Is the MPs’ new pension plan a clever manipulation?
After weeks of rumours about MP pension reforms in the works, the Harper regime finally brought them out in the budget . . . sort of. And it received great approbation for it. The mediasphere is tremendously excited at the good example the government is setting here. Even Stephen Maher of Postmedia wrote a glowing commentary praising Harper for the big pay cut he’s about to give himself. The Globe and Mail, aka the Daily Plagiarist, said the same thing. CTV said they “did the right thing.”
But then something weird happened: the Liberals and the NDP asked the Conservatives to separate the MP pension reforms out of the omnibus budget bill to vote on separately, and the Conservatives agreed to do this. That’s strange, because it was widely expected that the Conservatives put them into the bill in the first place specifically to embarrass the Opposition. In three years’ time, when there’s another election campaign, the Conservatives planned to attack the NDP and the Liberals for voting against the budget in order to save their gold-plated pensions. That’s what the National Post said the strategy was. That’s what The Globe and Mail said the strategy was. It’s certainly the sort of ammunition the Conservatives’ PR office loves to make use of.
So why would they abandon such a golden strategy midstream? And more to the point, a few quick questions: What do MPs pay into their pension scheme this year? How much will they pay in next year? Is the second number higher than the first? Are you sure?
I wouldn’t venture to say, but I can say what has happened as a result of the special deal: next year, at least so far as I can tell, the amount the MPs pay into their pension fund will be going down, not up. What is publicly being described as a “phase-in” to a higher rate is, in fact, a clever manipulation intended to keep the pension rates basically the same until at least after the next election. What happens after that is anyone’s guess.
Being neither a lawyer nor an accountant, I have to stress I may be missing something here. I do invite correction. However, I don’t think I’m wrong.
Let me show you what I mean. The public announcements on this Fall’s omnibus budget claim that the Conservatives are going to phase in a higher pension interest rate for MPs, which will rise in 2017 to a level where MPs pay into their pension fund from their salaries the same amount that goes into the fund from the public purse, as their employer (the “50-50 mandate”). This has been publicly advertised as a rise in annual contributions from $11,000 per year to $39,000 per year, or thereabouts.
And it may get there, eventually, but I don’t think it’s actually been spelled out yet. Currently, MP pensions are governed by the Members of Parliament Retiring Allowances Act. Under that Act, right now five percent of MPs’ basic salary is deducted and invested in the pension fund. It rises to nine percent on earnings above the maximum pensionable limit. MPs who are over age 71 pay 9% on all of their earnings.
But Bill C-45 rewrites the act. The relevant sections have now been hived off and sent to the Senate as Bill C-46. It’s unbelievably convoluted, presumably to discourage anyone from reading it, but here’s what I think I can make out. The definitions are now spread out over multiple sections of the bill, but again, here’s what appears to be happening.
Starting next year, the MP’s pension contribution rate will fall to four percent — effectively, a 20% cut in what they will be paying into the fund, without any change in what they’re eligible to get out of it. Then, in 2014, it rises back up to 5%, and in 2015, it increases further to 6%. The effect is that, over the course of the next three years, it will look as though MP pension contributions are climbing, but averaged out, they will not actually change at all. I expect this was a compromise delivered to the Conservative caucus: we will get a chance for a press release in 2015 saying pension contribution rates have climbed by 50%, whereas averaged out over three years, they haven’t changed at all.
The change is the same for amounts over the pensionable limit and for members who are over 71 years old: whereas it is now 9%, it will fall to 8% next year, climb back to 9% the year after that, and finally rise to 10% in 2015.
The upshot of all this is that while the government has announced they are “phasing in” pension contribution increases, which will rise to a 50-50 level by 2017, in effect what the government has done is push off all pension adjustments into 2016 or beyond. At that point, what happens is anyone’s guess. They haven’t actually specified how things will go from there; the legislation just establishes a “goal” of setting the rates at 50-50 in 2017 and beyond.
So now we’re left with three facts: first, a pension bill which has been introduced as a dramatic change but really isn’t; second, an abandoned Conservative strategy to use this pension bill as PR ammunition against its opponents (who were expected to vote against it); and third, a sudden agreement to hive off the pension reforms from the omnibus budget bill (which the Conservatives didn’t want) followed by unanimous consent by the House of Commons without any detailed committee study (which the Conservatives did want).
How to explain all this? I’m not sure.