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New Tory plan would water down MPs’ lucrative pensions

The House of Commons on Parliament Hill in Ottawa is pictured September 14, 2012. Parliamentarians will return from their summer break September 17.

CHRIS WATTIE/REUTERS

Canadian MPs will have to wait upwards of 10 years longer to start collecting their political pensions under changes the Harper government is crafting to demonstrate the Conservatives are leading by example on restraint.

It's part of a major overhaul that Tory government MPs are designing to water down the relatively lucrative pensions collected by federal politicians – and one that, if enacted, could eventually cost members of Parliament hundreds of thousands of dollars in foregone retirement payouts.

The plan would be to change the rules – beginning after the next federal election – so that MPs begin receiving their parliamentary pension at age 65 instead of 55. The Conservatives are hoping to insert all the pension changes into the second and final implementation bill for the 2012 budget.

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This would present their political rivals with a dilemma: If the NDP and Liberals oppose the budget – because of other measures in it – they will leave themselves open to charges they didn't support MP pension reforms.

Any delay in the collection age for MPs pensions would only apply to pension entitlements earned after the changes go into effect.

MPs who have racked up entitlement benefits under the current system would still begin receiving that portion of payouts at age 55.

There's a plan, however, being hatched to take more drastic action on the collection date for political pensions.

By 2029, changes to seniors pensions announced by the Harper government this year will mean Canadians must wait until age 67 to receive Old Age Security benefits – up from age 65. Another proposal in the works would require MPs to similarly wait until age 67 to receive their pensions – an additional change that would take effect years from now when the OAS changes kick in. It's meeting resistance inside Tory caucus.

The Tories are also going to dramatically increase the amount of cash MPs must pay into their retirement nest egg. The Harper government, which has signalled it wants federal public servants to shoulder more of the burden for contributions to their pension plans, has told MPs that they must do the same.

That's why the Conservative caucus is designing a new scheme that would force MPs to pay 50 per cent of the annual contribution to their pension package. These days, MP contributions represent a small fraction of what the government is contributing.

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The Harper government has left it to MPs to decide how aggressive the savings rate will be for the revised retirement plan.

Benefits under the existing scheme accrue at the generous rate of 3 per cent annually – all of this heavily subsidized by the Canadian taxpayer.

Conservative MPs are being asked to select as a group which of three options they want: a plan where benefits accrue at 2 per cent a year, 2.5 per cent a year or 3 per cent a year. Each one would require heftier contributions from their annual take-home pay package.

On paper it looks as if recently elected MPs supply $1 in annual pension-plan contributions for every $5 to $6 anted up by the government.

William Robson, president of the C.D. Howe Institute, said the accounting of members of Parliament pension plans is misleading and confusing. "The setup is so opaque that most MPs themselves don't realize how generous it is."

Sources say, in fact, MP contributions only amount to 14 per cent of the pension benefit that's accruing each year.

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The latest report for the MPs pension plan, for the year ended March 31, 2011, suggests there's a balance in the fund that amounts to $870-million but this is a notional figure because the government has not set aside any funds for it. Obligations each year are merely paid out of general revenue.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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