Media May Have Missed the Story on MP Pension “Reforms”: MPs Unanimously Vote Themselves Pension Bonus for Next Year?
Being neither a lawyer nor an accountant, I have to stress I may be missing something here. I do invite correction. However, I don’t think I’m wrong here. Here’s a simple question: what percentage of their income are MPs paying into their pension fund this year, and what percentage of their income will MPs be paying into their pension fund next year? Is the second number higher than the first? Are you sure?
After weeks of rumours about MP pension reforms in the works, the Harper regime finally brought them out in the budget… sort of. And it received great aplomb for it. The mediasphere is tremendously excited at the good example the government is setting here. Even Stephen Maher of Postmedia wrote a glowing commentary praising Harper for the big pay cut he’s about to give himself. The Globe & Mail, aka the Daily Plagiarist, said the same thing. CTV said they “did the right thing.”
But then something weird happened: the Liberals and the NDP asked the Conservatives to separate the MP pension reforms out of the omnibus budget bill to vote on separately, and the Conservatives agreed to do this. That’s strange, because it was widely expected that the Conservatives put them into the bill in the first place specifically to embarrass the Opposition. In three years’ time, when there’s another election campaign, the Conservatives planned to attack the NDP and the Liberals for voting against the budget in order to save their gold-plated pensions. That’s what the National Post said the strategy was. That’s what the Globe & Mail said the strategy was. It’s certainly the sort of ammunition the Conservatives’ PR office loves to make use of.
So why would they abandon such a golden strategy midstream? And more to the point, a few quick questions: What do MPs pay into their pension scheme this year? How much will they pay in next year? Is the second number higher than the first? Are you sure?
I wouldn’t venture to say, but I can say what has happened as a result of the special deal: next year, at least so far as I can tell, the amount the MPs pay into their pension fund will be going down, not up. What is publicly being described as a “phase-in” to a higher rate is, in fact, a clever manipulation intended to keep the pension rates basically the same until at least after the next election. What happens after that is anyone’s guess.
Let me show you what I mean. The public announcements on this fall’s omnibus budget claim that the Conservatives are going to phase in a higher pension interest rate for MPs, which will rise in 2017 to a level where MPs pay into their pension fund from their salaries the same amount that goes into the fund from the public purse, as their employer (the “50-50 mandate”). This has been publicly advertised as a rise in annual contributions from $11,000 per year to $39,000 per year, or thereabouts.
And it may get there, eventually, but I don’t think it’s actually been spelled out yet. Currently, MP pensions are governed by the Members of Parliament Retiring Allowances Act. Under that Act, right now five percent of MPs’ basic salary is deducted and invested in the pension fund. It rises to nine percent on earnings above the maximum pensionable limit. MPs who are over age 71 pay 9% on all of their earnings.
But Bill C-45 rewrites the act. The relevant sections have now been hived off and sent to the Senate as Bill C-46. It’s unbelievably convoluted, presumably to discourage anyone from reading it, but here’s what I think I can make out. The definitions are now spread out over multiple sections of the bill, but again, here’s what appears to be happening.
Starting next year, the MP’s pension contribution rate will fall to four percent — effectively, a 20% cut in what they will be paying into the fund, without any change in what they’re eligible to get out of it. Then, in 2014, it rises back up to 5%, and in 2015, it increases further to 6%. The effect is that, over the course of the next three years, it will look as though MP pension contributions are climbing, but averaged out, they will not actually change at all. I expect this was a compromise delivered to the Conservative caucus: we will get a chance for a press release in 2015 saying pension contribution rates have climbed by 50%, whereas averaged out over three years, they haven’t changed at all.
The change is the same for amounts over the pensionable limit and for members who are over 71 years old: whereas it is now 9%, it will fall to 8% next year, climb back to 9% the year after that, and finally rise to 10% in 2015.
The upshot of all this is that while the government has announced they are “phasing in” pension contribution increases, which will rise to a 50-50 level by 2017, in effect what the government has done is push off all pension adjustments into 2016 or beyond. At that point, what happens is anyone’s guess. They haven’t actually specified how things will go from there; the legislation just establishes a “goal” of setting the rates at 50-50 in 2017 and beyond.
So now we’re left with three facts: first, a pension bill which has been introduced as a dramatic change but really isn’t; second, an abandoned Conservative strategy to use this pension bill as PR ammunition against its opponents (who were expected to vote against it); and third, a sudden agreement to hive off the pension reforms from the omnibus budget bill (which the Conservatives didn’t want) followed by unanimous consent by the House of Commons without any detailed committee study (which the Conservatives did want).
How to explain all this? I’m not sure.
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Cathie from Canada
Good catch — I had wondered what was going on. I think you have nailed it.
Rural
I found it hard to believe that with all the talk of MPs paying 50% of their pension cost the actual bill did not say so. What it does say is this “The Chief Actuary shall fix contribution rates for the purpose of the provisions of this Act that require contributions to be made at the applicable contribution rate. “ Then follows the exceptions show above setting a hard rate of 4 – 6% over the next 3 years.
The ONLY reference I can find to the 50% is this “In fixing contribution rates, the Chief Actuary’s objective is to ensure that by not later than January 1, 2017 the total amount of contributions to be paid by members under Parts I and II will meet 50% of the current service cost in respect of the benefits payable under Parts I, II and IV. “
So IF the Actuary meets his ‘objective’ the contributions MAY reach 50% of the CURRENT cost by the end of 2017 but unlike the next 3 years that is NOT fixed or legislated. No wonder the MPs were so quick to send this one through the system.
You can read the text of that portion of the bill here.
http://www.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&DocId=5769216&File=33#3
Thanx for picking upon this.
the salamander
I don’t recall there being a standing vote on the matter, nor any debate. Chalk up another contemptuous corrosive dismissal of democracy, parliament and the Canadian electorate ‘handed down’ by Stephen Harper for his flunkies Flaherty, Clement et al to dump in the trough. The rest of Parliament, either suggested, wished for, or negotiated this ‘deal’ or agreed to, or rolled over for it. They should all be red-faced but that appears impossible. Now that they’ve looked after themselves without letting Canada and Canadians have any say, can we expect them to do any better on matters of State, Justice, Environment, Budget or Elections? No ..
You’re quite correct in questioning and calling out cowardly, complicit mainstream media for with very few exceptions accepting ‘news’ handouts, being addicted to opinion polls, cutting and pasting and dull, uninformed or partisan hack work. Truly, they must fear or relish, loutish media employers, the Conservative Party louts and lawyers, the high and mighty and mean PMO, the PM’s war room cabin boyz. or being late for cocktails. Or perhaps they really just prefer reporting the foibles of obscure ‘personalities’ or politicos
Ray Grigg used the term ‘poverty of ethics’ in a recent and scathing essay on The Enbridge Corporate Character. http://thecanadian.org/item/1775-the-enbridge-corporate-character
I find the term.. perfectly apropos for the entire mad, inane and asinine circus being perpetrated in Ottawa and across Canada, much of it acting in support of ethically backrupt Enbridge and the Petro Players. Parliament as a purportedly elected realm, yet composed primarily of liars, theocrats, political hacks and complete assclowns that really don’t live in the riding that may or may not have elected them, legally.
Political parties as inept, ‘follow the leader if you have one’ .. country clubs.. that you can join. You can be conservative today, Liberal tomorrow, NDP next week or Green all over. Mainstream media hacks drowsily put the lipstick to the pig on fundamental nonsense like this and few actual journalists are able to shout above the noise, that the ‘want to be emperor’ is stark naked and full of shite.. and his clown princes have their heads on backwards.. are ignorant pigs and could not discover the truth or ethics if they were stabbed in the ass with both at the same time.
Canada’s Parliament needs more than a broom to remove the creeps, cronies, and political dung beetles that have dug themselves into the woodwork.. Parliament needs a stouthearted Sergeant at Arms with a pressure hose and insect fumigation gear to attempt the impossible. Parliament needs honest carpenters to cut out and replace the rot. The mainstream media should stop admiring itself in the mirror.. dancing with the devil .. and start taking clear responsibility for its actions. Mainstream media thinks its part of the 3 ring circus in Ottawa.. and you know, I think its right. If you’re a lazy, smug or partisan paper, TV outlet, crap writer, pundit, hack, mouthpiece.. you fit right in with the Freak Show..
past
What’s the logic in having older MPs pay a significantly higher rate than younger ones? Wouldn’t older MPs have a potentially shorter period of drawing from the pension?
Sixth Estate
past — Not sure on this, but I suspect the logic is that older MPs will have less time to pay into the fund, and less time before they collect from the fund during which their conributions can accrue “interest,” and therefore their upfront payments should be higher to compensate for that. According to the Canadian Taxpayers Federation, whose views should always be taken with heaping piles of salt, the MP pension fund’s balance is not invested in the markets but instead earns “interest” from the government at 10.4%. I am not sure how accurate this statement is, but it is a disturbing one.
http://www.lfpress.com/2012/09/17/tax-watchdog-airs-pension-beef-with-mps
Sixth Estate
Rural — With regard to the 50% vs 4-6%, yes, the budget contains specific provisions for what I argue here is a meaningless change, which is being reported in the press as “phasing in increases.” I’m not sure what percentage of an MP salary would amount to a 50-50 balance in contributions to the pension fund, but assuming it’s in the 20-25% range, this method of “phasing in” increases is going to take decades for them to get to the ideal rate.
What’s truly disturbing is that nobody in the media appears to have bothered to read the bill in order to notice this. I assume the Opposition read the bill, and I suspect that is part of the reason that they were able to get the Conservatives to take the pensoin reform scheme out and pass it separately.
There was no debate or committee review of the bill because there was unanimous consent to the bill in the House of Commons. You do not need to proceed through all three stages and committee review, as I understand it, if MPs vote unanimously in favour of the bill after first reading.
The Navigable Waters Unprotection Act : Canada's online magazine: Politics, entertainment, technology, media, arts, books: backofthebook.ca
[...] Estate’s fall 2012 budget coverage, which began with a look at what appears to me to be some appalling chicanery in the MP pension “reform” scheme, I thought it would be nice to look at the end of the Navigable Waters Protection Act. Symbolic of [...]