Fear the politicization of pensions, no matter the politician

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Alberta Premier Danielle Smith and federal Finance Minister Chrystia Freeland don’t have a lot in common. But they do share at least one view: that governments could play a bigger role directing pension investments to the benefit of domestic industries and economic priorities.

Canadians, no matter who they vote for, should be worried that these two political heavyweights share any common ground in this regard.

It became clearer in the federal budget last week as Ottawa appointed former Bank of Canada governor Stephen Poloz to lead a working group to explore “how to catalyze greater domestic investment opportunities for Canadian pension funds.” The group will examine how Canadian pension funds can spur innovation and drive economic growth, while still meeting fiduciary and actuarial responsibilities.

This idea has been in discussion since it was highlighted in the fall economic statement. In March, dozens of chief executives signed an open letter urging federal and provincial finance ministers to “amend the rules governing pension funds to encourage them to invest in Canada.”

Rewind to last fall, and it was Alberta’s plans that were dominating controversial pension discussions. As Ms. Smith championed Alberta going it alone, Canadians (including Albertans) were dumbfounded by her government’s claim the province could be entitled to 53 per cent of Canada Pension Plan assets – $334-billion of the plan’s expected $575-billion by 2027. The Premier has made the argument that starting with this nest egg, and with the province’s large working-age population, a separate Alberta plan could provide more in the way of benefits to seniors with lower premiums.

The main point of contention between the Smith government and Justin Trudeau’s Liberals has been what amount Alberta would take, should it exit the Canada Pension Plan. All parties are now waiting on Ottawa’s counterassessment; the Office of the Chief Actuary will provide a calculation some time this fall.

But lost in this furious debate over that dollar amount is Ms. Smith’s desire to see the province have a say in how the pension contributions of Albertans are invested. The Premier has long expressed frustration that Canadian pension funds were being influenced by fossil-fuel divestment movements, and has suggested a separate Alberta pension plan could be a counterweight to this.

In addition, a key part of the promise for many supporters of the Alberta pension plan idea – including former premier Jason Kenney and pension panel chair Jim Dinning – has been the benefits that would accrue to the province’s financial services sector.

But just as the UCP government might see the potential of using the heft of pension assets to bolster the province’s energy sector, or to spur white-collar jobs in Calgary, the federal Liberals would like to see more pension dollars directed toward Canadian AI, digital infrastructure and housing. These are some of the areas Ms. Freeland has directed Mr. Poloz’s working group to focus on.

Some would deem Ms. Freeland’s goals admirable. Tax dollars are already flowing to these sectors. It comes at a time of increasing concern about the housing crunch, Canada’s weak GDP numbers, and the fact that Canada’s economy is being carried along by strong population growth.

But many Canadians are already concerned with government priorities and federal spending. Many more would balk at governments picking winning industries with pension contributions. And governments change. A Conservative government, for instance, might have very different industries in mind for its own pension-fund working group – say, for instance, to make sure Canada doesn’t cede oil market share to Venezuela or the United States.

This pension working group is a convenient sweetener for a business community that has in many ways soured on this Liberal government. It comes at a moment when Ottawa is facing pushback – from technology entrepreneurs to doctors – to its proposed capital-gains tax hike.

It doesn’t appear Ottawa wants to go as far as recreating the CPP in the image of the Caisse de dépôt et placement du Québec, which has a formal mandate that includes contributing to the province’s economic development. And this isn’t to say there’s such a thing as complete neutrality in pension management now. The Canada Pension Plan Investment Board makes decisions open to debate and criticism. It should hear what governments and industry have to say, and setting up a couple of regional offices, beyond Toronto, could be helpful.

But if pension plans are formally burdened with policy imperatives from politicians, it could distract from the main goals of reasonable premiums and retirement security for Canadians. It could see the prioritization of being re-elected over returns. The regional and sectoral tug-of-wars over the cash would be never-ending.

There’s good reason to fear what an Alberta government would do should it take control of its citizens’ pension wealth. The same is most definitely true for Ottawa.