Good morning, Mr. Chair, Honourable members of the Committee. Thank you for the opportunity to appear before you today.
Mandate and Activities of the Office of the Chief Actuary
The primary role of the Office of the Chief Actuary (OCA) is to provide actuarial services to the federal and provincial governments that are Canada Pension Plan stakeholders. While I report to the Superintendent of Financial Institutions, I am solely responsible for the
content and actuarial opinions reflected in the reports prepared by my office.
The OCA conducts statutory actuarial valuations on the CPP, Old Age Security Program, and pension and benefits plans covering the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police, federally appointed judges, and Members of Parliament. Since 2001, we have also performed annual actuarial reviews of the Canada Student Loans Program.
In addition, whenever an amendment is made that has a significant impact on the financial status of a public pension plan falling under the statutory responsibilities of the Chief Actuary, the OCA must submit an actuarial report to the appropriate minister.
Recently Introduced Amendments to the Members of Parliament Retiring Allowance
Changes to the pension plan for members of House and Senate were recently introduced in Bill C-45: A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures, and more recently in Bill C-46: An Act to amend the Members of Parliament Retiring Allowances Act.
The main changes put forth to members retirement allowances, that is, their pensions are as follows:
- The contribution rates paid by members will be increased to bring their share of their plan’s current service cost from 14% to 50%, thereby splitting the cost 50/50 between the members and the Government. With this equal cost sharing, members will contribute just over 20% of their pensionable earnings by 2017 compared to the current rate of 7%. In dollars, this represents an after-tax contribution increase for a member of the House of Commons from about $6,000 in 2012 to $21,000 by 2017. For a member of the Senate, the after-tax contribution increase would be from about $5,000 in 2012 to over $18,000 by 2017.
- The age at which plan members can retire with an unreduced pension will be raised from 55 to 65, effective January 1, 2016.
- Retirement allowances will be permitted before age 65, subject to a reduction;
- Benefits paid will be coordinated with those paid by the Canada or Québec Pension Plans;
- The rate of interest that is credited to the pension accounts will be reduced from 10.4% to the same interest rate as the funding valuation interest rate, which would allow the accounts to be more closely aligned with the actuarial liabilities of this pension plan;
- The expected total savings to the Government is about $29 million by 2017-18; and,
- The retirement allowance for the Prime Minister will be reduced from 2/3 of his salary as a Prime Minister, to 3% per year of service as Prime Minister. Also, the age at which this is payable will increase from 65 to 67.
Thank you for the opportunity to appear before this Committee to discuss the amendments to the Members of Parliament Retiring Allowances Act. I would be pleased to answer any questions that you might have.