A historic bill to reform the federal MP pension plan received royal assent Nov. 1.
"Our government moved quickly to implement MP pension reform because we believe it is important to lead by example," said President of the Treasury Board Tony Clement. "These reforms underscore our government's commitment to keeping taxes low, returning to balanced budgets and respecting taxpayers' money."
The Pension Reform Act amends the Members of Parliament Retiring Allowances Act so that MPs will pay 50 per cent of the pension plan's cost, up from the current 14 per cent.
Once fully implemented, MPs' contributions will nearly quadruple from $11,060 to $38,796 per year, said the government.
"We are paying our fair share," said Clement. "Our government is proud to be the first government in history to introduce such a significant change to the system."
The age at which MPs can retire with an unreduced pension will also rise from 55 to 65, as of Jan. 1, 2016. The reforms are expected to save taxpayers approximately $29 million by 2017.
But further reforms to the MP pension plans are required, according to a report by the C.D. Howe Institute.
“More sweeping reforms are needed to achieve better funding and a more reasonable division of obligations and risks between taxpayers and public servants,” said Federal Employee Pension Reforms: First Steps — On a Much Longer Journey.
"The guaranteed incomes those plans promise participants are far more valuable, and their costs and obligations on taxpayers are far larger, than reported," said William Robson, president of the institute.
The report found:
•The annual accumulations of wealth in these plans are now much higher than their reported current service costs, meaning that employee contributions will fall far short of their advertised 50-per cent share.
•Taxpayers will still bear more than one-half of the risk of changes in the cost of new obligations and the entire risk of changes in the cost of servicing past obligations unless the federal plans are converted to target benefit plans in which benefits adjust depending on funding.
•The proposed reforms will still leave the MPs' plan completely unfunded.
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