OTTAWA – The Canadian Taxpayers Federation is calling on the federal government to shut down the pension plan for elected politicians, after their number crunching shows the fund costs taxpayers four times more than previous estimates.
The numbers show taxpayers contribute $23.30 for every dollar MPs put into the fund, compared to the $5.80 officially reported by the government.
“This is a rip-off on a massive scale,” said the organization’s federal director Gregory Thomas, who presented the finding in Ottawa on Wednesday.
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The discrepancy is due to a 10.4 per cent interest rate guaranteed in law, coupled with the fact that the fund is not invested in the market, meaning it doesn’t grow or shrink with market fluctuations.
“It’s a phoney return on an imaginary investment,” said Thomas. “The government simply passed a degree paying interest to the MP pension fund and at a staggering rate.”
“They have the best performing pension over ten years on the planet,” he added.
After six years of service, MPs are eligible for a pension at age 55. Politicians serving less than six years receive severance payments instead.
The report comes just days before the six-year anniversary of the Harper government’s election in 2006. Another 39 MPs will become eligible for the pension plan, which will cost taxpayers (or federal coffers) $29.1 million by the time those politicians are 80 years old.
The cost to retire the entire 41st Parliament in 2015 would be $277 million in pensions and severance payments, according to the report.
Search for cuts should start on Parliament Hill: CTF
While the federal government is currently searching for $4-billion in cuts across the government in a bid to balance the budget, Thomas called on the Conservatives to lead by example and close down the pension plan immediately and replace it with a dollar-for-dollar matching defined contribution plan.
“They need to be the House of Commons, not the House of Royalty,” Thomas said.
An estimated 60 per cent of workers in the private sector do not have a company pension plan and one-third of Canadian adults have no retirement savings at all, according to statistics from the Canadian Labour Congress.
An average Canadian would have to save for 30 years to have a nest egg comparable to that of a backbench MPs after just six years of service, according to the report.
The CTF has long been calling for reforms to what it calls a “platinum-plated” pension plan.
Recently, the Harper government hinted it is considering changes to the fund, with both Prime Minister Stephen Harper telling CBC’s Peter Mansbridge the government would be looking at MP pensions while looking at the issue of public service pensions in general.
The government is looking at everything, including MP pensions, as it looks for savings, said Treasury Board President Tony Clement’s spokeswoman Jennifer Geary, in response to Wednesday’s announcement.
She also said people should remember the Conservatives froze MP salaries and increased the public servants’ share of pension contributions.
Any changes to the pension plan would have to be passed as law in the House of Commons and then implemented by Parliament’s Board of Internal Economy.
Political careers add financial risk: NDP
NDP MP Joe Comartin said his party is open to having an independent review of the pension plan to see if it is out of line with other comparable positions, but he believes it is fair.
“This pension fits fairly squarely into the level that is should be at for the type of people we want as MPs. We want highly qualified people in various sectors of society to step forward and I’m not sure we would do that if we started doing these kinds of cutbacks.”
Comartin, a lawyer, says his MP pension plan only exceeded the benefits he would have had if he stayed in the private sector after 10 years. Most MPs only last for eight.
People who run for office often do so in their peak earning years and can’t regain foregone time and promotions when they are not re-elected, says Comartin.
“It’s really a risk to run for Parliament, even if you get elected and you don’t get beyond the six year mark.”
The pension plan for MPs was established in 1952 by Prime Minister Louis St. Laurent, who believed talented people wouldn’t run for office if the compensation didn’t allow them to plan for their future needs.
That should still be a factor when weighing the size of MP pension benefits, says Alison Loat, executive director of Samara, a non-partisan research organization specializing in political engagement.
“There is a significant personal and financial risk in running for politics,” Loat said. “Assuming we want politics as accessible as possible for as many people as possible, i.e. not just the wealthy, then you’ve got to consider pensions and MP compensation in that discussion.”
The report is dedicated to former MPs Preston Manning, Werner Schmidt and Lee Morrison who refused to accept their pension entitlement.
Back in 1993 the Reform Party, including new MP Stephen Harper, arrived on Parliament Hill and advocated cuts to MP benefits. Some said they would turn down the pension benefits, but many eventually opted back in, according to the CTF.
© Global News. A division of Shaw Media Inc., 2012.