Canada Pension Plan security heralded at SACPA

Posted on November 24, 2023 by Ryan Dahlman

By Al Beeber
Southern Alberta Newspapers

The Canada Pension Plan is reliable, dependable and is rated one of the safest and top-performing in the world.

And Alberta is not entitled to more than 50 per cent of its assets. Those were among the messages delivered to a packed house at the Lethbridge Senior Citizens Organization during the Nov. 2 session of the Southern Alberta Council on Public Affairs.

Brad Lafortune of Public Interest Alberta, which calls itself a “non-profit, non-partisan, province-wide organization focused on education and advocacy on public interest issues,” addressed the CPP and Alberta premier Danielle Smith’s interest in leaving it to start an Alberta Pension Plan.

Lafortune, executive director of PIA, previously served as chief of staff for the Minister of Labour for the NDP government.

During his discussion, Lafortune addressed the history of the CPP and reiterated that all Canadians pay the same rates and get the benefits from the plan under the same formula.

He said pension discussions going now aren’t just an issue for seniors but for all Albertans. Canadians paying into the Canadian Pension Plan, he pointed out, are paying the benefits of their previous generation.

He called the CPP one of the pillars of retirement security with many Canadians not having company pensions or relying on registered retirement savings plans. Old Age Security benefits are another source of retirement income.

The CPP, he said, is healthy and sustainable for at least 75 years whereas uncertainty and risk can be expected with an APP. 

Lafortune told the crowd that AIMCo, the Alberta Investment Management Corporation, lost $20 billion in 2020.

While the province is allowed to leave the CPP, it must, said Lafortune, establish a comparable plan with similar benefits.

He said the provincial report on the benefits of an Alberta plan is misleading and wrong. Alberta, he said, is only entitled to between 12 and 16 per cent of the CPP’s assets, not $334 billion.

Lafortune pointed out inaccuracies that Albertans are hearing. One is that this province’s residents pay more into CPP than other Canadians.

“All Canadians make contributions at the same rate and draw out on the same formula,” said Lafortune.

And contrary to what some may have heard, Quebec was never in the CPP, choosing instead when the CPP was created to start its own.

“Unfortunately Albertans don’t have a lot of information on the question of their financial security,” he said.

CPP is the first of three pillars of financial security, which is very safe, secure, reliable and efficient, he said.

“The CPP is there for all workers, we all pay the same contribution rates” and receive the same benefits, he said.

“When we look at the CPP it is a democratic issue. The CPP is independent from government. Their board is responsible for making the best investments to maximize returns for Canadians to secure the long-term viability of the Canada Pension Plan. They don’t make investment decisions based on politics, they don’t make investment decisions based on geography,” he said.

“Their sole purpose is to invest in the CPP so that it will be there” to be strong for all Canadians.

“It’s also about equity and fairness,” Lafortune said.

In the 1990s, Ottawa and the provinces sat down to make sure the plan would be sustainable for decades, he said.

“CPP is really that strong foundational pillar that’s always going to be there for folks,” he said.

Creating a new pension plan requires thinking of how big that plan is going to be and how it can take in volatility, he said.

“There’s a debate about the number we might be able to access, there’s a big number of the government of Alberta versus a smaller number other people are talking about. But at the end of the day, it’s still going to be much much smaller than the Canada Pension Plan and therefore” there will be more uncertainty and risk involved, he added.

CPP was established as a pay-as-you go plan funded half and half by employers and employees and it’s legislated up to a contribution rate of 9.9 per cent but that rate is presently a bit lower, said Lafortune.

Pay-as-you-go plans are funded from the salaries of those currently employed and that money is used to pay those who are no longer employed and are beneficiaries of the plan, he said.

“Essentially, each generation funds the income of the previous generation while they’re working.”

Contributions above those required to fund the pensions being paid right now go into an investment fund and the proceeds of the investment fund partially fund future pension benefits, he said.

According to the chief actuary of Canada, Lafortune said, the added income from the investment funds should mean the contribution rates will remain steady at their current level for decades to come, he added.

Two important features of the CPP are that it is portable and indexed to inflation. Portability means it can be taken from one province to another – except Quebec – and to different jobs.

And because it’s indexed to inflation, pension benefits don’t erode over time, Lafortune added.