Premier David Alward has introduced a bill to strip down the pensions of future members of the legislative assembly and move MLAs to a shared-risk system.
Under the bill, MLA benefits would be significantly reduced going forward, said Alward.
And under the shared-risk model, MLAs and the province would be equally at risk if pension plan investments don't perform as well as expected.
The changes will save taxpayers about $1.3 million annually, Alward said in a statement on Wednesday.
"Everyone has a role to play in pension reform and MLAs are no different," he said.
"What we need to make sure is that we have all of our plans sustainable for the long-term, and that's good for teachers, that's good for retirees and it's good for taxpayers."
MLAs will be able to retain the service they have accrued to date, but new service will be calculated differently.
Switch in September
The end of the current legislature session is the cut-off for the old system, so the new shared-risk plan will first apply to those elected in September's provincial election.
Any current MLAs who are re-elected in September will effectively have two pensions under two systems. The old rules will apply to what has been contributed, up until the new system takes effect, and be paid out of the government's general revenues.
After the election, all MLAs will contribute into the public service pension fund like civil servants. That fund will be subject to the shared-risk rules, and payments will be based on that as well.
One difference is that while the government has guaranteed the base amount for civil servants, there is no such guarantee for MLAs.
The age for unreduced retirement on future service will also be increased to 65 from 60.
MLAs will be treated like civil servants for the purpose of eligibility and become eligible for a pension after just two years, although the amount received will be small and based on their contributions.
Will take longer to accumulate
Alward says it will take an MLA 16 years under the new system to accumulate a pension equivalent to one that currently takes eight years to achieve.
Former MLAs won't see any reduction in their pension cheques, but they will now receive conditional cost of living increases on par with other members of the shared-risk plan, Alward said.
There are about 90 retired members and 55 active members in both of the existing MLA plans, the government says.
When Alward unveiled his government's new pension plan two years ago, promising MLAs would join, he gave no indication new MLAs would be treated so differently than current MLAs.
Speaker Dale Graham, an MLA for 21 years, for example, who just announced last week that he is retiring this fall, will begin collecting a $71,000-pension. The new rules would have cut his pension to less than $40,000 if they had been retroactive.
Although Alward says current MLA pensions like Graham's, are nearly double the size they should be, it's unfair to change them now.
"Members have contributed up until this point in time as part of the previous plan we have been part of, similar to public servants," said Alward, who has accumulated about $60,000 in annual MLA pension benefits so far, which will also be grandfathered and untouched when the stricter new rules take effect later this year.
"On a go forward basis we will be part of the shared-risk plan," he said.
The government recently passed legislation to move 33,000 current and former civil servants out of their defined benefit pension plan and into a new shared-risk model.
Employees will have to increase their own contributions to the pension plan by 30 per cent or more starting next spring, even though benefits they can accumulate will be less generous.
The government did, however, give in on cost-of-living adjustments after a huge outcry, guaranteeing their pension payments won't drop below the current level if markets perform poorly.
Finance Minister Blaine Higgs has said he also wants to change the teachers' pension plan to a shared-risk model by the spring.