The time has come for members of parliament to suck it up and change their excessively costly pension plan. So out of kilter (on the generous side) are MP pensions, it takes two pension accounts to keep their funds onside with what’s allowed by the federal tax code.
Here’s how generous parliamentarians are to themselves.
In 2010-11, parliamentarians—MPs and senators—contributed $4.5-million to their pension fund. To that, we taxpayers added an employer-share worth $26.7-million. And, since the pension fund is never actually invested anywhere, parliamentarians voted to assign 10 per cent “interest”, which compounded quarterly—yes, they don’t miss a trick—yields an effective rate of 10.38 per cent. This sweet deal added a further $83.4-million on top of taxpayers’ “employer” portion, giving a whopping total of $110.1-million for 2010-11.
All this at a time when banks offer interest rates in the very low single digits. But, apparently, even the 10.38 per cent is not enough to grow the two MP pensions funds large enough to cover future payouts as estimated by actuaries. And, consequently, the fund had to be topped up with an additional $600,000.
At the end of the day, therefore, for every dollar parliamentarians put into their retirement savings we taxpayers have to contribute a whopping $24.
Not bad if you can get it. Unfortunately, very, very few Canadians can take advantage of anything even close to this level of government generosity.
Only in Canada, eh?