The changes to the pensions of members of Parliament, in the latest gargantuan budget-implementation bill, add up to a step in the right direction, but MPs should have a real pension plan, not just a notional account in the government’s books.
The Finance Department says the new arrangements will be fair relative to the plans offered in the private sector. In some respects, that is true. The MPs and senators will contribute half and the Crown will contribute half of the required payments to the parliamentarians’ Retiring Allowances Account. The expected retirement age will be a conventional 65 – not 55, as it is now, as if quinquegenarian politicians were so physically or psychologically exhausted by the perils of their jobs that they need to cease working. Smaller “allowances” corresponding to earlier departures make sense, too.
Likewise, it is right to reduce the interest rates attributed to the parliamentary pension account, in the light (or shadow) of the very low rates that have prevailed since the crash of 2008.
Again, it is reasonable enough that the changes will take effect after the next election, probably in 2015. The people who decided to run for the House of Commons in 2011 were entitled to consider their finances and to rely on the existing scheme, for the sake of their families, as well as themselves.
On the other hand, the plans that are now current in the private sector are more often “defined-contribution” than “defined-benefit.” In other words, the employees of companies share in the ups and the downs of pension funds. For Canadian parliamentarians, however, there are no real returns on investment, no real losses, and no competent or incompetent – or lucky or unlucky – fund managers.
Instead there are calculations fixed by a statute and regulations. For the Retiring Allowances Account and the related Compensation Arrangements Account, there can only be defined benefits, because the whole process consists of debiting and crediting the Crown’s general revenue. That process cannot mirror the pension experience of most Canadians.
If the representatives of the people appear to benefit disproportionately from office, they undermine the country’s institutions. Politicians need a real pension fund, sooner rather than later.