Quote:
Originally Posted by opendoor
It's not quite so straightforward. For one, someone who works in Alberta but retires in BC, is considered an Albertan when they pay in and a British Columbian when they collect, so that's going to create distortions that make Alberta's share look bigger than it is.
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This is certainly a good point. If you were just looking at it from a "fairness" point of view, a hypothetical APP would be liable for payments to its retirees wherever they lived. I don't have a sense of how meaningful that is, but you'd certainly want to adjust for it.
Quote:
Originally Posted by opendoor
And their figure also seems to rely on the assumption that Alberta is entitled to the returns on their contributions as if they were segregated in a hypothetical account that matched the CPP returns. This creates a huge figure, because Alberta's excessive net contributions are almost entirely composed of contributions from the last 20 years, when the pension plan has done extremely well after it moved from bonds to a more growth-oriented investment portfolio in the '90s.
But the pension doesn't work that way. Individuals don't get higher pension payments because they happened to pay in during a boom period. It's a shared pot of money and you receive payments on the basis of your contributions. So why would a province get extra money beyond what it needs to fund future liabilities on that basis?
The more likely way it would be apportioned would be on the basis of:
Alberta's % of total contributions (16%)
+ 16% of the net returns over the life of the plan
– any payments from CPP to Albertans
– Administrative and other costs
If done that way, then the share is more like 20-25% of current net assets.
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I'm not quite as sure I agree with this piece. Earlier contributions absolutely shouldn't get credited as a straight percentage, because they produced no excess contributions. Until the reforms of the 1990s, CPP contributions weren't high enough to cover the benefits being earned. It was more like "as long as the population grows geometrically forever it should work out". Basically the early Boomers/greatest generation voted themselves pensions without paying for them. The changes in the 1990s mean that everyone since then is helping to pay off that previous deficit plus funding their own pensions.
At roughly the same time they reformed the investments making them much active, which has also helped with the previous deficit.
All that said, ultimately it doesn't matter. Like anything else, Alberta won't get what it "deserves", if we leave the CPP we'll get what we can negotiate. And I don't see any reason to think Smith (who is an imbecile) will be able to negotiate anything better than a straight $/population deal.