For years we've understood the value public sector employees receive from paying into a workplace pension that provides them with a secure income for life. We've also appreciated the value delivered to contributing employers, through the benefits of recruitment, retention, and workplace planning.
New research released by the Canadian Centre for Economic Analysis (CANCEA) confirms that public sector pensions contribute significantly to the provincial economy, providing value to all Albertans and benefitting the local communities in which they live.
The economic research was commissioned by LAPP, the Public Service Pension Plan (PSPP), the Alberta Teachers' Retirement Fund (ATRF), and the Special Forces Pension Plan (SFPP), to see exactly what impact these plans, their investments, and their retirees have on the Alberta economy each year. How many jobs are created? How much money do retirees contribute back into the economy? How much do they pay in taxes? What percentage of the annual provincial GDP results from these plans?
The final report shows that public pension plans and their 401,500 active, retired, and deferred members contributed more than $4.8 billion to Alberta’s economy last year.
The plans supported over 43,700 local jobs and over $2.2 billion in local wages across the province, covering the full range of industry sectors such as healthcare, manufacturing, finance, retail, accommodations, and the food supply chain.
Over 504,000 Albertans benefitted in total, with the plans also directly supporting nearly 40,000 households, including 2,900 lone-parents and over 19,400 households with children.
The plans have investments worth over $2.5 billion in nearly 100 communities across Alberta, including office space, apartment buildings, industrial buildings, shopping malls, and utilities such as natural gas supplying over 82,000 households in 90 communities.
With pension payments of $3.1 billion in 2021, representing 27% of all provincial retirement income, Defined Benefit (DB) plan retirees contributed $1 billion towards corporate, income, and consumption government tax revenue. One-fifth (20%) of all created employment and pension spending was outside the major urban centres.
In addition, LAPP, PSPP, and SFPP were interested in exploring the social value that returns to Alberta as a result of members and retirees benefitting from the many features provided by a Defined Benefit (DB) pension and how that compares with other arrangements. That resulted in a second research paper from CANCEA, also released today, on the social value of the plans.
This new social impact report shows that the DB pensions enjoyed by both active and retired public sector plan members not only dramatically reduce financial pressures, stress, and uncertainty, but also directly increase quality of life, career satisfaction, physical and mental health, community engagement, volunteerism, and charitable donations — confirming that LAPP members' lives are enriched by their plan.
Using the Wellbeing Valuation approach, which converts subjective satisfaction into financial terms for each unique individual, the financial value of increased life satisfaction is $1.2 billion. Combined with pension payments of $2.1 billion, the total financial, persona, and societal benefits for retired members of the included plans amounted to $3.3 billion in 2021 alone.
Primarily due to financial security, nearly two thirds (64%) of DB plan retirees meet their financial needs very or extremely well, and that they are much better (203%) prepared for unexpected expenses. This directly translates to higher satisfaction with life across all regions, genders, incomes, and ages, which only increases with age as members recognize the growing importance of their plan while nearing retirement.