Why Should Rulers Get To Feather Their Own Nests?

Here in Canada there is a simple rule regarding the saving of money in a registered retirement savings plan. No more than 18% of your income can be saved per year.

I work for the provincial government here in Ontario. Currently the mandatory plan that I belong to takes 7.6% of my money, and combines it with a matching 7.6% from my employer. That means I am being forced to save about 15% toward my pension. I get a tax savings from my 7.6% share.

However, within 2 years it will be 9.6% from each, meaning that a total of 19.2% of my income will be saved each year. More than the 18% Joe and Jane Public are allowed. This results in a pension payment of 2% of my best years, per year of work. That is a defined plan, something many of my readers can only dream about. As an example, if I work for the province for 25 years, then my pension will be 25 x 2% = 50% of my best years of income. If I make $70K per year, then my pension will be $35K per year. (it is more complex than that, but that is close to the correct numbers) I do not have to worry about return on investment, as my plan is defined to pay a fixed percentage. Keep in mind that the plan sponsors have raised the contribution levels from 6.6% due to economic downturns, so I am not totally immune to those factors. The plan for our MPs is NOT affected by the financial world in any way. It is guaranteed to increase in value at a certain rate no matter what.

My counterparts working for the federal government get a 2 for 1 deal. I do not know the % values, but for every $1 that the employee is forced to save, the employer puts in $2.

What about our members of parliament (MPs)? What deal do they have? Again, I do not have all the numbers, but according to an article in The Toronto Star, here is the effect.

Ontario’s civil servants = close to 20% saved (1:1)
Canada’s civil servants = about 33% saved (2:1)
Canada’s MPs = about 50% saved (4:1)

The numbers in () are the employer:employee ratios. So, in the case of our MPs, for every $1 they invest, the employer (you and I) invests $4.

Here is a (slightly edited) quote from the Star’s article.

Federal public servants enjoy pension benefits that amount to about a third of their income, through a so-called defined-benefit plan that has been criticized for being too generous and unaffordable.

But MPs and senators do considerably better than that, with pension benefits worth about half their income — and indexed to inflation.

Our rulers have a very generous pension compared to what they allow the ruled to have. That’s monumentally unfair. Is there any justification for it.

While I would have liked some further hard facts, like “what % comes directly out of MP’s pay?”, the article does show a discrepancy in how rules for the common folk are different than rules for the rulers.

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