The government of Alberta is considering creating its own pension plan, separate from the Canada Pension Plan (CPP). This has led to much debate and confusion among Canadians. Let’s break down what each plan entails and what it could mean for you.
What is the Canada Pension Plan (CPP)?
The CPP is a national pension plan that started in the late 1960s. Both employers and employees contribute to this plan through payroll deductions. When people retire, they receive a pension based on their contributions.
What is the Alberta Pension Plan (APP)?
Alberta is proposing its own pension plan, separate from the CPP. Supporters of the APP believe it will benefit Alberta residents by lowering costs and boosting investments within the province. They claim that Alberta’s younger population makes the APP more sustainable.
Comparing APP and CPP
Alberta Pension Plan (APP)
- Proposal Phase: The plan is still being discussed.
- Cost Savings: The Alberta government says the province could save $5 billion by leaving the CPP.
- Lower Premiums: Workers in Alberta could pay a lower contribution rate of 5.91% compared to the CPP’s 9.9%.
- Risks: Setting up the APP could be costly and risky, especially for those close to retirement who rely on the CPP.
Canada Pension Plan (CPP)
- Established System: The CPP is a well-established, nationwide plan.
- Broad Coverage: Serves over 650,000 Albertans and is sustainable for at least the next 75 years.
- Higher Contributions: The current base contribution rate is 9.9%.
Implications of the Alberta Plan
The proposed Alberta Pension Plan comes with potential challenges:
- High Setup Costs: Establishing a new pension plan would be expensive.
- Political Influence: Investment decisions could be influenced by politics, leading to less favorable returns.
- Uncertainty: The APP could bring uncertainty, especially for those nearing retirement who have relied on the CPP.
Deciding between the Alberta Pension Plan and the Canada Pension Plan involves weighing potential savings against the risks and costs of setting up a new system. The Alberta government’s proposal claims significant savings but also faces substantial uncertainties and expenses.
What is the current status of the Alberta Pension Plan?
The APP is still in the proposal phase and has not been implemented yet.
How much could Alberta save by leaving the CPP?
Alberta could potentially save $5 billion, according to the provincial government.
What are the contribution rates for APP and CPP?
APP: Proposed rate of 5.91%. CPP: Current rate of 9.9%.
Who is most affected by the change to the APP?
People nearing retirement who have relied on the CPP throughout their working lives.
How can Albertans provide input on the APP proposal?
Albertans can give their feedback online or during public engagement sessions. The final report will be presented in May 2024.