Al­berta to study with­drawal from CPP

There is al­ready ‘com­pelling case’ for Alta. exit from CPP: Ken­ney

Lethbridge Herald - - FRONT PAGE - Andy Blatchford THE CANADIAN PRESS — OT­TAWA

Al­berta Premier Jason Ken­ney says there’s a “com­pelling case” to be made for his prov­ince to exit the half-cen­tury-old Canada Pen­sion Plan — an idea sure to face in­creas­ing scru­tiny over the com­ing months. With grow­ing frus­tra­tions in his prov­ince about its place in the federation, Ken­ney has re­vealed that a deeper anal­y­sis is on the way to con­sider Al­berta’s po­ten­tial with­drawal from the na­tional pen­sion plan.

The move, if it goes for­ward, would pull Al­ber­tans’ multi­bil­lion-dol­lar share from the $400-bil­lion pool of as­sets that are han­dled by the in­vest­ment man­ager, the Canada Pen­sion Plan In­vest­ment Board.

The pro­posed de­par­ture, Ken­ney said, will be ex­am­ined by a panel his gov­ern­ment in­tends to cre­ate as a way to as­sess “fair­ness” for Al­berta within the federation.

Talk of the CPP with­drawal fol­lows a fed­eral elec­tion re­sult late last month that many say ex­em­pli­fied Prairie frus­tra­tion to­ward the Lib­eral gov­ern­ment in Ot­tawa. The fed­eral Lib­er­als were re­duced to a mi­nor­ity man­date af­ter fail­ing to cap­ture a sin­gle seat in Al­berta or Saskatchew­an.

There’s also been mo­men­tum be­hind sep­a­ratist sen­ti­ments in the two re­source-de­pen­dent prov­inces, where their economies have strug­gled through a com­mod­ity down­turn.

Much of the anger has been di­rected at Ot­tawa and other parts of Canada — which are ac­cused of pre­vent­ing the land­locked Prairie prov­inces from get­ting their nat­u­ral re­sources to the coast for ex­port.

Now, Ken­ney is ready to take a long look at ditch­ing the CPP, which has been in place ev­ery­where in Canada, ex­cept Que­bec, since the mid-1960s. Que­bec has been man­ag­ing its own sis­ter pen­sion plan.

“I can cer­tainly tell you that will be one of the is­sues stud­ied by the panel that I will be ap­point­ing to con­sult with Al­ber­tans on fight­ing for a fair deal in Canada,” the Al­berta premier said in a re­cent video clip, which was posted last week on Face­book.

“I be­lieve that a com­pelling case can be made for such a shift.”

In his mes­sage, Ken­ney said he un­der­stands about $40 bil­lion worth of Al­ber­tans’ pre­mi­ums are man­aged by the CPPIB.

He said the funds, if pulled from the CPPIB, would be trans­ferred to the Al­berta In­vest­ment Man­age­ment Cor­po­ra­tion, also known as AIMCo. The in­sti­tu­tional investor, which in­cludes the prov­ince’s pub­lic-sec­tor pen­sion plans, al­ready man­ages about $100 bil­lion in as­sets for Al­berta tax­pay­ers, he said.

With Al­berta home to Canada’s youngest pop­u­la­tion, he added it’s the big­gest net con­trib­u­tor to the CPP.

“Let me un­der­score, our gov­ern­ment has not made any de­ci­sion in this re­spect — but it is cer­tainly one of the ideas that peo­ple will be pre­sent­ing to our panel on fair­ness within the federation,” Ken­ney said.

The premier ar­gued the ex­tra funds would en­able AIMCo to di­ver­sify fur­ther and po­ten­tially im­prove the re­turns over time. Ken­ney also noted Que­bec has re­spon­si­bly man­aged its own pen­sion plan out­side of CPP for decades.

Bill Morneau, who is widely ex­pected to stay in his role as fi­nance min­is­ter once Prime Min­is­ter Justin Trudeau forms his new cab­i­net Nov. 20, was asked Thurs­day whether Al­berta should be able to leave the plan.

“I think there will be more that we’ll have to dis­cuss af­ter Nov. 20 and we’re look­ing for­ward to hav­ing those dis­cus­sions,” Morneau said in Ot­tawa on his way to a post-elec­tion meet­ing of cur­rent and de­feated Lib­eral MPs.

Kevin Mil­li­gan, a Univer­sity of Bri­tish Columbia econ­o­mist, said Al­berta’s pro­posed exit from the CPP should be taken se­ri­ously given it’s com­ing from the premier.

Any push by Al­berta to aban­don the CPP is a much more cred­i­ble sug­ges­tion than the de­bate about equal­iza­tion, given the pen­sion plan is a joint fed­eral-pro­vin­cial project with exit pro­vi­sions, while equal­iza­tion is a fed­eral pro­gram, Mil­li­gan said.

“I do won­der what the goal of this is,” he said of Al­berta’s pos­si­ble with­drawal from the CPP. “Al­berta could cer­tainly do this — it is in their rights to do so. But in do­ing so they would have to set up their own ad­min­is­tra­tion, set up their own ben­e­fits struc­tures... and these things are not cost-free.”

The Que­bec pen­sion plan com­par­i­son, he added, is dif­fi­cult to make be­cause try­ing to undo the CPP ar­range­ment now — af­ter decades — would be far more com­pli­cated than at the out­set.

Mil­li­gan also said from the fu­ture of the pen­sion plan’s stand­point a threat by Al­berta to leave the CPP is un­likely to cause con­sid­er­able con­cerns in the rest of the coun­try. Ac­tu­ar­ial pro­jec­tions, he added, show the CPP is tens of bil­lions of dol­lars ahead right now than where it should be.

“The idea that this would be a way to get peo­ple in the rest of Canada, to poke them in the eye — I’m not sure that’s true in terms of the fact (the CPP) is in pretty good shape right now,” he said.

Keith Am­bacht­sheer, a pen­sion ex­pert, said he sees no eco­nomic ar­gu­ment for Al­berta to exit the CPP and that it would be purely a po­lit­i­cal de­ci­sion.

“There’s noth­ing in it for the Al­berta tax­payer. So, it’s pure spite,” said Am­bacht­sheer, di­rec­tor emer­i­tus of the Univer­sity of Toronto’s Rot­man In­ter­na­tional Cen­tre for Pen­sion Man­age­ment.

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