Doug Chandler, Bonnie-Jeanne MacDonald: Transfer represents 53% of the CPP fund and that seems too big
The Alberta government has released a consultant’s report that includes a $334-billion estimate of the asset transfer from theThere are three distinct issues with this number. First, the provisions in the CPP Act concerning the asset transfer are not particularly clear. Second, the number is calculated using data by province of residence, whereas CPP operates on the province of employment.
The consultants chose to deduct benefits and fees before allocating hypothetical investment earnings at the actual rate earned by the fund. This liberty brings the estimate down to $334 billion, excluding a small additional transfer for the benefit improvements added to CPP in 2019. Even with this correction, the formula doesn’t add up.
If the result is unreasonable and the formula was never intended to be applied in this way, the solution is to amend the CPP Act to substitute a more equitable formula. The principle that a formula must be changed when it produces an unreasonable result appears to be what Alberta Premier Danielle Smith meant when she said Alberta wants a “better constructive relationship with the rest of the country and this begins the conversation” about equalization payments and other national programs.
A third approach would be to determine the asset transfer in a way that avoids disruption for either Alberta or the remaining provinces by keeping the steady-state contribution rate or the target ratio of assets to liabilities the same in the new plans as it is in the existing plan. This last approach could produce an even smaller asset transfer, especially if it is assumed that Alberta’s working age population will continue to grow at the current pace.
Bonnie-Jeanne MacDonald is a Halifax-based actuary and the Director of Financial Security Research at the National Institute on Ageing, Toronto Metropolitan University.The 60/40 investing strategy is broken. But it's 'far from dead' I was all set for my trip, or so I thought. That's when my friend told me to always keep a bread clip when traveling. The reason is quite clever.Imperative for Italy to control public spending, economy minister says
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