Pension Reform – Why MP’s Don’t Feel Your Pain

Recommendations to increase the CPP coverage to provide a pension of about 70% of pensionable earnings up to $127,777 for 2010[8] are estimated to raise the CPP contribution rate from 9.9% to about 20% of pensionable payroll funded by combined employer and employee contributions. This is still substantially less expensive than the MP pension again mainly because the benefits accrue at a lower rate, are not payable until age 65 and a full pension is available only after 40 years of service.

This is what pensions cost – all dependent on what benefits are provided. Critics who point to the rich pensions funded by tax dollars need first to consider whether they accept the argument that such contributions represent deferred wages or alternatively, mandatory employer contributions to a retirement scheme, rather than as some kind of bonus that MPs should not receive. Either way, the outcry might be directed at the total compensation package for MPs or civil servants, or ourselves – but not because they have a pension plan that is well managed, large enough to sustain economic downturns and provides the substantial retirement income we would all like to have.

So there you have it folks. The MPs have a gold plated defined benefit pension plan with mandatory contributions that promises them a secure retirement. So it’s hard to explain why they cannot come up with the political will to insist on a mandatory contribution structure for the rest of us. Don’t let them tell you they feel your pain, because they can’t.


[1] ACTUARIAL REPORT Pension Plan for the MEMBERS OF PARLIAMENT as at 31 March 2007 at p 24

[2] This index is the average percentage increase in base-rate wages resulting from major settlements negotiated with bargaining units of 500 or more employees in the private sector in Canada. idem at p. 43

[3] Idem at p. 31

[4] Maximum Pensionable Earnings (MPE) benefits accrued in respect of pensionable salary (sessional indemnity and additional allowance) in excess of the MPE must be provided through a Retirement Compensation Arrangement. The MPE was $111,100 in calendar year 2007 and increased to $122,200 in calendar year 2009. Idem at p. 44

[5] Idem at p. 32

[6] Idem at p. 53

[7] Actuarial Report on the Public Service Pension Plan as at 31 March 31 2008,at p. 9

[8] providing a maximum annual pension of about $82,000 after about 40 years

Keywords: pension, pension reform