Alberta pension plan split not about efficiency, says former CEO of AIMCo

The former chief executive officer of the organization that would administer a separate Alberta pension plan says the proposed switch from the Canada Pension Plan doesn’t make much sense from an efficiency point of view.

Leo de Bever, who retired from the Alberta Investment Management Corp. in 2015, says the threatened move by the Alberta government to pull out of the national plan is really about asserting the province’s place in the country in the face of opposition to pipelines for its vital oil and gas industry.

“Look, it would be better if all of Canada had one plan, OK, from an efficiency point of view,” he said in an interview Thursday, noting there are economies of scale from having one investment manager. “But I think this is just a symptom of something much deeper. . . . If you’re invading our turf and telling us what we cannot do, then maybe we should take away some stuff that we’ve given to you to administer.”

Read: Alberta launches panel to examine involvement in CPP, national pharmacare

Last weekend, Alberta Premier Jason Kenney appointed a panel to conduct research and hold public meetings on independence-related topics including the pension plan switch. The panel is to report back by the end of March.

Kenney has said he believes about $40 billion of the $409 billion in funds under administration by the Canada Pension Plan Investment Board would be transferred to Alberta if it opts out, which would only happen if endorsed in a referendum.

The provincial pension plan would be administered by the AIMCo, which currently manages about $108 billion in Alberta public employee pension funds.

The federal finance department says a province that wants to exit the CPP must give three years written notice, pass comparable pension legislation and assume all of the obligations and liabilities of CPP benefits due to employment or self-employment in the province.

Read: Alberta will study already ‘compelling case’ for its exit from CPP: Kenney

“If a province was to set up its own pension plan, it would have to staff and set up systems to collect contributions and deliver pension benefits,” it said in an emailed statement. “A provincial pension plan would also no longer enjoy the same economies of scale, pooling of risk and investment advantage available through the Canada Pension Plan.”

De Bever said it’s possible an Alberta pension plan would help diversify the provincial economy by creating more financial services jobs.

Meanwhile, an executive with the Retail Council of Canada said the proposed Alberta pension plan raises questions about the potential impact on future retirement income of workers and customers. “We have an interest in the retirement outcomes of employees,” said Karl Littler, senior vice-president of public affairs. “We also have an interest in the retirement outcomes of our customers, who are essentially everybody. Anything that might potentially jeopardize that would be a concern from our perspective.”

Read: Can CPP have a provincial bias?

He said he believes the CPPIB is an efficient pension investor that’s posting good returns, while the performance of a new Alberta plan is unknown. The plan could also limit the ability of council members, who have about 45,000 storefronts and more than one million employees across Canada, to transfer staff and their pensions from one jurisdiction to another, said Littler.

Retailers, many of whom already deal with a separate provincial pension plan in Quebec, would likely have few administrative issues adjusting to a separate plan in Alberta, he added.

The Alberta panel must consider the red tape impact of a separate pension plan on entrepreneurs, said Annie Dormuth, Alberta director for the Canadian Federation of Independent Business. She said the organization intends to poll its members before taking a firm stance on the proposal itself.

Read: CPPIB posts 2.3% return in Q2, reaching $409.5 billion in assets