Freeland Warns Alberta Premier Smith Against Leaving CPP, Citing ‘Historic, Costly, Irreversible Mistake’

Alberta's Threat to Pull Out of CPP Raises Concerns, Sparks Meeting Between Freeland and Other Finance Ministers
Deputy Prime Minister and Minister of Finance Chrystia Freeland holds a press conference in Ottawa on Tuesday, Oct. 31, 2023. THE CANADIAN PRESS/Sean Kilpatrick

Finance Minister Chrystia Freeland and Alberta Premier Danielle Smith at odds over potential withdrawal from Canada Pension Plan.

Finance Minister Chrystia Freeland has issued a stark warning to Alberta Premier Danielle Smith, stating that withdrawing the province from the Canada Pension Plan (CPP) would be a “historic, costly, and irreversible mistake.”

In a letter sent to Premier Smith on Wednesday, Freeland highlighted the positive track record of the CPP, which has provided “strong and consistent levels of return” on pension investments. Freeland pointed out that CPP Investments has grown the fund’s assets from $36 billion to more than $570 billion over the past two decades, with about $380 billion generated from investment income. She also noted that the CPP earned a rate of return of almost 10 per cent over the last ten years, ranking it as “the highest ten-year returns of any pension fund in the world.”

Premier Smith, however, has long advocated for Alberta to leave the CPP. Last month, she released a report by consultant LifeWorks, which claimed that Alberta would be entitled to $334 billion, more than half of the fund’s assets, upon withdrawal. Smith argues that “an Alberta pension plan would be fairer and could make life more affordable for all Albertans.”

Freeland, however, has refuted these claims, stating that the numbers relied upon by Smith and her government are flawed. She pointed out that if every province and territory used the same exit formula, Alberta, Ontario, and British Columbia alone would be entitled to an estimated 128 per cent of CPP assets. Freeland emphasized that Alberta’s withdrawal from the CPP would jeopardize the retirements of its residents.

Alberta Premier Danielle Smith speaks at an event for the Canada Strong and Free Network in Ottawa on March 23. Smith has threatened legal action against the CBC if the corporation doesn’t retract and apologize for some of its reporting about her by April 28. (Sean Kilpatrick/The Canadian Press)

Alberta Finance Minister Nate Horner has challenged Freeland’s calculations, demanding that she reveal the federal government’s calculations regarding how much of the CPP’s assets Alberta would receive. In a letter also sent on Wednesday, Horner acknowledged the limitations of the LifeWorks report and called for the federal government to provide its calculations, including any non-public data that could impact the asset transfer amount.

Critics have questioned the validity of the LifeWorks report, with Michel Leduc, senior managing director of the non-partisan Canada Pension Plan Investment Board, dismissing the $334 billion claim as an “impossible figure.” University of Calgary economist Trevor Tombe estimated that Alberta is entitled to only about 20 to 25 per cent of the fund, while a 2019 briefing note from Alberta’s Finance Department estimated the province’s slice at less than 12 per cent.

Amidst this debate, the idea of Alberta withdrawing from the CPP remains widely opposed by its residents. A recent poll conducted by Abacus Data revealed that 52 per cent of Albertans believe it is a bad or very bad idea, compared to 19 per cent who think it is a good or very good one. The few supporters of the withdrawal are primarily younger Albertans, who are further away from receiving pensions and are therefore less vulnerable to potential changes to the retirement fund.

Premier Smith has floated the idea of holding a referendum on the matter as early as 2025, but she has stated that the question of Alberta’s entitlement needs to be settled first.