HAMILTON: It is widely expected that later this week, Finance Minster Jim Flaherty will unveil changes to the MP pension plan. While the changes may be viewed as significant, the truth is they are largely symbolic. Currently, MPs have one of the richest pension plans in the country. For every dollar that they invest, we the taxpayer, give them 24.
This is clearly not an equitable plan and the expectation is that Minister Flaherty will change the contributions to a 50/50 split. That is, for every dollar the MPs invest, we will give them a dollar. While this plan is acceptable, the change will not really save us much money, as there are only a few hundred MP’s. However, the change in the MP's plan should allow the government to take strong action on all Public Sector pensions.
What we expect to see
At Fair Pensions For All we expect that Minister Flaherty will make some modest changes to the Public Sector pension system. First, he will require all federal workers to increase their contributions to 50%.
That is, the employee and the taxpayer will both contribute the same amount to the plan. However, it is expected that this will be phased in over a number of years and not done immediately. Secondly, we expect that the government will increase the retirement age for federal workers to 65. Currently the largest group of federal employees retire at age 55. But we also believe that Minister Flaherty will only do this for new hires and anyone in the system today will be grand fathered under the current rules. One thing that we do not expect to see is an end to the Defined Benefit pension plan that currently exists.
What we would like to see
Our Public Sector Defined Benefit pension system is not only broken, its going bankrupt. We believe that the federal employee system should be changed to a Hybrid Pension plan with a retirement age of 67. This plan could be phased in with the current schedule for the increase in Old Age Security (OAS). This change would still give the Public Sector employees a far superior pension than those in the Private Sector and would have no effect on those who are currently retired.
The benefit of this solution is that it limits the amount of unfunded liability that the taxpayer would be on the hook for in the future, and puts an emphasis on the employee’s own contributions. Canadians are already responsible for the accumulated debt of $227 billion for the pensions of these employees in addition to the federal debt of $582 billion.
If we want fairness in our pension system, there must be a pension plan for Private Sector workers as well. Although we were encouraged in the spring when Minister Flaherty announced the creation of the PRPP plan, we think the government should urge their provincial counterparts to speed up the establishment of these plans.
All Canadian’s should have the same retirement age and the federal government needs to raise the age of retirement for the Public Sector. Along with this rise, the Bridge Benefit needs to be eliminated. Currently government workers can collect their full pension as early as age 55. They then use the Bridge Benefit to top up their CPP until they reach age 65, so they don’t take a hit to their benefits. This special rule for Public Sector employees is unfair to the rest of us who have to wait until age 65 to collect an unreduced CPP.
With the Private Sector employee struggling to save for their own retirement, it is unfair that the financially secure Public Sector employee gets not only their pension, but also early CPP. It is time for the Public Sector to leave something behind for the rest of us, who pay the bills.
Bill Tufts, Fair Pensions For All, founded in January 2009, our goal is to promote an honest and fair analysis of our pension system; to expose abuse and waste within the system; to develops and promote new ideas and concepts on pensions based on fairness for all.
We maintain that it is every Canadian’s right to receive sufficient income in retirement to afford an acceptable quality of life.
