Politicians’ Pensions

Recently there have been increasing discussions about the cost of public sector compensation and benefits. In Alberta, after the revelations at Alberta Health Services, the common man was made aware of supplemental pension funds. Now with the start of a new Parliament, the pensions of MPs and the Prime Minister are also coming under the microscope. The trend of supplemental pension seems to exist at all levels of the public sector. The questions are; why do they exist? Why are they so generous? Why do we continue to provide them?

Politicians like most of us are entitled to a pension, so are public sector workers. In the case of politicians, their career may be short lived and in many cases most of us would not agree to spend the time and aggravations they have to put up with.

We can all agree that the size and the formula used for politicians’ pensions are far more generous than most of us. They have large pensions, because in most cases they award themselves lucrative packages; albeit some government use an ‘independent’ individual or committee to award themselves compensation. The results produced by these independent adjudicators seem to always favor an increase rather than a decrease in compensation.

As for public servants we are always told that the pensions and benefits must be competitive with the private sector to attract good workers. All paid for by taxpayers.

I will go further in saying that if they do not like pension plans offered when they sign up, they can go and find a job in the private sector; where we are always told that compensations are better. They have a choice, while taxpayers never have a choice about the level of taxes they pay to support these inflated costs. History shows that public sector costs are rising to such levels that in some instances governments are going bankrupt in the United States, and Europe.

The dilemma faced by politicians who have large pension funds happens when some of them try to cut costs in the public sector. Given their lucrative packages, it becomes difficult to say to public sector unions that their compensations will be cut. Leadership demands that an example should be set from the top. Especially at a time of economic turmoil, there is not only a need to cut public sector costs but also an opportunity to restructure the civil service. How are politicians, of any stripe, be able to reconcile their compensation with major cuts?

The problem is that the public sector is rarely managed like the private sector. The demands of customer service may be the same but in the public sector they are rarely achieved to the customers’ satisfaction. In the private sector at least some shareholders do benefit from the results and share in the profits.

There is no doubt that the greater public awareness of the public sector’s pension funds regime is causing problems for politicians. It is time for politicians to take responsibility and reform their pensions. In our opinion there are better ways to have an equitable system for all. In addition to the proposed changes made by the federal Government it would be nice to see the implementation of the following:

• Reduce politicians’ pension. At all levels
• Increase the amount of RRSP and TFSA contribution for all Canadians
• Reduce the tax rate on withdrawal of RRIFs, and annuities

Now that the federal politicians have agreed to review and change their pensions, it would be nice to see their provincial counterparts do the same thing.

Politicians must remember that their pensions are paid for by tax payers. Only when there is balance can they say they are accountable.

Marcel Latouche

President & CEO

The Institute for Public Sector Accountability

ipsa@shaw.ca