Monday, April 12, 2010

MPs' Pension Jackpot Derailing Pension Reform?


So far, Canadian pension reform is all talk, no action. Critics are accusing the Tories of being in denial about pension woes:
Older Canadians struggling to pay for shelter and food can be forgiven for shrugging at the latest public talkfest on pension shortcomings, which continues with Finance Minister Jim Flaherty's roundtable discussion in Winnipeg on Monday.

In the wake of the recession, the golden years appear increasingly bleak for many. Nearly a third of all families lack any pension savings, and 1.6 million seniors are trying to get by on less than $15,000 a year.

An aging population, coupled with strained government finances, has imbued the pension situation with a sense of crisis and prompted widespread calls for action. Prime Minister Stephen Harper's government has responded with expressions of concern and has started working with the provinces on options for better retirement security.

But many who follow the issue say the Conservatives are in denial about the severity of the crisis.

Asked what message he expected to take away from a town hall meeting on pensions in Charlottetown on April 6, Flaherty said, "I expect to hear that there are some gaps in the system (but) that overall the system is working relatively well."

"There are some areas in the research that indicate some middle-class Canadians are not saving adequately for their future, and if that's so, that has to concern all of us."

Flaherty stresses that Canada's retirement-security system is one of the best in the world. Improving pensions is a complex undertaking and policymakers must be cautious about change, he says. "The first thing is don't do any harm to a system that works,"

But critics say the right-wing finance chief is not personally disposed to support any sweeping project like increasing contributions to the Canada Pension Plan (CPP). Partly, it goes against Flaherty's philosophy that private solutions are better than government solutions, insiders say. Also, facing deficits totalling $158 billion by 2014, the Conservatives are in no position to invest to bolster pensions.

So the current public consultations, which will feed into a meeting of federal and provincial finance ministers in May or June, appear unlikely to lead quickly to a wide-ranging overhaul of the system.

Labour leader Lana Payne, who attended one of the federally convened pension roundtables in St. John's, said enlisting Ottawa and the provinces in major reforms will be an uphill battle.

"What we're asking for is a kind of big nation-building moment," said Payne, president of the Newfoundland and Labrador Federation of Labour. She was referring to the labour movement's call for an overhaul of the Canada Pension Plan that would increase workers' and employers' contributions and eventually double CPP benefits.

"The recession highlighted and exposed huge cracks in our retirement system," she said. "But we're dealing with a government that would be philosophically opposed to trying to do anything in this kind of a collective way."

The Harper government put a mention of pensions in the March 3 Speech from the Throne, saying it would continue to work with provinces on options to improve retirement income systems. It also established an annual "Seniors Day."

Ottawa and the provinces began work on pension issues a year ago. But much of the intensity behind the project seemed to evaporate in December when federal and provincial finance ministers received a report from University of Calgary professor Jack Mintz. His conclusion – hotly disputed by pension reform advocates – was that the retirement income system in Canada is working well. With that report in hand, the ministers agreed only to public consultations as a way to focus policymakers' discussions.

Susan Eng, vice-president of advocacy for the Canadian Association of Retired Persons, says the Conservatives appear to be stalling.

On the throne speech, Eng said her group "wanted the government to focus on retirement security and pension reform issues, but got Seniors' Day instead."

Of the latest pension consultations, she said, "They're trying to ask the same questions over and over again, hoping to get a different answer, to see if somebody will tell them, `No, we're fine, don't do any more.'"

So why are the Conservatives not in a rush to revamp the Canadian pension system? Part of the answer is that they, and other MPs, have a vested interest in maintaining the status quo.

Don Martin of the Calgary Herald reports, MPs' pension jackpot back in spotlight:

In 75 days, another 75 MPs will join that most exclusive of retirement clubs by qualifying for the safest pension on the planet.

The surviving MP class of 2004 will have reached six years of elected service on June 24 and thus qualify for a minimum $27,000 parliamentary pension at age 55 that will, in some cases, hit six figures by the time they are unelected.

The pension for those lucky MPs and cabinet ministers like Jim Prentice, Rona Ambrose, Diane Finley and late minister of state Helena Guergis is, according to the Canadian Taxpayers Federation director Kevin Gaudet, "the most lucrative in the country."

Protected from stock market free-falls and indexed to grow without interruption at the rate of inflation, the MP pension fund is the closest thing to a guaranteed senior citizen payoff anywhere.

Actually pension "fund" is a misnomer. The MP contributions disappear into a bottomless pot filled with your tax revenue. That means there's no practical limit to payouts from the no-risk plan.

So unbeatably generous is the scheme that conspiracy theorists suggest enthusiasm for a federal election this spring was dampened by MPs, including 18 Bloc Quebecois, who didn't want to risk losing their seats a few months before they hit the federal government jackpot.

The government pension "fund" has been on an interesting track lately, growing by 10 per cent during the recession in sharp contrast to the 21 per cent average drop in the value of private plans and 14 per cent hit on the Canada Pension Plan, according to a recent Organization for Economic Co-operation and Development report.

This jarring contrast comes at a time when finance parliamentary secretary Ted Menzies is roaming the country for a second year in a row consulting on pensions, some grossly underfunded or collapsing amid corporate bankruptcies, while examining the state of retirement readiness for a report to finance ministers in May.

When asked if parliamentary pensions are on the agenda, Menzies confirmed that was not a topic for discussion. And it's a safe bet this outrageous disparity will never be raised in question period, either.

Every time the MP pension plan comes up, one face comes to mind: Jason Kenney.

The current immigration minister and Calgary MP rocketed to fame by using his status as the Alberta Taxpayers' Federation pension-fighter to publicly shame then-premier Ralph Klein into killing the provincial MLA pension plan just before the 1993 election.

Now that's he's just 41 and at top of the food chain politically with his fifth term in progress and no end to a promising career in sight, Kenney is heading for a six-figure pension when he hits 55, payouts enriched by his salary premium as a cabinet minister.

(As an aside, it's odd how the Prime Minister's Office is stuffed with Canadian Taxpayers Federation alumni, including Stephen Harper's director of communications, his senior press relations officer, a pair of PMO researchers and another former CTF staffer in justice. This is an organization that has its origins in taxpayer outrage at political perks in general and parliamentary pensions in particular. Interesting. I digress.)

Despite a government-commissioned report from economist Jack Mintz last December which concluded Canada was not in an imminent pension crisis, public apprehension about retirement income is clearly on the rise.

Alberta's talking about going it alone with a supplemented Alberta Pension Plan. Ditto for British Columbia.

The federal Liberal "deep thinkers" conference last month featured speakers recommending a supplemental plan allowing Canadians to contribute more toward raising their meagre CPP benefits.

The federal government is musing about boosting mandatory contributions or reforming RRSPs and tax-free savings accounts to induce higher retirement savings.

Any reforms now under discussion will be too late for the first wave of baby boomers now heading for the retirement beach. They'll have to live high on the hog or dine on dog food, based on their current savings.

But there's no small irony in having the one group immune from retirement plan risk -- veteran MPs and the orbiting public service -- as the ones responsible for reforming a system causing the rest of us high anxiety about low pension payouts.

Let me comment here. My stepfather spent over 20 years in public office and I know it's a grueling job that takes its toll. He is now working in Europe for the Quebec government, but once he's done, he will enjoy a nice cushy pension. It's part of the benefits that go with public office and someone who completes at least two full terms deserves a pension. Politicians take huge risks running for public office and they deserve some compensation.

But with such powerful vested interests looking to maintain the status quo, it's easy to get cynical and ask if these politicians really want to reform the pension system. Obviously not.

Nevertheless, I warn politicians that if they don't take pension reform seriously, one day their own pensions will be at risk. If you think it will never happen, think again. Start taking pension reform seriously. We Canadians enjoy a good pension system but it can be a hell of a lot better and it can include both private and public sector solutions.

I will discuss my ideas next Thursday in Ottawa at the Senate Standing Committee on Banking, Trade and Commerce. I also invite Prime Minister Harper and Finance Minister Flaherty to meet with me at any time for a one on one discussion. I have nothing but the best interests of our country in mind when discussing pension reform.

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