The Calgary Chamber of Commerce has taken a cautionary stance against a potential Alberta Pension Plan (APP), which Premier Danielle Smith unveiled as an item for consideration by the Alberta Government.
The chamber urged the government to consider some of the detrimental impacts that could occur if Alberta pulled out of the Canada Pension Plan (CPP).
“Dismantling existing systems and altering our pension system could compromise labour mobility from other provinces, the benefits of risk pooling that comes with a larger pension fund, and investor confidence,” said Deborah Yedlin, CEO of the Calgary Chamber of Commerce.
At issue for the chamber is the instability in investment into Alberta businesses by the APP, increased risk to Alberta businesses regarding the premiums they would pay into an APP on behalf of employees, and foreign investment into the Alberta economy moving elsewhere.
“The Alberta Pension Plan proposal is complex and has far-reaching implications for businesses and investors—in Alberta and across Canada,” said Yedlin.
The Chamber said that historically the Government of Alberta has done an excellent job attracting people to live and work in the province, but that a change to an APP instead of the CPP would make attracting talent harder in the future.
They said that the labour shortage was critical in the province and that an uncertain APP would counter those efforts to attract talent to fill those gaps.
Among the other issues related to employment, was the likelihood of lower returns on investment from an APP instead of the current CPP. That would affect the ability to support retirees who choose to make their careers beforehand in Alberta.
“There is no certainty Alberta will continue to benefit from having a young population, as it currently does – and we remain price takers for our natural resources, making future revenue streams uncertain. Quebec remains a cautionary tale, as Quebeckers now have the highest contribution rates in the country,” said the Chamber.
Investment into Alberta at risk
Replacing the CPP with an APP would also have the potential to lower returns on investment, said the Chamber.
“Historically, Alberta has benefitted from being part of CPP that is not only recognized as a leader for its governance structure but also generates a very high rate of return on a global basis. By pooling capital with other provinces to create a large portfolio, investment risk and costs are minimized,” said the Chamber.
“The investment community suggests if Alberta does choose to withdraw from the CPP, lower returns should be anticipated, simply due to having a smaller total portfolio. This could mean higher premiums for Alberta businesses.”
They said that the international investment market was becoming more mobile in terms of where investment dollars are placed and that an APP would be unlikely to attract the same level of foreign investment alongside Canadian investment as the CPP currently does.
“CPP is a major investor in several Canadian companies and attracts local and foreign capital as co-investors, thereby serving as a vehicle for investment in our local economy. Uncertainty for investors in the CPP – and potential APP – will jeopardize future investment,” the Chamber said.