Fraser Institute outlines how lower APP rates could translate into higher retirement payouts
Albertans earning the median income could receive $454,741 in retirement income—an increase of 71.6 percent—if the province replaced the Canada Pension Plan (CPP) with a provincial alternative and workers invested the resulting savings, according to a new Fraser Institute study.
The report, Illustrating the Potential of an Alberta Pension Plan, compares projected retirement income under the CPP with two potential contribution rates for a new Alberta Pension Plan (APP): 5.85 percent and 8.21 percent.
Both rates are lower than the current CPP contribution rate of 9.9 percent, and the study assumes Albertans would receive identical benefits under either plan.
The lower contribution rates would generate lifetime savings for workers, which, if invested in private retirement accounts such as RRSPs, could result in substantial financial gains.
For median income earners ($53,061 in 2025), the APP at 5.85 percent would allow for $189,773 in additional pre-tax retirement income compared to the CPP.
Even at the higher 8.21 percent APP contribution rate, workers would see a 24.4 percent increase in income, totalling $329,640 compared to the CPP’s $264,968.
The analysis also includes scenarios for workers earning the Year’s Maximum Pensionable Earnings (YMPE), set at $71,300 in 2025.
These individuals could receive $584,235 in retirement income with the 5.85 percent APP rate—67.1 percent more than under the CPP—and $429,524 with the 8.21 percent rate, marking a 22.9 percent increase.
The report stated that Alberta’s comparatively high employment rates, higher average incomes, and younger population would allow the province to offer the same benefits as the CPP at a lower contribution rate.
“Albertans would pay a lower contribution rate through a separate provincial pension plan while receiving the same benefits as under the CPP,” the report said.
The study’s authors, Tegan Hill and Joel Emes, emphasize that the analysis is illustrative and not an endorsement of policy.
Savings under the APP are based on redirecting the difference between CPP and APP contribution rates into private investment accounts from age 18 to retirement at age 65.
These savings would be invested in a blended portfolio of equities and bonds. For median income earners, private savings at retirement would total $125,085 at a 5.85 percent rate, and $42,627 at an 8.21 percent rate.
For YMPE earners, private savings would reach $154,690 and $52,717 respectively.
The net present value of the total APP—which includes both the defined APP pension and returns on private savings—exceeds CPP payouts across all scenarios.
The structure also allows individuals greater flexibility over the timing and management of withdrawals compared to the CPP.
While the study notes that full cost-benefit considerations, such as portability and administration, are outside its scope, it highlights that a lower contribution rate model could create additional income potential for plan members under identical benefit conditions.
