Friday, January 20, 2012

MP pension = great, military pension = meh

Canadians are beginning to learn more details regarding MP pensions. We kind of already knew that an MP only needed to serve 6 years as a Member of Parliament to qualify for a pension. What we didn't know was just how great their plan was. The Canadian Taxpayers Federation (CTF) says MPs have the best pension fund "on the planet". They also suggest that it's time for the government to set a good example and shut it down.

The CTF claims that while officially, for every $1 that MPs pay into their own pension fund, taxpayers contribute $5, in reality, taxpayers pay more like $23. That's because the pension fund is guaranteed a 10.4% interest rate - by law. To put this into perspective, during the economic collapse of 2008, the Canada Pension Plan lost 18.6% of its value, the Ontario Teachers' Pension Plan lost 18%, the Quebec Pension Plan lost 25% and the S&P/TSX total return index lost 33%. Meanwhile, the MP pension plan returned 10.4%. Same as it ever was.

As well, MPs can start collecting at age 55. During the 6 years and MP serves to qualify for a pension, they need only contribute $10,900 a year to get the minimum pension. In comparison, it would take the average Canadian almost 30 years to save as much as what a backbench MP would get in their eventual pension payout after 6 years of service. The CTF thinks an optional dollar-for-dollar matching defined contribution plan is a fairer way to go.

According to the CTF's calculations:
  • Prime Minister Stephen Harper can collect a pension of at least $223,500 per year by 2015.
  • Interim Liberal Leader Bob Rae, if he stays on as leader, can collect a pension of at least $71,400 per year by 2015.
  • NDP MP Pierre-Luc Dusseault, elected last year at age 19, can collect a pension of $40,000 per year if he retires at 27.
  • 20 MPs will be able to collect more than $100,000 a year if they retire or lose after the next election in 2015.
Maybe this would be a good time to re-introduce the private member's bill asking for the removal of the Old Age Security clawback for military pensioners......

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