A separate fund that is part of the enhanced Canada Pension Plan (CPP) could grow to approximately $1.3 trillion by 2050, according to a report from the Office of the Chief Actuary. This additional CPP pool, which has been managed alongside the CPP fund’s core assets since 2019, is expected to reach around $92.5 billion by the beginning of 2027.
While there is ongoing debate about how much of the CPP fund Alberta would be entitled to if it withdraws from the national pension scheme, it is generally agreed that the province’s claim on the additional CPP pool would be relatively smaller. According to the report, Alberta would be entitled to only about 17% of the additional CPP fund in 2027, which amounts to approximately $16 billion out of the projected $92.5 billion.
The Lifeworks report, commissioned by Alberta Premier Danielle Smith’s government, initially suggested that Alberta could potentially transfer $334 billion in assets if it exits the CPP. However, this figure primarily refers to the base CPP fund’s projected value and does not account for the additional post-2019 CPP fund.
The Lifeworks report also notes that the historical contributions made by Albertans to the CPP, based on factors such as the province’s younger population, high employment, and higher-paying jobs, would have less impact on the returns generated by the additional CPP fund.
It is important to note that provinces have the option to withdraw from the CPP and establish their own provincial pension plans. The additional CPP fund, funded through phased-in contributions, has a lower-risk profile compared to the base fund and consists of a diversified portfolio of equities, fixed income, real assets, and absolute return strategies.
As the enhanced CPP continues to grow, it will play a crucial role in providing additional retirement benefits for Canadians. With projections showing potential growth to $1.3 trillion by 2050, this fund promises to significantly contribute to the financial security of future retirees.
1. What is the enhanced Canada Pension Plan (CPP)?
The enhanced CPP is a pension plan created through an agreement between the Canadian federal government and the provinces to enhance the existing CPP. It includes additional phased-in contributions and benefits to provide Canadians with improved retirement income.
2. How much of the additional CPP fund would Alberta be entitled to in 2027?
According to the report, Alberta would be entitled to approximately 17% of the additional CPP fund in 2027, which equates to around $16 billion out of a projected $92.5 billion.
3. Can provinces withdraw from the CPP?
Yes, when the CPP was established in 1966, provinces were given the option to join or withdraw from the national pension scheme. Quebec, for example, chose not to join the CPP and has its own provincial pension plan.
4. What is the asset mix of the additional CPP fund?
The additional CPP fund consists of a blend of equities, fixed income, real assets, and absolute return strategies. It has a lower-risk profile compared to the base CPP fund.