Madam Speaker, I am pleased to speak today on third reading of Bill C-85, which proposes amendments to the Members of Parliament Retiring Allowances Act.
Before I begin, I want to highlight the points that I wish to make during my comments. First, it has to do with the question of total compensation. Most members would agree that the pension plan is an integral part of the compensation of any employee. When an employee looks at a position that pension plan is part of the compensation in this debate and in the comments made by hon. members.
They know very well that they are dealing with pension plans as a stand alone item without reference to the total compensation package. That is the first point.
The second point is that the salaries of members of Parliament have been frozen since 1991 and will be frozen and have been designated to be frozen until 1997. That is the commitment the government has made and members of Parliament have made, to have their salaries frozen for seven years.
The third point is that independent consultants have been asked to assess the total compensation offered to members of Parliament. Their conclusion was that the total compensation of members of Parliament was not out of line with comparable work in other sectors.
The fourth point that I am going to make has to do with this bill and what it does. The bill reduces the value of the pension plan that members of Parliament presently enjoy. It eliminates things called double dipping. It sets a minimum age that must be reached before a member can start collecting. It also reduces the accrual rate. This bill reduces the value of the pension plan. To defeat this bill would mean that the existing plan would stay intact. As a result it is clear all members of Parliament will be supporting this bill, if not at least in principle.
I am going to touch on the two options that have been suggested particularly by the Reform Party. I intend to demonstrate that the actual cost of those options would be more to the Canadian taxpayers.
Some individuals and organizations have waged a constant publicity battle against the bill and its provisions as being too generous. They have targeted the earned pension entitlements of individual members. Some of this outside criticism has involved exaggeration that treats pensions in isolation removing them from the total compensation context which is where they properly belong.
The independent study conducted by Sobeco Ernst and Young and tabled in this House in March of last year did not find MPs' total compensation package to be overly generous but I emphasize that it did recommend a redistribution of the various elements of that package. Sobeco Ernst and Young recommended increases in direct compensation with corresponding decreases in indirect compensation including pensions.
This is point number one. We are talking about total compensation. In fact the total compensation is not overly generous but the distribution of that income between the various forms of income should be readdressed.
The Lapointe commission report which was tabled last July also recommends changes. Among other things it recommends that pensions should not be payable before age 55 and that basic indemnities should be increased once the salary freeze is lifted. Again an independent commission has recommended, and the government has accepted the recommendation, that pensions not be payable until age 55 or later and that the basic components of the total compensation should be dealt with but not until the freeze on salaries is lifted. It would be inappropriate at this time to increase the basic salary of members and reduce the pension. We are going to respect the salary freeze that has been accepted by all the civil service and all members of Parliament.
A variety of views have been expressed during the course of debates on the pension issue. Some members no doubt would like to stay with the status quo while others seek radical change. I doubt that there is a single member who has not been affected by all the criticisms that have been made. One thing I am certain of though is that we have all heard from our constituents and we have listened to them.
The government has paid particular attention to what Canadians have had to say on the issue. Bill C-85 fulfils our commitment set out in the election platform with respect to double dipping and the minimum age at which pensions will begin to be paid. It further fulfils the President of the Treasury
Board's commitment made in February of this year to table legislation before the end of April.
I believe that the amendments proposed in the bill are balanced and fair both to the taxpayers of this country and to members of Parliament. The proposed changes show Canadians that the government has taken note of their concerns and has acted upon them.
At the same time the government is conscious of the fact that in periods of deficits and public sector salary freezes, it would not be ethical to increase members' basic indemnities as recommended by the Sobeco Ernst & Young report. Consequently it would be inappropriate to implement the recommended cutbacks to MP pensions at this time.
As I have said, the changes proposed in this bill are reasonable and fair. Nevertheless not everyone will agree with them. There will be criticism within and outside this House that the changes do not go far enough. This said, I think we will all do well to remind ourselves that no matter how hard we try we cannot please everyone. I do believe that this bill represents a fair and justifiable compromise that seeks to accommodate various points of view.
I would like to go briefly through the main changes to the pension plan proposed by Bill C-85. The new minimum pensionable age will be 55. In the future, senators and members of Parliament who earn over $5,000 a year from an appointment, employment or other personal service contracts in the federal public sector will see their pensions reduced on a dollar for dollar basis by their earnings. The pension accrual on future service will drop from 5 per cent for each year of service to 4 per cent. The contribution rate on future service for members of the House of Commons will drop from 11 per cent to 9 per cent of salary. Common law spouses will be recognized for survivor benefit purposes just as they are under the public service, Canadian forces and RCMP pension plans.
In keeping with the generally accepted practice in Canada that when changes are made in pension plans they do not reduce benefits accrued to date, all of these changes, with the exception of changes to the survivor benefit arrangements, will apply only to pensions or portions of pensions earned on service that occurs after the date this bill receives royal assent. This represents a fair and equitable approach. It means that members who have organized their financial affairs taking into account the pensions they have earned to date will not see rules changed midstream leaving them potentially adversely affected.
As I have said, it is simply not possible to please everyone. Consequently, those members of Parliament who do not agree with the changes and reductions proposed by Bill C-85 or who do not believe them to be far reaching enough will not be obliged to continue participating in the plan. As the Prime Minister promised, all members of Parliament will be given a choice. They will have 60 days from the date this bill receives royal assent to exercise an option to stay in the plan.
Having touched briefly on the main changes proposed by Bill C-85, I would now like to focus on the issue of the new minimum age for payment of members' pensions. As we all know once a member has six years of service, the present provisions see the pension commence as soon as the member leaves office. I would like to repeat that because some of my constituents have understood it differently. There is no pension payable when a member completes six years. Six years is the earliest date at which a member could collect, but he or she must have left office to commence receipt of pension payments.
I do not believe this provision was the result of some arbitrary decision. There were sound philosophical and practical reasons behind it. The provision was introduced so a member would have an immediate income on which to draw to assist him or her in the often difficult transition from public to private life. This is the only immediate income available to a member with an immediate pension entitlement. There are no cash settlements, no lump sum severance benefits. In fact, members of Parliament do not qualify for unemployment insurance benefits under the current legislation.
I would remind those who believe the immediate payment of a pension is indefensible that not a single member of this House enjoys any kind of job security. There is absolutely no guarantee of a career as a member of Parliament. Every four or five years we must seek re-election and many of us find our tenure in this House brought to an abrupt end.
Nevertheless, despite these considerations a general consensus was reached that the minimum pensionable age should be raised. In addition, after considering recommendations from both the Sobeco Ernst & Young and the Lapointe commission reports, the government accepted the recommendation that 55 was a reasonable pensionable age.
This new age will only apply to pensions or portions of pensions earned after the bill receives royal assent. This means that any pension earned prior to royal assent will still be payable according to the existing rules, that is, as soon as a member leaves office. Once again I should emphasize the government believes this to be a fair and equitable approach and one that is consistent with generally accepted and legislated pension practice, namely the protection of accrued pension rights and benefits.
I know full well there will be critics who say we are not going far enough, that possibly the minimum pensionable age should be 60 or 65. To such critics I would again emphasize the precarious nature of an MP's career and the likelihood of a member suddenly finding himself or herself unemployed. We all know it is not easy to switch careers in midstream and once a person has turned 50 years of age it can often prove impossible to find new employment. Therefore, I would suggest that it is
not unreasonable to propose in future MP pensions should go into pay once a former member reaches age 55.
How does age 55 compare with the pensionable age under provincial pension plans for members of respective legislative assemblies? The government's proposal of age 55 appears to be very much in keeping with the majority of those plans. Let me give some examples. Age 55 is the earliest pensionable age for MLAs in Saskatchewan, Nova Scotia, Yukon and the Northwest Territories.
Some provinces have adopted a formula approach. In Newfoundland the pension starts when age and service total 60. In Ontario it starts when a member's age and service total 55. British Columbia has a combination of straight minimum age and a formula requirement. The pension is paid when a member reaches age 55 or when age and years of service total 60. Quebec has a similar arrangement whereby the pension goes into pay when a member's age and service equal 65, but the member must be at least 50 years of age.
Only the province of New Brunswick still has no minimum pensionable age. Alberta has terminated the MLAs pension plan and Prince Edward Island has discontinued its pension arrangements for its present MLAs, although new arrangements are under review by an independent commission. The recent election in Manitoba was to see the existing pension arrangements terminated and replaced by a registered retirement savings plan, to which both MLAs and the province would contribute.
If we look at the pensionable age for elected representatives in some other western democracies, we also see a variety of practices, some of which contain a service component, some of which are based on age alone once the pension is vested. For example, in Australia a pension is paid after 12 years of service or at age 60 with at least eight years of service. In Belgium the minimum pensionable age is 55 or age 52 with eight years of service. In France the pension is based on age alone, age 55, while in Sweden it is based on service alone being 12 years. In the United Kingdom the pension is payable at age 65, or age 60 if the age and service equal 80. In the United States it is the age of 62 or age 50 with 20 years of service or 25 years of service with no age qualification.
I would suggest that these various combinations of age alone, service alone, or age and years of service together have been developed in recognition, and I stress in recognition, of the uniqueness of service as an elected representative, in recognition of the fact that there is no guaranteed career as such. I would suggest that the government's decision to set age 55 as the new minimum pensionable age is well within the range of those generally accepted for elected representatives of the countries I have just mentioned.
We have looked at the pensionable age ranges for the MLAs of the provinces and we have looked at the arrangements for elected representatives in some of our fellow western democracies. I do know there are some people who will ask how a pensionable age of 55 compares with the pensionable age for ordinary Canadians. I go back again to the unique and specialized nature of our employment here on the Hill and I point out that it is not unusual to tailor pension plans to meet specific career needs to accommodate career patterns that differ from the norm.
I would light to highlight the special early retirement provisions that have been put in place for air traffic controllers, members of the Canadian forces and the many police forces across the country. These all recognize the vagaries, demands and requirements on career patterns that do not correspond at all to career patterns of the majority of Canadians.
I would like to go back and look at the options Reform members have presented to the House. I should like to address the general feeling of many of their speakers that pensions of members of Parliament should have the same provisions as those applicable to the private sector.
One aspect of private sector pension plans to which those members have not given consideration is the vesting differential. Vesting is the point at which the contributions of the employer become the property of the employee. As an example, in many plans in the private sector companies have plans which allow members to start accumulating pension benefits after only two years of service, whereas presently members of Parliament do not have that kind of provision.
If we were to adopt two years of service before vesting began, each and every member of Parliament who has served in this place would qualify for a pension, when in fact less than half of members of Parliament ultimately qualify for pensions. On that basis alone, to simply change that aspect of a pension plan would mean that the cost to the Canadian taxpayers would double.
There are some differences. For instance, members of Parliament are required to pay 11 per cent of salary and the basic salary for a member of Parliament is $64,400 a year. Eleven per cent of that salary or some $7,000 per year must be paid into the plan. No private plan requires 11 per cent. Most plans only require about a 3 per cent contribution rate to a maximum of some $3,000 to $5,000. In terms of the actual contribution on behalf of members, it is substantially higher than we see in private plans.
The vesting for members begins after six years, whereas private plans begin vesting after two years and employees could qualify for a pension after only two years of service.
Members of Parliament also have their eligible RRSP contributions reduced by the amount of pension benefits accrued in the plan. Should a member not qualify for the pension, the funds they have contributed would be returned to the member, but the RRSP limits that were forgone because of the MP pension plan are not recoverable.
Members can qualify for pensions after 19 years of service of up to 75 per cent of their salary. Many plans pay up to 90 per cent. I give examples of teachers, school boards and firefighters.
The hon. member for Calgary Centre said that members of Parliament should not receive any expense allowance and that they should be paid $150,000 a year. That is the wrong time to increase members' salaries.
I simply close by saying that I have no hesitation in supporting Bill C-85 which brings into effect important changes that can be fairly and reasonably implemented at this time.