Potential Implications of an Alberta Pension Plan for CPP Investments

The Alberta government released a report about exploring the possibility of withdrawing from the Canada Pension Plan (CPP) and creating an Alberta Pension Plan (APP). The report states that there could be significant savings for Albertans if they were to set up their own provincial pension plan, assuming a large asset transfer from the CPP. This commentary focuses on credit implications for CPP Investments from the potential withdrawal of Alberta from the CPP.

Key highlights include the following:

-- At this time, there is no indication that Alberta is pursuing this option. This is an early step in what could be a very complex, multiyear project.

-- Should Alberta move ahead with implementing an APP, we expect the three years the province will have after providing notice to the Minister of Employment and Social Development, combined with the discussions and planning that would need to take place ahead of it, would provide enough time to plan for an orderly transfer of assets from the CPP to the APP.

-- The CPP Act entitles CPP Investments to retain at all times assets that have a fair market value not less than its liabilities including the liabilities under the guarantees in respect of debt issued by CPPIB Capital Inc.

“Even with a lower asset base under management, we expect CPP Investments would retain the scale and degree of sophistication that would allow it to continue to source attractive investment opportunities, retain and attract talent, maintain a global and diversified asset portfolio, provide cost efficiencies, and maintain its strong governance framework with prudent risk management practices, which have supported its strong operating performance since its inception,” said Clara Vargas, Senior Vice President, Canadian Structured Finance.