Lavish MP pensions on chopping block
Posted Jan 9, 2012
by John Ivison, nationalpost.com
Members of Parliament are likely to see the generous terms of their gold-plated pensions significantly eroded as part of the Harper government’s deficit reduction budget this spring. Stephen Harper had hinted in an interview last week that part of the strategy to reduce the deficit will include changes to programs that are likely to see ballooning costs as the number of retirees increases, such as public service pensions and Old Age Security. “We’ve got to make sure that we have, with an ageing population, a series of programs that are sustainable over the long-term,” he said.
As the National Post has written, the government is considering moves that could phase out lucrative defined benefit pension schemes for new hires in the public service and raise the age at which Canadians qualify for OAS from 65 to 67. However, the Prime Minister knows that he cannot ask public servants and Canadian seniors to suffer austerity measures while MPs benefit from one of the most lavish pension plans in the country. Possible reforms to the MPs’ scheme could include raising the minimum retirement age (currently 55) to lengthening the period of time it takes to qualify for a pension (currently just six years).
Senior sources said that a decision on public service pensions has not yet been made, largely because of legal and legislative barriers to unilateral changes. But the source confirmed the government could still move on MPs’ pensions, even if it holds off on reforms covering the bureaucracy. He said all three strands of pension policy are linked as part of the government’s plan to make sure there is sustainability and fairness in the system.
Ian Lee, a professor at Sprott Business School, said the government would be smart to address what he called “the profound unfairness of MPs’ pensions” before it moves on broader reforms. “The government cannot ask ordinary Canadians to put their shoulder to the wheel and carry to the burden of austerity – if the elites are not sharing in the pain,” he said.
MPs’ pensions have long been a lightning rod for criticism. Preston Manning and his Reform Party MPs “opted out” of the government pension plan when they came to Ottawa in 1993, but opted back in when then-prime minister Jean Chrétien gave them the chance in 2000.
The formula that determines MPs’ pensions has been reduced since then but remains extremely prodigal. The latest numbers show that taxpayers pay $5.50 for every $1 that MPs and senators contributed to their pension plan. Most private schemes call on the employer to contribute $1 for every $1 added by the member. The parliamentary pension scheme paid out $48.8-million in the 2009/2010 fiscal year to 503 former MPs and senators collecting pension benefits. The report said 117 of them received more than $70,000 a year, with the average for senators being $56,512 and for MPs $53,586.
Since then, 113 more MPs were defeated at the last election and will receive millions more in pensions and severance payments. There was an outcry last May when it emerged that defeated Bloc Québécois leader, Gilles Duceppe is in line to receive $140,000 a year from taxpayers, despite devoting his career to breaking up the country.
MPs are eligible for a pension after serving in the House for six years, and pensions are calculated on the best five earnings years. On a current salary of $157,000 a year, MPs qualify for an indexed lifetime pension of $27,000 when they reach 55. That means a six-year MP who reaches the age of 80 could receive a minimum of $675,000.
The absurd munificence of the scheme is apparent from just one example: Pierre-Luc Dusseault, who became Canada’s youngest ever MP when he was elected as a member of the NDP in Sherbrooke, will qualify for his pension before his 26th birthday, if he is re-elected.
As Sprott’s Mr. Lee put it: “Presently there are three classes of Canadians concerning pensions: First-class Canadians who receive MPs pensions; government-class Canadians, who get public service pensions, with retirement at 50 or 55; and cattle-class Canadians, who collect OAS at 65. Or, as Orwell said: ‘All animals are equal, but some animals are more equal than others’.”
Alberta Member Representative
Conservative Party of Canada