Something both the Left and Right can get behind: MP Pension Reform

[Knut]

http://taxpayer.com/issues/federal/f...rm-mp-pensions

Currently retired MPs, once they have reached 6 years service, are entitled to a pension that pays them out $24 for every $1 they put into the program.

After just six years of service, MPs are eligible to receive one of the richest pensions in the country, and taxpayers are paying for it. Taxpayers contribute $24.36 for every $1 contributed by an MP into an MP’s pension account.

How is that possible?

Unlike normal pension plans, the MP pension fund is not actually invested into the market. By cabinet order, the fund is simply credited with 10.4% annual interest, courtesy of taxpayers. So generous is the MP Pension Plan that it is not even legal under the Income Tax Act which mandates that no registered pension plan can exceed an accrual rate of 2% of salary for each year worked. (MPs have rigged up two funds to get around the law).

Is there an easy way out of this ? Probably not.

Here is the Canadian Taxpayers Foundation report on the subject.

http://taxpayer.com/sites/default/fi...Report-WEB.pdf

A guy on QR77 was saying that Gilles Duceppe would collect close to $3 Million in pension if he were to live another 20 years.

[EddyBeers]

The Reform Party was behind this idea before they got elected. Then things changed once they got elected.

[MarchHare]

MPs should receive the exact same pension as other senior-level employees of the federal government.

[TurdFerguson]

MPs can also claim the pension as early as 55 as opposed to 67 like everyone else.

Garbage!

[First Lady]

Originally Posted by MarchHare

MPs should receive the exact same pension as other senior-level employees of the federal government.

Actually I wouldn't be surprised if some of those are out of line with private sector too.

[Rerun]

I wish I worked at a job where I could determine my own monthly salary and monthly pension amount.

Hell, I'd be happy just to get a pension in my job.

Good thing my wife works for the Government of Canada so she'll get one (although its miniscule compared to what politicians get). But at least we'll be able to buy groceries once we retire.

[Slava]

Originally Posted by TurdFerguson

MPs can also claim the pension as early as 55 as opposed to 67 like everyone else.

Garbage!

There are actually a number of other professions (non-governmental) who can take their pensions at 55.

Originally Posted by Rerun

I wish I worked at a job where I could determine my own monthly salary and monthly pension amount.

Hell, I'd be happy just to get a pension in my job.

Good thing my wife works for the Government of Canada so she'll get one (although its miniscule compared to what politicians get). But at least we'll be able to buy groceries once we retire.

I'm not going to try to defend the pensions for MPs, as I think its too rich. I do have to say that these kinds of opinions make me laugh though. If things are so easy as a politician then just go get yourself elected!

For the record I don't have a pension either. I do know that well in advance though, and as a result am planning accordingly.

[Skootenbeeten]

Originally Posted by Slava

There are actually a number of other professions (non-governmental) who can take their pensions at 55.



I'm not going to try to defend the pensions for MPs, as I think its too rich. I do have to say that these kinds of opinions make me laugh though. If things are so easy as a politician then just go get yourself elected!

For the record I don't have a pension either. I do know that well in advance though, and as a result am planning accordingly.

If we all got to be politicians who would pay that $24 on the dollar for our pensions?

[Knut]

Slava.

The issue is not that they get a pension it is that their pension is such an outlier based on what everyone else gets.

I also do not get a pension and plan accordingly, but I think taxpayers have a right to be upset about how big this pension is.

[Slava]

Ya, true. I do agree that the pensions are too high, but there is an argument to be made for a high pension here as well. We want good people running for office and paying a good wage and good benefits helps make that happen.

[Knut]

Originally Posted by Slava

Ya, true. I do agree that the pensions are too high, but there is an argument to be made for a high pension here as well. We want good people running for office and paying a good wage and good benefits helps make that happen.

Tie it to economic prosperity then. That will get them working harder !!

[Slava]

Originally Posted by Hesla

Tie it to economic prosperity then. That will get them working harder !!

Well then all of the old PC MPs would help elect Liberals! You could be onto something there...

[Knut]

^fishing for reruns are you?

[ikaris]

Originally Posted by Slava

Ya, true. I do agree that the pensions are too high, but there is an argument to be made for a high pension here as well. We want good people running for office and paying a good wage and good benefits helps make that happen.

I don't think I know even a single person that could justify a pension that is funded by taxpayers that pays out 24 dollars to each dollar contributed. That's just asinine.

[Skootenbeeten]

Originally Posted by Slava

Ya, true. I do agree that the pensions are too high, but there is an argument to be made for a high pension here as well. We want good people running for office and paying a good wage and good benefits helps make that happen.

No having good people run is what makes it happen, not having people whose sole interest is making a pile of cash and having the ability to make even more cash. Someone who wants to truly make a difference will run no matter the wage, like teachers for example. Teachers tend to make #### wages but most love their jobs and do it well. The only incentive a politician has is not doing anything risky so the gravy train runs out.

Canada like many countries is very top heavy.

[Slava]

Originally Posted by Skootenbeeten

No having good people run is what makes it happen, not having people whose sole interest is making a pile of cash and having the ability to make even more cash. Someone who wants to truly make a difference will run no matter the wage, like teachers for example. Teachers tend to make #### wages but most love their jobs and do it well. The only incentive a politician has is not doing anything risky so the gravy train runs out.

Canada like many countries is very top heavy.

Well it's a rather thankless job (just ask Jason Kenney!!), so if you want people to leave private sector work and try to get elected there has to be some compensation aside from notoriety and pure altruism.

Most people don't know how pension plans are supposed to work though. The employee contributes, the employer contributes and the money is invested one way or another to provide an income down the road. In the case of a lot of public institutions the pensions are defined benefit (DB) as opposed to defined contribution (DC). A defined benefit is where the benefit is set and no matter what the performance of the underlying investment the employee receives a set and pre-determined pension amount.

More and more plans are DC plans where the employee chooses how to invest their contributions and the employers contribution. The size of the pension here is based on how that investment performs and there aren't the same guarantees as a DB plan.

Thats a pretty basic overview, but a major consideration. While the 24:1 ratio is agreeably too rich, the figure isn't 1:1 either. First you have to have some matching from the employer (lets say that this is a mere $1 for every dollar the employee puts in). This probably doesn't match the plan that many people in Calgary have with an oil company, at least not many that I've seen, but its simple. So before we've accounted for any investment growth the money has doubled once. The investment growth is obviously more of a moving target, but realistically the money should double again 3-4 times before withdrawals begin (over say 30-35 years). Now the original dollar is worth say $16-32 depending on whether its 3 or 4 times.

So here's another difference between DC and DB. If you are withdrawing and on a DC plan you're going to reduce risks, at least for the vast majority of your funds at this point. This isn't so much about investment strategy, but about preservation of the funds so you don't have to go back to work or anything. A DB plan though is different because other employees are contributing to the pool regardless of you retiring...the investment style doesn't have to change because of your life changing.

Anyway, all my point is here is that the 24:1 ratio might well be too rich for people who serve for a limited period, but for long term plan members its not a huge stretch. Could the figure be smaller? Sure. At the same time though its not complete pie in the sky.

[Cowperson]

Originally Posted by Slava

Well it's a rather thankless job (just ask Jason Kenney!!), so if you want people to leave private sector work and try to get elected there has to be some compensation aside from notoriety and pure altruism.

Most people don't know how pension plans are supposed to work though. The employee contributes, the employer contributes and the money is invested one way or another to provide an income down the road. In the case of a lot of public institutions the pensions are defined benefit (DB) as opposed to defined contribution (DC). A defined benefit is where the benefit is set and no matter what the performance of the underlying investment the employee receives a set and pre-determined pension amount.

More and more plans are DC plans where the employee chooses how to invest their contributions and the employers contribution. The size of the pension here is based on how that investment performs and there aren't the same guarantees as a DB plan.

Thats a pretty basic overview, but a major consideration. While the 24:1 ratio is agreeably too rich, the figure isn't 1:1 either. First you have to have some matching from the employer (lets say that this is a mere $1 for every dollar the employee puts in). This probably doesn't match the plan that many people in Calgary have with an oil company, at least not many that I've seen, but its simple. So before we've accounted for any investment growth the money has doubled once. The investment growth is obviously more of a moving target, but realistically the money should double again 3-4 times before withdrawals begin (over say 30-35 years). Now the original dollar is worth say $16-32 depending on whether its 3 or 4 times.

So here's another difference between DC and DB. If you are withdrawing and on a DC plan you're going to reduce risks, at least for the vast majority of your funds at this point. This isn't so much about investment strategy, but about preservation of the funds so you don't have to go back to work or anything. A DB plan though is different because other employees are contributing to the pool regardless of you retiring...the investment style doesn't have to change because of your life changing.

Anyway, all my point is here is that the 24:1 ratio might well be too rich for people who serve for a limited period, but for long term plan members its not a huge stretch. Could the figure be smaller? Sure. At the same time though its not complete pie in the sky.

Generally, the argument in favour of these pension amounts is that you are looking to attract quality people and secondly, these quality people would typically be sacrificing very lucrative careers in the private sector for what might be only a limited time and you have to compensate them for that to make it interesting.

I'm not saying that this tactic is actually attracting such high quality people. Just pointing out the logic.

From my observation, politics doesn't necessarily attract the best and brightest among us but rather those most motivated by power. Those are often two different things.

Therefore, generous pensions for this "thankless job" might not be necessary since you're getting people who might just do it for free simply because of how they're self-motivated.

I like the theory of very generous pensions to attract the best and brightest but those aren't necessarily people who would want to be involved in this type of activity anyway.

It might be interesting to look at the current Parliament and audit what each were doing and how much they were paid before they were elected.

Cowperson

[Flames in 07]

Originally Posted by Cowperson

Generally, the argument in favour of these pension amounts is that you are looking to attract quality people and secondly, these quality people would typically be sacrificing very lucrative careers in the private sector for what might be only a limited time and you have to compensate them for that to make it interesting.

I'm not saying that this tactic is actually attracting such high quality people. Just pointing out the logic.

From my observation, politics doesn't necessarily attract the best and brightest among us but rather those most motivated by power. Those are often two different things.

Therefore, generous pensions for this "thankless job" might not be necessary since you're getting people who might just do it for free simply because of how they're self-motivated.

I like the theory of very generous pensions to attract the best and brightest but those aren't necessarily people who would want to be involved in this type of activity anyway.

It might be interesting to look at the current Parliament and audit what each were doing and how much they were paid before they were elected.

Cowperson

I doubt it's a binary one or the other cause and effect. I suspect if they reduced the pensions to be a fraction of what they are today you would get worse 'applicants'. Sure there's a few people who'd do it for the love of the job or their country, but you'd miss all the people who fall towards the middle of the spectrum, who would be good at the job, love their country, but wouldn't mind making their family comfortable.

I don't know the perfect answer, but the popular view that politicians are not competent enough for the job, and are paid too much just seems so conflicting to me. If you want top tier talent, you simply have to pay for it. I like my country, my province and my city, but to deal with all the crap politicians have to deal with, I doubt I could be paid enough to run for any kind of office to support and of these. And I'm sure when push comes to shove, that would be a very common view.

[Flames in 07]

Originally Posted by Skootenbeeten

No having good people run is what makes it happen, not having people whose sole interest is making a pile of cash and having the ability to make even more cash. Someone who wants to truly make a difference will run no matter the wage, like teachers for example. Teachers tend to make #### wages but most love their jobs and do it well. The only incentive a politician has is not doing anything risky so the gravy train runs out.

Canada like many countries is very top heavy.

And tons of people who would be great teachers, and frankly would be much better than the current population of teachers, go off to be accountants and engineers instead.

If you took a room full of teachers and gave them a problem, and then gave the same problem to a room full of engineers, my money is on the engineers every time.

I think its naive to think the country is best off by paying politicians nothing and expecting all these great competent people to just come out of the wordwork, forgo their high paying career just to serve in a government.

[GP_Matt]

An issue with low pay is that you won't attract people who are earlier in their careers. For someone who is advancing in their career it is a huge loss to take 5 years out to run for political office.

I am not sure that they should make more money but less might be tough.

As for the pension, I don't understand why they breakout the portion that tax payers pay from the portion they pay. Would it really change things if they reduced the taxpayer portion, raised their portion and gave them a raise?
The total compensation should be looked at and singling out one aspect is ignoring the whole picture.