Unlike most pension plans whose contributions and funds are carefully accounted for the MP Pension Plan actually has no money set aside or even invested. It is simply a number on paper that continuously changes to reflect the growing liability. So if the plan has no assets where does the money actually come from to pay pensions? Out of general revenues of course, (translation = taxpayers pockets).
So, if there are no actual funds in the plan per say, how is it invested? Well folks that is where it gets really interesting, it isn't invested. The government simply mandates a return on the plan which once again is funded by the taxpayer. Now, if your not sitting down please do so as I am about to tell you the amount of the return ...10.4% per year! That's right, in an economy where the average hard working taxpayer feels like he has won the lottery if he can achieve a 2% return on an investment our MP's see 5 times that amount on funds that are not invested and don't even exist except on paper! Sound terribly wrong? You bet. In fact Canada's Chief Actuary thought so too and suggested two years ago that the rate be cut in half to be more in line with current investment realities, naturally this request was ignored.
Unfortunately it just keeps getting better (or worse if don't happen to be an MP), a recent report by the C.D. Howe Institute, a Toronto-based non-profit think-tank found that if ordinary Canadians want to guarantee themselves a retirement income equivalent to an MP’s pension, they would have to save 50 per cent of their income every year. Unfortunately even if the average taxpayer had the ability or means to put aside half of their pretax income, there is a problem. Canada's Income Tax Act only allows Canadians (most who have no pension at all) to contribute a maximum of 18 per cent of their annual incomes to their own RRSPs.
So here are just a few more facts to stew over
- For every $1.00 an MP contributes to their pension plan, the taxpayer contributes an additional $23.30.
- As the plan is unfunded and has no assets it currently is a long term liability to the taxpayer of over $1 Billion. Only a billion you say? You must be an elected official with that mind set!
- The cost of the plan each year including contributions and "interest" is about $102 Million to the taxpayer, while MP's themselves contribute another $4.5 Million
- Based on the 10.4% interest the plan is mandated to "earn" the plan has outperformed the Canada Pension Plan by 60 per cent over the last 10 years.
- While a MP has to contribute just $10,900 annually for six years to receive minimum backbencher pension, a regular Canadian would have to save $129,000 annually over six years for the same retirement payment.
- Prime Minister Stephen Harper can collect a pension of at least $223,500 per year by 2015
- Interim Liberal Leader Bob Rae, if he stays on as leader, can collect a pension of at least $71,400 per year by 2015
- NDP MP Pierre-Luc Dusseault, elected last year at age 19, can collect a pension of $40,000 per year if he retires at 27
- 20 MPs will be able to collect more than $100,000 a year if they retire or lose after the next election in 2015
- In addition to the 113 defeated and retired MPs from the May 2, 2011 General Election, 97 former MPs and 20 former Senators were collecting an annual pension in excess of $70,000 per year as of April 2010.