All pensions are not created equal

How often have you heard someone you know say, “Boy, I can hardly wait until I can retire.” I’ll bet you’ve lost count on that one. Little do these people realize that unless you have planned well for the future, the CCP/OAS government pension is a token joke for those who have worked in the labour force for 35-45 or more years. The pensions today are a mere pittance after contributing and after working all those years.

How often have you heard someone you know say, “Boy, I can hardly wait until I can retire.” I’ll bet you’ve lost count on that one. Little do these people realize that unless you have planned well for the future, the CCP/OAS government pension is a token joke for those who have worked in the labour force for 35-45 or more years. The pensions today are a mere pittance after contributing and after working all those years.

Let’s look at federal politicians. If politicians have served for a period of two terms or more, they qualify for full pension (at age 55). If they are 65+, they also qualify for a senior’s pension as well. Wouldn’t it be nice to retire from something after eight years and receive a pension for it ( albeit at 55)? I can hear some pro-politicos out there now. If you want the benefits get involved. Somewhat idealistic, isn’t it? How many thousands of people can be politically involved?

Let’s analyze the performance of duty factor here. A “rookie MP” enters the political fray at about $157,000 a year. Not a bad starting wage, you say? Not included here would be office and staff expenses etc. If this individual serves just 6-8 years in office, he or she would have qualified for the lucrative MP pension plan — “arguably one of the best pension plans in Canada.” MPs enjoy a threefold compensation package which consists of: a sessional allowance or salary; an expense allowance and a lucrative pension. The MP pension plan starts out with annual payments of around $30,000 once someone hits 55 years of age. However, the starting amount rises significantly once you get a few years under your belt and automatically increases each year for inflation. Not so with seniors. This would seem to indicate that those who worked in the field are of lesser importance than politicians who may have only worked in politics for a minimum of two terms.

Compare this to the average “blue collar worker” who works for roughly 25-40 years. This individual receives a salary (with possible employer contributions to pension plans etc.), pays his/her own way and looks after his/her own pension. On reaching retirement age there may be a company pension. On reaching 65, there may be Canada Pension and/or Old Age Security. The federal pension is meager at best for all those years of work.

Consider the case of Bloc Leader Gilles Duceppe who is due for an annual pension of about $140,000 per year. There have been estimates that if he lives until he’s 80 years of age, we taxpayers will have given him $2.9 million in pension benefits. That’s quite the haul for a guy who spent years trying to break up the country.

It’s true that the overly generous formula that determines MP pension payments was reduced a few years ago. But if you peer into the new rules, you’ll find they’re still, well, overly generous. Right now, for every $1 MPs put into their pension plan, taxpayers contribute about $4 towards it. The Canadian Taxpayers Federation has recommended MPs overhaul the pension plan. Under such a plan, the federal government would match contributions MPs put into their own pension fund. If an MP puts in $1, then taxpayers would put in $1. If the fund does well, then MPs would see a gain. Conversely, if the fund performs poorly, then MPs would also feel the pinch.

That would bring MPs in-line with many private-sector companies that offer the same type of pension plan. In fact, it would still leave MPs better off than most Canadians that have no pension plan whatsoever.

Ron Barillaro

 

Penticton