Fixing rich, underfunded MP pensions is a key step in pension reform, according to a report released today by the C.D. Howe Institute.
In “,” author William B.P. Robson argues that the pension plan for MPs is the most problematic of federal employee pension plans and that it’s underfunded by up to $1 billion.
“The MPs’ plan promises very generous benefits but has set aside essentially no assets to pay them,” says Robson, president and CEO of the C.D. Howe Institute. “Realistically, gaining the moral authority to lead Canada’s search for a better retirement income system means MPs must fix their own pensions first.”
The report says that the plan provides MPs with more than 50% of their six-figure salary but has no assets set aside to pay for those future benefits.
It says the funding shortfall is at odds with actuarial reports on the plan, which say it has an excess of $176 million.
Robson says MPs should put real retirement savings in a properly funded pooled registered plan or a target benefit plan. Increases in MPs’ current compensation could compensate for their more modest retirement benefits. The federal government, he says, should also legislate more generous limits on tax-deferred saving, giving everyone a chance to achieve retirement incomes closer to those promised to MPs. “Canadians need better, and properly funded, pensions,” said Robson. “Federal MPs should lead by example.”
The institute’s plea for reform echoes a similar call issued Wednesday by the Canadian Taxpayers Federation, which urged MPs to surrender their pension plan and adopt a more modest system.
The federation contends that the existing plan is the best funded in the world but lamented that taxpayers foot the bill for most of its perks at a rate of $23.03 for every dollar contributed by an MP.
The federation called on MPs to set up a new program in which government matches their payments on a dollar-for-dollar basis.
“There’s no way the prime minister and these MPs can do what they need to do to balance the budget and control spending if they’ve got their own snouts in the pension trough,” said Gregory Thomas, the federation’s federal director. “They need to lead by example. They need to put Canada ahead of their own personal bank balance.”