Trudeau, Smith Trade Open Letters Over Pitch to Consider Removing Alberta From CPP

While the prime minister says he will ‘do anything possible’ to ensure the CPP remains intact, the Alberta premier says the decision is ‘not his to make.’

Prime Minister Justin Trudeau and Alberta Premier Danielle Smith meet in Calgary on July 7, 2023. The Canadian Press/Jeff McIntosh

Prime Minister Justin Trudeau and Alberta Premier Danielle Smith have each issued strongly worded letters on the suggestion that the Prairie province could decide to exit the Canadian Pension Plan (CPP).

“I am deeply concerned that your government has proposed to withdraw Albertans from the Canadian Pension Plan,” states Mr. Trudeau’s letter dated Oct. 18. “Alberta’s withdrawal would weaken the pensions of millions of seniors and hardworking people in Alberta and right across the country. The harm it would cause is undeniable.”

Mr. Trudeau said Alberta’s withdrawal from the CPP would expose Canadians to more uncertainty.

“External forces and events—from geopolitical unrest to climate change, and more—are having a direct impact on people here at home. As leaders, we have a duty to protect Canadians from these headwinds—not to introduce even more with uncertainty and instability.”

He added that his government will be doing “everything possible to ensure CPP remains intact.”

“We will not stand by as anyone seeks to weaken pensions and reduce the retirement income of Canadians,” Mr. Trudeau said.

Ms. Smith responded with her own letter on Oct. 18, stating, “Prime Minister Justin Trudeau is clearly against Albertans having a referendum to decide their future.”

“Thankfully, this decision is not his to make. These pensions belong to Albertans. They will decide,” said the premier.

She said it was “disingenuous and inappropriate” for the prime minister to “stoke fear in the hearts and minds of Canadian retirees on this issue,” and although there would be some effect on CPP, they would not be as severe as Mr. Trudeau implies.

On Oct. 12, Albertans were invited to review the findings of an independent report on a potential Alberta Pension Plan (APP). Over the next several months, the province intends to obtain public engagement with online surveys and a panel that will obtain feedback from Albertans through telephone town halls.

Alberta Over-Contributes: Report

The independent report was commissioned by the Alberta government and compiled by consultant Lifeworks, and was released on Sept. 21.

In her letter, Ms. Smith says the experts who wrote the report estimate that if Alberta withdraws its share of net assets following the withdrawal formula in the CPP Act, the CPP would “return to the stability rating it enjoyed in 2013.”

The province has said that Albertans pay more than their fair share into CPP for the benefits that Albertans actually receive, an estimated $60 billion more since inception. “The report estimates that Albertans could save over $5 billion in the first year alone by moving from the CPP to an APP,” it said.

The report calculates that the savings from moving to a provincial pension plan could increase each senior’s monthly payment significantly or provide a $5,000 to $10,000 bonus payment on retirement.

“The report estimates the difference between the rate Alberta workers would pay in Canada Pension Plan premiums and Alberta Pension Plan premiums would save Alberta workers up to $1,425 every year,” said the province. That amount would also mean businesses save the same amount each year for each worker, as employers match premiums paid by employees to CPP.

According to the Canada Pension Plan Act, any province can withdraw from the CPP and set up its own pension plan. One condition is that the new plan provides comparable benefits to the CPP (the same condition for Quebec’s own plan).

The LifeWorks report states that if Alberta gave the required three-year notice to quit CPP next year, it would be entitled to $334 billion, or about 53 percent, of the national pension plan’s pool by 2027.

Alberta would be the first province to quit the CPP.

Ms. Smith said that any attempt Ottawa makes to not follow the withdrawal formula should Albertans decide to withdraw from the CPP “will be seen as an attack on the constitutional and legal rights of Alberta, and met with serious legal and political consequences.”

She noted that Quebec chose not to participate in the CPP from its inception, and the plan was designed to allow other provinces to make the same choice in the future.

She asked Mr. Trudeau to provide the federal government’s “actuarial analysis and interpretation of the CPP Act withdrawal formula as it applies to Alberta’s potential withdrawal from the CPP.”

The Canadian Press contributed to this report.