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Pension Reform - Why MP’s Don’t Feel Your Pain...
Topic Started: Feb 26 2010, 10:33 PM (120 Views)
Bruce
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Susan Eng
Carp magazine.

If you were wondering why your Member of Parliament does not appear to see why pension reform in necessary, look no further than his/her own gold-plated pension plan. And before you pile on if they go after the federal civil service pensions in the upcoming Budget, compare and contrast what they, the civil servants and you can expect on retirement.

Just to make the comparison useful, assume that your salary is the base remuneration for MPs which was $150,800 in April 2007[1] and increased in step with the “average Canadian wage increase”[2] since. This ignores the additional amounts for their service as the prime minister, speakers, ministers, leaders of the opposition, parliamentary secretaries, and the like.

You need a bit of patience to make the comparison, and not blank out at the first sign of actuarial jargon or “%” signs. Otherwise, these issues continue to hide in plain sight.

A MP with $100,000 in earnings would receive a full pension of $75,000 after 25 years of service whereas the average federal civil servant would receive about $50,000 with same service period. The CPP pension is a modest $7,000 and the fully expanded CPP or UPP that CARP recommends would provide $43,750 since both these pensions and the civil service pension are based on much longer years of service.

The differences are even more dramatic for a person with only 8 years of service. A MP can look forward to a pension starting at age 55 of $24,000 whereas the civil servant would get about $16,000 for that service and would normally wait until age 60 to start receiving it. The CPP currently offers about $2,242 and the UPP would provide $14,000 – payable at age 65.

The most important difference between the MP pensions and what we have is the richness of the employer contribution. MPs pay 7% of their pensionable earnings and the taxpayer as employer pays the balance of “whatever it takes” to ensure a pension of 75% of the average of the best five years’ earnings after 25 years of service. Pensions for shorter stays are pro-rated.

According to the 2007 Actuarial Report of the MP Pension Plan, MPs contributed $1.6 million in fiscal 2006-07 and the taxpayer contributed $5.4 million[3] – or more than three times as much. But if MPs opt to contribute on their remuneration above $111,100[4], the taxpayer contribution is significantly higher. MPs contributed $2.6 million and the taxpayer contributed $16.2 million[5] or over 6 times as much.

“Whatever it takes” to produce the MPs’ pension is over 45% of pensionable payroll[6] which is split between the MP and the taxpayer in the ratio of 7% to 38%.

By comparison the federal civil service pension costs 19% of pensionable payroll[7] primarily because the benefits accrue at a lower rate, are not normally payable until age 60 and a full pension is available only after 35 years of service.

The current CPP costs 9.9% shared equally by the employer and employee and provides a maximum pension of $11,210 or 25% of the CPP 5-year average maximum pensionable earnings for 2010 of $44,840.

Recommendations to increase the CPP coverage to provide a pension of about 70% of pensionable earnings up to $127,777 for 2010[8] are estimated to raise the CPP contribution rate from 9.9% to about 20% of pensionable payroll funded by combined employer and employee contributions. This is still substantially less expensive than the MP pension again mainly because the benefits accrue at a lower rate, are not payable until age 65 and a full pension is available only after 40 years of service.

This is what pensions cost – all dependent on what benefits are provided. Critics who point to the rich pensions funded by tax dollars need first to consider whether they accept the argument that such contributions represent deferred wages or alternatively, mandatory employer contributions to a retirement scheme, rather than as some kind of bonus that MPs should not receive. Either way, the outcry might be directed at the total compensation package for MPs or civil servants, or ourselves – but not because they have a pension plan that is well managed, large enough to sustain economic downturns and provides the substantial retirement income we would all like to have.

So there you have it folks. The MPs have a gold plated defined benefit pension plan with mandatory contributions that promises them a secure retirement. So it’s hard to explain why they cannot come up with the political will to insist on a mandatory contribution structure for the rest of us. Don’t let them tell you they feel your pain, because they can’t.

[1] ACTUARIAL REPORT Pension Plan for the MEMBERS OF PARLIAMENT as at 31 March 2007 at p 24 http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/reports/oca/mp08_e.pdf

[2] This index is the average percentage increase in base-rate wages resulting from major settlements negotiated with bargaining units of 500 or more employees in the private sector in Canada. idem at p. 43

[3] Idem at p. 31

[4] Maximum Pensionable Earnings (MPE) benefits accrued in respect of pensionable salary (sessional indemnity and additional allowance) in excess of the MPE must be provided through a Retirement Compensation Arrangement. The MPE was $111,100 in calendar year 2007 and increased to $122,200 in calendar year 2009. Idem at p. 44

[5] Idem at p. 32

[6] Idem at p. 53

[7] Actuarial Report on the Public Service Pension Plan as at 31 March 31 2008,at p. 9 http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/reports/oca/PSSA08_e.pdf

[8] providing a maximum annual pension of about $82,000 after about 40 years



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Beancounter

Yes, they look after themselves very well. don't they?
Reform tried to change that, but the Lie-berals would not let them.
The sense of entitlement is just part of the left-wing make up.
There is no room for initiative, everything has to be looked after by the state, from the cradle (actually before that: abortion!) to the grave. And, if you live in BC or Ontario, after July 1st your funeral (or cremation) and grave plot, will be subject to an additional 8% HST.
Which is why I HATE (and despise) the totalitarian state, as visioned by socialists, communists, Marxists, Fascists, as well as Islam which is just the religious side of the same coin.
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Bruce
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Quote:
 
Reform tried to change that, but the Lie-berals would not let them.
The sense of entitlement is just part of the left-wing make up.


Yes, the Reform Party did try to change the pension plan. But the day that the Liberal Party took it to a vote in Parliament, only half of the Reform Party members bothered to show up to vote against it and then they cried about how the Liberals forced them to accept it. If all of the Reformers had showed up to vote against it, it might not have gone through. Which tells me, the Reform Party wanted the gold plated pension just as much as the Liberals did because they also felt entitiled.
The only Reformer that did not take the pension was Preston Manning and if the rest of that right wing crowd was as honest as Manning, they wouldn't take the pension either. But right wingers brains aren't wired that way because they are just as greedy as the Liberals..
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Bruce
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Quote:
 
There is no room for initiative, everything has to be looked after by the state, from the cradle (actually before that: abortion!) to the grave. And, if you live in BC or Ontario, after July 1st your funeral (or cremation) and grave plot, will be subject to an additional 8% HST.
Which is why I HATE (and despise) the totalitarian state, as visioned by socialists, communists, Marxists, Fascists, as well as Islam which is just the religious side of the same coin.


If you really hate the HST that much, then tell your socialist friend Stephen Harper to eliminate the GST and all of your problems will be solved. Until that happens, save most of your criticisim for the feds.
Edited by Bruce, Feb 27 2010, 11:38 AM.
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xray
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Yes, when they get to power..... whoever they are.... they all want the big pension. It will never change.

When it comes to looking after themselves, politicians at the Federal and Provincial level make me sick. :yck: :thd:
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