le 6 juin 1998
Following that change of government, some 130 defeated and retiring MPs
started to collect their pensions which, regardless of their ages, averaged
about $40,000 each, a total of some $5.5 million a year excluding
inflation protection. The interesting thing about these pensions is that
the contributions made by these MPs and the « matching
amounts » credited to them will run out sometime before
the year 2000. In other words, their pensions are underfunded. If this
were a private company, the trustees of the fund would probably be making
licence plates or sewing mailbags for a few years. A private pension plan
must, by law, make certain that the money to pay the pensions is there
for the expected lifetimes of the annuitants.
in the defence of liberty is no vice... Moderation in the pursuit of justice
is no virtue. »
MUSINGS BY MADDOCKS
I'M ALRIGHT JACK...
by Ralph Maddocks
That old British expression came to mind recently when I compared what
has been happening to the government's pension schemes for the voters and
the scheme for those we elect.
At the end of the last session of parliament in 1997 there were 54
eligible Quebec members of Parliament, 40 Bloc Québécois
members and 14 Liberals, who could expect to receive some
$36 millions in pensions, based upon estimated payouts to
age 75, an average of $667,000 each. Not bad compensation for those trying
to break up a country — not bad compensation either for those who are supposed
to be trying to stop them.
In his election campaign of 1984, under pressure from certain right-wing
groups, the unregretted Brian Mulroney promised to reform the «
gold plated » Pension Plan for Members of Parliament.
However, when later he attempted to keep his promise he was confronted
by a massive revolt by his caucus. He probably knew this in advance anyway,
which is why it was easy for him to make the promise in the first place.
The Liberal government under Jean Chrétien (the man who promised
to abolish the GST) also promised to reform MP's pensions. He waited for
over a year before doing anything, during which time some 52 sitting MPs
became qualified for underfunded lifetime pensions. The total cost of this
delay amounts to almost $1 million annually, payable immediately
upon their leaving the House of Commons, regardless of their ages. In December
1994, Mr Chrétien, true to his promise and probably
knowing what would happen like his predeccessor, attempted to reform the
pension plan and was met by a similar caucus revolt. Ultimately, in the
spring of 1995, a very much diluted pension reform bill was introduced
which passed in July of the same year. Not all MPs are unconscious of the
profligate nature of their pension plan and fifty-one Reform, six Liberal
and four Bloc members chose to save the taxpayers the additional expense
of about $34 million. They opted out of the new pension scheme entirely;
but more than 230 MPs, untroubled by such concerns for their fellow taxpayers,
remained in the plan.
...keep your hands of my stack
The « Old » plan essentially gave an MP a pension
credit of 5% per year of service, so that an MP with six years service
would get 30% of the average of his best six year's pay. After seven years
it would be 35% etc. up to a maximum of 75% after 15 years service. There
was no minimum age for collecting a pension and no limit regarding additional
benefits payable with respect to salaried appointments (Cabinet minister,
Parliamentary secretary, etc.). The « New » plan
provides for credits of 4% per year of service with a maximum pension of
75% after almost 19 years of service instead of the former 15 years. Again
there is no limit regarding salaried appointments but they can collect
only after age 55. Any MP who qualified under the old plan may still collect
his pension regardless of age.
Those of us in the real world earned our pension credits at the rate of
2% a year with maximum pensions of 70% being paid after 35 years service,
eligibility at age 65 or at best 55 (on a reduced basis).
Even after these minor reforms, MPs' pension entitlements grow twice as
fast as they do in private pension plans. This would be illegal under the
Income Tax Act, except for the fact that the government set up a special
« Compensation Arrangement Account »
for MPs. These CAA's accumulate contributions and pay out benefits in excess
of those allowed by the government's own pension rules. Who better to avoid
the government's own legal restrictions than our legislators?
Of course, our MPs pensions still have unlimited inflation indexing, unknown
in the private sector, but their opportunity to « double
dip », i.e. to hold another federal job while receiving
a pension, has been restricted. The long suffering taxpayer will now have
to supply $4 of his taxes for every $1 contributed by the MP; admittedly
marginally better than the $6 we used to pay out under the old scheme.
So perhaps it is progress of a kind.
Last week saw the resurrection of the pension question when a committee,
meeting in secret and hoping to present the House of Commons with a fait
accompli, suddenly found its intended scheme made public. In brief,
the idea was to increase MP's pay by 2% a year for 4 years and to allow
those Reform members, who now regret their stand against the «
gold plated » MP's pensions, to return to the
arms of our beneficent government.
I have a suggestion. Why not give our MPs a 10% per year increase for each
of the next five years; and tell them all to stay home!