The Smith government has introduced the “Alberta Next” panel, a group of professionals assigned to assess and provide recommendations on several pressing issues, including the potential creation of an Alberta-based pension plan.
While the panel has yet to publish its findings, a recent economic study indicates that Albertans could enjoy substantially higher retirement income through a provincial pension program compared to the Canada Pension Plan (CPP).
Why Alberta’s Pension Contributions Are Unique
Alberta’s economic and demographic profile plays a crucial role in this conversation. The province benefits from:
- Higher employment rates
- Greater average incomes
- A younger population
Because of these factors, Albertans contribute more to the CPP (primarily through payroll deductions) than they receive in retirement benefits. This discrepancy raises the question: Could Alberta do better on its own?
How Lower Contribution Rates Could Help Albertans
Several analyses have examined what would happen if Alberta left the CPP and launched its own pension plan.
- A 2019 report suggested that Alberta’s contribution rate could drop from the CPP’s base rate of 9.9% to 5.85%.
- A 2023 study by economist Trevor Tombe estimated a slightly higher contribution rate of 8.2% under an Alberta plan.
Despite differences in exact figures, both scenarios agree on one thing: Albertans would pay less into a provincial plan while still receiving comparable benefits, as required by federal law. This reduction in contributions could be redirected into private retirement savings, boosting overall retirement income.
Financial Impact: Scenario at 5.85% Contribution Rate
Using the lower estimate of a 5.85% contribution rate, the study modeled the impact on workers earning the median Alberta income of $53,061 in 2025. Here’s what it found:
| Scenario | Total Retirement Income (Pre-Tax) | Increase from CPP Alone | Percentage Increase |
|---|---|---|---|
| CPP Only | $264,968 | – | – |
| Alberta Pension + Private Savings | $454,741 | $189,773 | 71.6% |
Under this model, Albertans could accumulate $454,741 in retirement savings, a $189,773 (or 71.6%) increase compared to staying solely with the CPP.
Alternative Scenario: Contribution Rate at 8.21%
If the Alberta pension plan set the contribution rate at 8.21%, workers earning the same $53,061 would still see a boost:
| Scenario | Total Retirement Income (Pre-Tax) | Increase from CPP Alone | Percentage Increase |
|---|---|---|---|
| CPP Only | $264,968 | – | – |
| Alberta Pension + Private Savings | $329,640 | $64,672 | 24.4% |
While the boost is smaller, it still represents a 24.4% increase—$64,672 more than CPP benefits alone.
As the Alberta Next panel continues its evaluation, the numbers suggest that Albertans stand to gain more in retirement income with a provincial pension plan, especially when combined with strategic private savings.
Thanks to lower contribution rates and Alberta’s unique economic profile, retirees could be significantly better off compared to relying on the Canada Pension Plan alone.
FAQs
Why would Alberta consider leaving the CPP?
Alberta contributes more to the CPP than it receives in benefits, making a provincial pension potentially more cost-effective and beneficial for Albertans.
Will benefits be the same under a provincial pension plan?
Yes. Legally, any province opting out of the CPP must provide a comparable pension program, ensuring equivalent retirement benefits.
How would private savings factor into the new pension plan?
The lower contribution rate under an Alberta plan would allow individuals to invest the difference in private retirement accounts, resulting in higher total retirement income.