November has passed at last. Men can shave off their moustaches. Black Friday is complete for another year, Christmas shoppers can now officially and unashamedly continue to run their credit cards to the limit, and Albertans can start dreaming of 2020 and the future.
What a brave new world we are about to enter into. With a population base (4.3 million) only slightly larger than Metropolitan Montreal (4.1 million), our provincial government proposes to secede from the Canada Pension Plan (CPP) and set up our own.
The CPP was set up in the mid-1960s as a federal-provincial initiative to complement the Old Age Pension. It was designed to be a mandatory defined pension plan financed by a compulsory deduction of a proportion of earnings. Faced with a looming unfunded liability, increases in contributions were made this year to cover a decision to increase maximum amount of income covered and adjust for our advancing longevity.
The CPP investment fund has one mandate: to obtain a return on investment to the extent that it is self-funding in meeting its pension output obligations. It was also agreed that any province would have the right to opt out and set up a parallel plan.
All provinces agreed to participate except for Quebec, which opted to set up its own fund using the same basic rules to the Canada Pension Plan. It created the Quebec Deposit and Investment Bank (‘Caisse’) to invest its contributions. The only significant difference between the mandates of the CPP and Quebec Pension Plan (QPP) was in a dual mandate given to the Caisse. While its primary purpose was to ‘maximize return without taking unnecessary risk,’ the Caisse was obliged to ‘adopt an investment policy (that) must also take into account the financing needs of the public sector and economic development of Québec.’
With an eye on concerns about fund management and administrative efficiency, our Alberta government is proposing that the same corporation that manages the Heritage Savings Trust Fund would manage the Alberta Pension Plan fund. The returns by this investment management company are similar to the returns on investment by both the CPP and QPP.
However, if the Heritage Savings Trust Fund is directed, as is QPP, to invest funds in Alberta-focused companies and Alberta Crown corporations, a different scenario emerges. Quite clearly, given the current economic challenges in Alberta, this last second factor holds a significant appeal to the United Conservative Party-led government. Presently, and for an indeterminate future, Alberta is clearly not a prime place to get an obligatory four-per-cent minimum return on investment if the primary mandate is to keep the fund viable.
One might hope that an Alberta Pension Plan investment manager might reckon that the best approach in taking into account the financing needs of Albertans pensioners and the Alberta economy is to invest elsewhere. Just as QPP has done in not having any Quebec-based investments in its portfolio. If so, why change?
Give it a break, Premier Kenney. You, too, may grow old. Or are you planning to return to Ottawa?
Alan Murdock is a local pediatrician.