MP Pensions

[sags]

It sounds like the government is going to introduce pension reform for MPs.

The full details aren't available yet, but some of it seems to have been leaked to the press.

It all looks good at first glance, but the devil is in the details, especially if the changes have been put into place as a precursor and justification for chopping public service pensions.

One detail I have read is that the MPs will contribute more into their pensions in the future, but the government is considering giving every MP an equivalent raise in pay before the higher contributions begin..........so the taxpayers are still going to be paying the cost.

http://www.canadafreepress.com/index...pension-reform

As mentioned in this article, another detail is the timeline and how the changes won't affect some current MPs with fat pensions.

http://fullcomment.nationalpost.com/...ntent=My+Yahoo

Tony Clement was used as an illustration.........and I read that Finance Minister Flaherty and his wife will be receiving numerous public service pensions with benefits of hundreds of thousands of dollars a year.

F has been either a lawyer or a senior politician his entire adult life. He’s married to a lawyer who is also now a politician. F has a pension from being finance minister and MPP in Ontario, and he will have another after being finance minister and MP federally. His wife, Christine Elliott, will also have a political pension. Once F’s done in Ottawa, he’ll surely find seats on many corporate boards, and be invited as a partner into one of the larger Bay Street lawgopolies. His wife may run for premier. And win.

In short, this family is set set. F and Christine will have a household pension income in retirement of at least $310,000, indexed and never-ending.

http://www.greaterfool.ca/2012/03/30/geezer-dole/

To have any credibility, one would hope the announced changes aren't just a charade.

[HaroldCrump]

It sounds like the government is going to introduce pension reform for MPs.
...
if the changes have been put into place as a precursor and justification for chopping public service pensions.

Why shouldn't public sector pensions not be "chopped"?
Private sector tax-payers are sick and tired of paying outrageous benefits and pensions far above what most people can even dream of.

Over the last 3 decades, the militant unions have negotiated ever increasing benefits, far above the intent and provisions from the origins of these programs.
70% income replacement, full indexation, bridge benefits, > 100% tax-payer matches, and so on.

Where does it end?

[GoldStone]

The budget bill that changes MP pensions also changes federal public service pensions. Public service pensions are not chopped.

Public servants will have to contribute more and work longer to receive the same pension.

Lots of details in the Ottawa Citizen article.
http://www.ottawacitizen.com/busines...944/story.html

[LondonHomes]

F has a pension from being finance minister and MPP in Ontario,

Ontario MPPs don't have a pension plan anymore, they have a defined contribution plan which is a lot like an RRSP. Mike Harris removed the defined benefit plan for MPPs.

I have no idea why anybody who has a successful career and is not already independently rich would ever run for office. The risks of giving up a good job to be an MP or MPP are just too high.

[Square Root]

Agree that it is risky financially to run for office. People do it for 3 possible reasons: power, prestige, a desire to improve things. Doesn't take too long for the third reason to fade. Incidently, I don't think a pension of $310k per year is that high for someone who has spent virtually his whole working life in public service. The risks are very high and you could easily find yourself out of a job at almost anytime. Not to mention the scrutiny your private life is subject to. Politics certainly never appealed to me and I don't begrudge them their perks and comp.

[Cal]

Why shouldn't public sector pensions not be "chopped"?
Private sector tax-payers are sick and tired of paying outrageous benefits and pensions far above what most people can even dream of.

Over the last 3 decades, the militant unions have negotiated ever increasing benefits, far above the intent and provisions from the origins of these programs.
70% income replacement, full indexation, bridge benefits, > 100% tax-payer matches, and so on.

Where does it end?

Harold, don't hold back, tell us what you really think.

I have no doubts that some of our future austerity measures will call for reduced public pensions.

[Guigz]

Why shouldn't public sector pensions not be "chopped"?
Private sector tax-payers are sick and tired of paying outrageous benefits and pensions far above what most people can even dream of.

Most public sector pensions do not provide "outrageous benefits far above what most people can dream of". It is not like working for the public sector is only for a select few.

To get one of these "outrageous" pensions, one only needs to apply to a job, have the proper qualifications and education, complete the qualification tests successfully, do the interview and score higher than the others that applied. Anybody can do it.

Of course, assuming that you have a mid-level or higher job, the total compensation is likely lower or at best on par with what you could get in the private sector.

I understand however from your other comments that you seem to have a bone to pick with the public sector and you are likely not interested in any of what I said.

I do think that public DB pensions should be capped at a certain amount and any salary above that cap should give rise to a DC pension. This would likely level the playing field.

[HaroldCrump]

Most public sector pensions do not provide "outrageous benefits far above what most people can dream of".

Oh really?
So show me all these pensions galore that provide guaranteed 70% income replacement for 5 highest years of pay, bridge benefits to retire at 55, full indexation, and the tax-payer footing more than the employee %.
Also show me the corresponding RRSP portfolio required to produce the same results.
Also show me the changes needed to CPP to produce the same results.

To get one of these "outrageous" pensions, one only needs to apply to a job, have the proper qualifications and education, complete the qualification tests successfully, do the interview and score higher than the others that applied. Anybody can do it.

Yeah, that's just it. Silly me.
Of course it has nothing to do with the fact that the unions are in bed with the politicians, the MPs and MPPs have a huge conflict of interest in this regard.
And of course the fact that we are running a $30B deficit at the federal level, and a $16B deficit at the provincial level is immaterial.
The fox is in charge of the hen house.
Just raise taxes again, problem solved.

Of course, assuming that you have a mid-level or higher job, the total compensation is likely lower or at best on par with what you could get in the private sector.

As I said, show me the corresponding RRSP portfolio and RoR required to produce the same results.
And the changes required to CPP to produce the same results.

I do think that public DB pensions should be capped at a certain amount and any salary above that cap should give rise to a DC pension. This would likely level the playing field.

I would agree with that.
No one is saying dismantle the entire pension system.
But there have to be reasonable limits.
Not a carte blanche to pillage the public coffers.

Your suggestion is reasonable, and a starting point for discussion.
What is not reasonable is to keep denying that the public sector pensions are outrageous for the tax payer, and keep denying that we have a [huge] problem.

[Daniel A.]

[QUOTE]I do think that public DB pensions should be capped at a certain amount and any salary above that cap should give rise to a DC pension. This would likely level the playing field.

I like that idea sure better than what is in place.

Harold the bridge benefit may be the only saving grace to get them off the payroll sooner.

[Guigz]

Oh really?
So show me all these pensions galore that provide guaranteed 70% income replacement for 5 continuous highest years of pay, bridge benefits to retire at 55with 30 years of service, full indexation, and the employer footing more than the employee %.
Also show me the corresponding RRSP portfolio required to produce the same results.
Also show me the changes needed to CPP to produce the same results.

These conditions are available to all employees of the federal public service (and likely very similar for provincial equivalent) so we are talking about 350,000-400,000 people, just on the federal level of goverment. All in, there are 3,631,837 people employed by the Gov' (all levels). Hardly what I would qualify as "out of reach of most people".

If you want a pension, feel free to leave your relatively lucrative private job and join the other 3,631,837 employees making 53,469$ in salary on average.

Yeah, that's just it. Silly me.
Of course it has nothing to do with the fact that the unions are in bed with the politicians, the MPs and MPPs have a huge conflict of interest in this regard.
And of course the fact that we are running a $30B deficit at the federal level, and a $16B deficit at the provincial level is immaterial.
The fox is in charge of the hen house.
Just raise taxes again, problem solved.

I don't think that you know what you are talking about here. Are you saying that the unions and the MPs and MPPs hand picked 3,600,000 of their "buddies" to work for them? The nomination process for a position is controlled and documented, you can't just pick who you want. The rest of this paragraph is just random ramblings.

I said, show me the corresponding RRSP portfolio and RoR required to produce the same results.
And the changes required to CPP to produce the same results.

Ok. Remember when I talked about the average Gov' employee making $54K? Let's take him as an example.

Gov' Joe:Let's put his top best 5 years salary at $60K. He will get a pension $42K per year assuming that he works for 35 years. According to the 4% model, you need about $1,050,000 to spend that amount each year in constant dollars. To get there, he needs to contribute about $6,000/year in his pension.

Private Joe: Let's put his salary at $54K for his entire career except for 5 years at $60K. Private Joe contributes the max allowed to his RRSP. After 35 years of service, he has about $928,000 assuming a real return of 5%. Joe also gets $12,000/year of CCP on top of that (which is already included in the first scenario due to the coordination of benefits). All in, with the same 4% model, Private Joe has about the equivalent of $1,228,000 in assets. To get there, he needs to contribute between $6,000 - $9,000 (depending on employer match) per year.

The comparison is not perfect because of the specifics which vary from situation to situation (e.g., RRSP matching, stock options, contribution ratios) but the final end result can be similar. Without even considering that the salary of the private employee is likely higher than that of the public servant.

Yes, the Gov' employee contributes less to his pension and does not have to share the risk of insolvancy, but my point is that the difference is hardly outrageous as you put it. YMMV

I would agree with that.

I am glad that we agree on something!


The biggest obstacle in people having money in retirement is not that they don't have the option, it's that they don't take the necessary steps to make sure that they do...