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Potential investment manager for an Alberta pension plan—here are the facts


6 minute read

From the Fraser Institute

As discussions around Alberta’s potential withdrawal from the Canada Pension Plan (CPP) continue, commentators have bombarded Albertans (and Canadians more generally) with sometimes misleading rhetoric, which can undermine the public’s understanding of this key issue. Albertans—and Canadians broadly—need facts to make well-informed decisions.

One key issue has been the potential investment manager for an Alberta pension plan. Specifically, commentators have implied that by leaving the CPP, Albertans retirement funds would no longer be managed by the Canada Pension Plan Investment Board (CPPIB) but rather by the Alberta Investment Management Corporation (AIMCo), which manages several public funds and pensions in the province.

This is not necessarily the case. The province has the option to retain the CPPIB as its investment manager, contract with AIMCo, create a new provider, or contract with the private sector. Put simply, an independent Albertan pension plan has options other than contracting with AIMCo.

But for argument’s sake, let’s assume AIMCo was chosen as the investment manager for an Alberta pension plan. There’s quite a bit of confusion regarding AIMCo that should be clarified. Perhaps most commonly, critics of AIMCo emphasize that the CPPIB has averaged 10 per cent annual returns over the past decade, higher than AIMCo’s 7.2 per cent.

While true, the CPPIB rate of return is distinct from the rate of return earned by contributors to the CPP. Put differently, an individual’s rate of return is not the same as the fund’s rate of return because of the way the CPP was originally designed. Some of the commentary written on this issue has implied that the lower rates of return at AIMCo would influence the benefits received by Alberta retirees. In fact, the retirement benefits Canadians receive from the CPP, and from a comparable Alberta pension plan, are based on several unrelated factors including how many years they’ve worked, their annual contributions and the age they retire. This is key since the CPP and a potential Alberta pension plan are largely based on current workers paying for current retirees, or what’s known as a pay-as-you-go system. Estimates suggest Canadian workers born in 1993 or later can expect a real rate of return of just 2.5 per cent from the CPP.

Given the pay-as-you-go nature of the plan, the key for the CPP, and one assumes for an independent Alberta pension plan, is that the fund earns a rate of return that allows for sustainable payments to retirees over time. The current required rate of return for the CPPIB is 6.0 per cent, which both it and AIMCo exceed.

Moreover, AIMCo, unlike the CPPIB, is constrained by the investment policies of each individual pension fund that it manages. Indeed, unlike the CPPIB, AIMCo is responsible for managing the funds of numerous pension plans, each with their own investment objectives, risk tolerances and asset mixes AIMCo must follow.

For instance, the Management Employees Pension Plan, one of AIMCo’s largest pension funds, requires that 20 per cent to 45 per cent of the market value of the plan’s assets be invested in “inflation sensitive” investments, which include real estate, renewable resources and other assets that may have lower returns compared to alternatives such as investments in private equity. These constraints can limit AIMCo’s overall rate of return, while the CPPIB, unencumbered by the investment policies of other pension funds, has the flexibility to invest according to its core objective, which is to maximize returns adjusted for risk. Put differently, Albertans could grant AIMCo the same flexibility—it all depends on the investment policy implemented if an Alberta pension plan were created.

Finally, opponents also argue that the CPPIB fund’s size (more than $575 billion) makes it superior to any potential provincial fund. Yet the evidence suggests that despite its size, the CPP is not a low-cost pension plan. In fact, according to an analysis by Philip Cross, former chief analyst at Statistics Canada, the CPP’s cost at 1.07 per cent of assets was higher than the other analyzed pension plans, which ranged from 0.34 per cent to 1.02 per cent. And the CPP’s costs have skyrocketed from $4 million in 2000 to 4.4. billion annually, largely due to an increase in staff and compensation. For perspective, the CPPIB had only five employees in 2000; by 2020 it employed nearly 2,000 people. And critically, these changes have not increased the fund’s net returns.

Ultimately, it will be up to Albertans to decide if they want to opt out of the CPP for an Alberta pension plan, but to make that decision, they must be armed with facts. That includes clarifying some misunderstanding on two potential investment managers—CPPIB and AIMCo.

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Provinces should be cautious about cost-sharing agreements with Ottawa

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From the Fraser Institute

By Tegan Hill and Jake Fuss

According to Premier Danielle Smith, Alberta will withdraw from the federal government’s dental care plan by 2026 mainly because the plan would duplicate coverage already provided to many Albertans (although she plans to negotiate unconditional funding in lieu of being in the program). Indeed, all provinces should be wary of entering into such agreements as history has shown that Ottawa can reduce or eliminate funding at any time, leaving the provinces holding the bag.

In the 1990s, for instance, the federal government reduced health and social transfers to the provinces amid a fiscal crisis fuelled by decades of unrestrained spending and persistent deficits (and worsened by high interest rates). Gross federal debt increased from $38.9 billion in 1970/71 to $615.9 billion in 1993/94, at which point debt interest costs consumed roughly $1 in every $3 of federal government revenue.

In response to this debt crisis, the Chrétien Liberal government reduced spending across nearly all federal departments and programs. Over a three-year period to 1996/97, health and social transfers to the provinces were 51 per cent ($41.0 billion) less than what the provinces expected based on previous transfers. In other words, the provinces suddenly got a lot less money from Ottawa than they anticipated.

This should serve as a warning for the provinces who may find themselves on the hook for Ottawa’s big spending today. In the case of dental care, an area of provincial jurisdiction, the Trudeau government has earmarked $4.4 billion  annually for the provinces on an ongoing basis. However, any change in federal priorities or federal finances could swing the financial burden from Ottawa to the provinces to maintain the program.

The current state of federal finances only heightens this risk to the provinces. The federal government has run uninterrupted budget deficits since 2007/08, with total federal debt climbing from $707.3 billion in 2007/08 to a projected $2.1 trillion in 2024/25. The current government—or perhaps a future reform-minded government focused on balancing the budget—could reduce transfers to the provinces.

The Trudeau government has committed to significant new funding in areas of provincial jurisdiction, but provincial policymakers would do well to understand the risks of entering into such agreements. Ottawa can unilaterally reduce or eliminate funding at any point, leaving provinces to either assume the unexpected financial burden through higher taxes or additional borrowing, or curtail the programs.

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Just in time for Canada Day weekend! Crescent Falls ready to be enjoyed again

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The new staircase structure and viewing platform are among many upgrades that visitors can look forward to at the reopening Crescent Falls Provincial Recreation Area. (Credit: Alberta Parks).

The popular Crescent Falls Provincial Recreation Area reopens following a significant capital investment to improve visitor safety and experiences.

Crescent Falls Provincial Recreation Area is ready to welcome visitors back to enjoy one of the most remarkable, accessible waterfall viewing opportunities in Alberta. The upgrades at Crescent Falls will help improve the park’s visitor experience. Guests can expect expanded parking, improved access roads, trails and day use areas, new and improved viewing areas to take in the falls and upgraded safety measures, including signage and wayfinding.

The Provincial Recreation Area (PRA) is reopening over the July long weekend after being closed since 2023. Visitors will notice increased public safety upgrades through additions such as new parking lots, a new stair structure to access the lower falls, new pedestrian trails, a new vehicle bridge to access the camping area and a viewing platform to enjoy the Crescent Falls.

“We are thrilled to welcome visitors back to Crescent Falls Provincial Recreation Area in time for the Canada Day long weekend. These additions will help visitors to safely access and enjoy the area’s natural beauty. Parks are for people and Alberta’s government will continue to invest in high-quality outdoor recreation opportunities.”

Todd Loewen, Minister of Forestry and Parks

“Today marks a significant milestone for our community as we reopen the Crescent Falls Provincial Recreation Area following extensive upgrades. Our province is well known for its incredible natural beauty, and these improvements will make our backcountry more accessible and ensure that Albertans and those visiting our great province can continue to explore our stunning landscapes for years to come.”

Jason Nixon, MLA for Rimbey-Rocky Mountain House-Sundre
This project is part of an investment of more than $12 million to upgrade 13 sites along the David Thompson Corridor. The improvements at Crescent Falls will provide improved safety measures and better visitor access to and from popular tourist destinations in the area. Partners from Clearwater County, Rocky Mountain House and other organizations were critical in helping to move the upgrades forward. Clearwater County and its officials worked with Alberta Parks staff to advise on the upgrades needed around the area.

Alberta’s government is committed to reconciliation and acknowledges the significance of the land around Crescent Falls Provincial Recreation Area to the Stoney Nakoda First Nation. The completed upgrades reflect an ongoing commitment to creating more outdoor recreation opportunities while protecting the land’s natural and cultural values so it can be enjoyed by current and future generations.

“The Alberta Government’s reopening of Crescent Falls is a remarkable achievement for our region. This project not only enhances recreational opportunities, natural beauty and accessibility in our area but also means safer, more enjoyable visits for our citizens and visitors alike.”

Michelle Swanson, councillor, Clearwater County

“The Town of Rocky Mountain House is where adventure begins, and we are thrilled that Crescent Falls Provincial Recreation Area has reopened to the public in time for the summer adventure season. This is a wonderful day trip destination for visitors and residents alike setting out from Rocky Mountain House. The provincial investment has only improved its accessibility and safety, making it a must-see destination if you are in the area.”

Dale Shippelt, incoming deputy mayor, Rocky Mountain House

“Westward Bound Campgrounds is the proud facility operator of the Crescent Falls Provincial Recreation Area and we are very excited to see our campers and visitors return to its beauty. These upgrades will have a significant impact on enhancing guest satisfaction levels, providing unique and memorable camper and visitor experiences while providing a safe environment to enjoy spectacular scenery.”

Lonnie and Edena Earl, Westward Bound Campgrounds

This work is part of an ongoing commitment to creating more outdoor recreation and camping opportunities, building trails and facilities and ensuring Alberta’s provincial parks can be enjoyed by all Albertans.

Quick facts

  • The upgrades at Crescent Falls PRA include the following improvements:
    • Enlarging the existing parking area
    • Developing a new parking area for large RV vehicles
    • Upgrading the access roads down to the lower area
    • Installing a new pedestrian trail to the lower day use area
    • Installing a new vehicle crossing from the day use to the camping site
    • Upgrading and expanding the day use areas
    • Increasing signage
    • Installing additional toilets and bear-proof garbage bins
    • Developing a new stair structure to access the lower falls areas with a viewing platform
  • Enhancing safety features throughout the PRA. The upgrades were part of a significant capital investment of $12.3 million by Alberta’s government to address safety and experience opportunities in 13 key provincial recreation sites along the David Thompson Corridor. Along with Crescent Falls PRA, other sites that were upgraded include:
    • Bighorn Dam Recreation Area
    • The following 11 Public lands and parks sites:
    • Coliseum
    • Allstone
    • Abraham Slabs
    • Hoo Doo Creek
    • Coral Creek
    • Pinto Creek
    • Preachers Point
    • Cavalcade
    • Kinglet/Tuff Puff
    • Wildhorse
    • Owen Creek
  • Crescent Falls PRA is located 22 km west of Nordegg on Highway 11 and 6 km north on a gravel access road. Crescent Falls PRA has a first-come, first-served campground with 12 tent-only sites and 22 RV sites. The day use area includes multiple viewing platforms of the upper and lower falls and picnic tables with views of the river. Access to the lower day use area is available on a 0.8 km trail from the main parking area or, alternatively, from the Bighorn Canyon lookout via a 3 km trail. The lower day use area also has accessible-only parking stalls adjacent to the viewing platforms with an accessible vault toilet and picnic areas.

Related information

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