years of hardened conservatives trying to turn the public tide on the pension issue.
Billions upon billions
At the centre of her new argument is that eye-popping figure, $334 billion, which a government-commissioned report estimates Alberta is entitled to if it wants to become like Quebec, and separates from CPP.
That’s one-third of a trillion dollars, or more than half the CPP program’s total assets in a fund that collects contributions and pays out pensions of every Canadian who lives in a province that doesn’t start with Q.
For perspective, the amount Alberta is claiming as its rightful share of CPP is more than triple the ransom amount that Austin Powers film villain Dr. Evil demanded from world leaders, with pinky diabolically extended to his mouth. (That’s after the not-good doctor realized $1 million wasn’t a sufficient ask).
It’s also nearly equivalent to the value of Alberta’s entire economy in a year.
Sovereignist leaders would say: separate, and “all this becomes possible.” Smith was musing Thursday about how all sorts of good becomes possible if Albertans agree to start their own nest egg with a $334-billion principal.
Dramatically slashed premiums! Larger paycheques! Higher benefits for seniors! Maybe a $10,000 bonus for retirees!
But the reality checks on the Lifeworks report’s central assumption rolled in almost instantly after the astronomical estimate rolled off the premier’s tongue.
It’s an “impossible figure,” says Michel Leduc, senior managing director of the non-partisan Canadian Pension Plan Investment Board, which stewards the assets for Canadians. While he maintains any province has the legal right to withdraw and start its own pension plan, he urged skepticism of the numeric claims.
If other provinces used the “alternate formula” and demanded their shares be paid out too, he explained, there would be a negative balance by the time Ontario, British Columbia and Alberta left. (Sorry, other provinces.)
While Smith attributed Alberta’s share to the hard work of Albertans, the Lifeworks report itself attributes about 80 per cent of the province’s claimed share to investment income — the amount CPPIB has made by investing contributions, most of that since the 1990s reforms that boosted CPP premiums but also made the pension board a global investment heavyweight.
If Alberta had its pension funds outside that larger pan-Canadian pool, it’s far from a given that it would have performed nearly as well all these decades.
One could hear a scoff in the voice of University of Calgary economist Trevor Tombe as he spoke of the outsized hunk — half! — of the pension pie Alberta believes it deserves. “I think it was a little problematic that the government’s hanging its hat on half the CPP assets, which you think is kind of transparently unreasonable and not going to fly anywhere else in the country,” he said.
In Tombe’s own newly published paper, he estimates Alberta would be more reasonably entitled to 20 or 25 per cent of CPP’s present assets. CPPIB has not worked out its own figure, but Leduc said Tombe’s math is much closer to a realistic figure, though even that may be high.
The ultimate number that Alberta would scoop up if it actually pursues the Alberta Pension Plan dream isn’t Alberta’s to determine, or Lifeworks’ or Tombe’s or even CPPIB’s.
The federal government ultimately determines the asset transfer to a withdrawing province, likely in consultation with the other provinces.
The spectre of higher pension contributions in an Alberta-less CPP may soon attract ire in the rest of Canada. Alberta leaders have a long tradition of spats with Ottawa, but this pie-slice-haggling could draw in Smith’s fellow premiers.
But the $334-billion claim will resonate with a slew of people in this province. They have spent generations absorbing conservative rhetoric about how we hard-working, high-earning Albertans send billions of dollars to federal coffers in taxes and premiums, and get far fewer billions returned to us. When the Kenney government held a referendum that purported to demand an end to the equalization program, 62 per cent of voters said yes, a fact Smith often mentioned as she kicked up her rhetorical campaign Thursday.
But in a nod to public discomfort on the pension question, Smith doesn’t even want to commit to a referendum yet, which she’s long promised as a necessary prelude to an APP — and wouldn’t happen until at least 2025, Finance Minister Nate Horner explained to CBC News.
The premier instead appointed an engagement panel to see where public mood is on this. It will be helmed by Jim Dinning, the former provincial treasurer who helped negotiate the modern CPP in the 1990s, and who ran for the Tory leadership decidedly opposed to a candidate who promised an APP — but now says he views the idea as an “intriguing opportunity” that could bring massive investment potential into this province.
An Alberta nest-minder
That opened one massive unknown among the many unknowns on what Alberta’s pension plan would look like. Theoretically, the fund could remain managed by CPPIB, but that would have to be approved in legislation by the Ottawa and other provinces that Alberta wishes to spurn here.
Smith could alternately task the Alberta Investment Management Co. (AIMCo) to manage Albertans’ pensions, but that body has not brought in nearly as sterling returns as the federal wealth manager, and is more susceptible to political intervention than the way CPPIB is set up.
To the many Albertans who are unsettled or spooked by the idea of abandoning the stability and reliability of the Canada Pension Plan, Smith is reassuring them they’ll be guaranteed the same benefits or better, and the same contribution rates or better.
She emphasizes the better, and purports there are 344 billion reasons to believe her on that.
There aren’t nearly as many reasons to question that number. But there are several, and when you add in all the uncertainties and risks that surround this monumental go-it-alone leap Alberta’s premier is proposing — well, that figure is probably pretty large as well.
Alberta wants to leave the CPP: Can they do that and what does it mean for the rest of Canada?
In short, yes, but we haven’t been down this road before: no province has left the Canada Pension Plan since its inception in 1966. Quebec never joined up with that pact, mind you, so it’s an outlier that has had its own provincial pension plan from the get-go. From there, life gets more complicated: Under the Canada Pension Plan Act, a province would need to give three years notice to the feds that it intends to exit CPP, enact its own legislation within one year of that notice, and prove its own made-at-home pension plan was roughly comparable in terms of providing that safety net. So, not a swift process. And in Alberta’s case, it’s by no means a done deal. The provincial government plans to consult with residents into early next year to gauge their appetite to leave the plan, with the results determining if a referendum is held sometime in 2024.
So they can leave — but why would they want to?
It boils down to a few things, all of which go hand-in-hand: demographics, economics and a lingering sense of Western alienation. On the first point, Alberta skews young — 66.2 per cent of those living in the province are between the ages of 15 and 64, according to the 2021 census, putting it above the national average of 64.8 per cent. That means more contributors to the plan, rather than those collecting benefits, with the province reckoning it can save somewhere in the neighbourhood of $5 billion a year by repatriating its share. The latter two points have been bedfellows for decades: generations of Alberta politicians have griped about the province over-contributing to so-called have-not provinces through equalization payments, mostly due to the province’s resource wealth, and thus there’s always been a simmer of discontent with allowing Ottawa to control the purse strings.
So what happens now?
We wait and see. With those consultations underway and a referendum possibly in the offing, there’s no chance Alberta leaves CPP until 2027 at the earliest, which, wouldn’t you know it, coincides with the province’s next scheduled general election. Political seas change, and all that, so who knows what will have happened by then.
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