MPs' pension fund grew amid recession: report
The pension fund for members of Parliament rose by 10 per cent during the global recession — thanks to Canadian taxpayers, whose own pension funds and retirement savings nosedived.
A new report shows the half-billion-dollar pension fund for MPs and senators jumped in value by $53.8 million in 2008-09.
Over the same period, private pension plans in Canada lost an average of 21 per cent of their value, according to the Organization for Economic Co-operation and Development.
Even the Canada Pension Plan reported a 14 per cent hit, losing $17.2 billion.
The parliamentary plan was immune to the market meltdown that decimated millions of Canadians' retirement nest eggs. That's because its interest rate is set by regulation and backed by ordinary taxpayers.
The fund is not invested in the markets. Indeed, there is no actual money in the fund. It's strictly a paper account, for which taxpayers are on the hook when the bill eventually comes due.
"It's all got to be backed by the taxpayers," said Bill Robson, president of the C.D. Howe Institute, a conservative think-tank.
"Not a dollar of real cash has gone into these plans, so when the time comes to pay the pensions, all of this money is going to have to be raised either by real borrowing — like actually floating bonds that people pay cash to invest in — or through taxes."
The pension fund's annual report to Parliament for 2008-09, tabled recently, underscores just how "mind-bogglingly generous" the parliamentary pension plan is, Robson added.
He pointed out that ordinary taxpayers are limited by law to contributing up to 18 per cent of their annual income to registered retirement savings plans, known as RRSPs, or private pension plans. In other words, their tax-sheltered pensions will amount to less than one-fifth of their annual pre-retirement gross income.
Federal public servants enjoy pension benefits that amount to about a third of their income, through a so-called defined-benefit plan that Robson has criticized for being too generous and unaffordable.
But MPs and senators do considerably better than that, with pension benefits worth about half their income — and indexed to inflation.
"The rulers have a very generous pension compared to what they allow the ruled to have," Robson said. "That's monumentally unfair. I can't think of any justification for it."
Kevin Gaudet, head of the Canadian Taxpayers Federation, said there's a "Niagara Falls of a chasm" between the private and parliamentary pension plans.
The parliamentary pension report comes as Canadians are being warned of a looming pension crisis, in which they're going to have to work longer and save more to retire with even a modest income.
Gaudet said he doubts many Canadians are aware that "not only do they not have enough of their own money saved, but they're also paying through the nose in their taxes so that they can feather the retirement beds of public sector employees and politicians."
"I think they ought to be mad. It's a huge discrepancy."
The taxpayers federation calculates that after serving only six years, an MP is entitled to an annual pension of $27,000. Long-serving MPs can collect more than $100,000 a year.
Having just completed his fourth year as prime minister, Stephen Harper is now eligible to collect a special retirement allowance once he turns 65 — on top of his MP's pension, which he can begin collecting at 55.
By Gaudet's calculation, that means Harper will eventually collect an annual pension and allowance worth at least $178,000.
"Wow, that's the good life," Gaudet said.