Impact of Government Pay cut and Pensions ProposalMPs and Ministers’ SalariesBackgroundMPs and Ministers pay 12.5 per cent of their gross salaries into their pension fund called the Ministers and Members of the Legislature Pension Fund. Government employees pay 8 percent of their gross salaries into their pension fund called the Public Service Superannuation Fund. Government matches contributions of employees and MPs to their respective plans.Pensions are paid out based on a formula pertaining to the number of years in which contributions were made.Premier’s Proposal (simplified based on a $100 salary)Impact on MPs Salary Current Proposed DifferenceGross Salary $100 $100Less pension deduction 12.5 percent ($12.5) -Salary Cut of 12.5 percent - ($12.50)Salary Cut of 5 percent - ($5.00)Take home pay before other deductions(payroll tax, social insurance) $87.5 $82.50 $5.00Result: MP take home pay before other deductions is $5 lessImpact on Government MP Salary ExpenditureMP’s gross salary cost to government $100 $100Government pension contribution (12.5 percent) $12.5 -MP salary cut of 12.5 percent - ($12.50)MP salary cut of 5 percent - ($5.00)Total Government cost before other deductions(payroll tax, social insurance) $112.5 $82.50 ($30.00)Result: Government gains an additional $30 to spendImpact on Pension FundMP’s pension contribution 12.5 percent $12.5 -Government pension contribution 12.5 pension $12.5 -Net contribution to pension fund $25.0 - ($25.0)Result: pension fund loses $25 of contributionsImpact on workers Salary Current Proposed DifferenceGross Salary $100 $100Less pension deduction 8 percent ($8) -Salary Cut of 8 percent - ($8)Take home pay before other deductions(payroll tax, social insurance) $92 $92 -Result: Government workers take home pay before other deductions is unchangedImpact on Government Salary ExpenditureGovernment worker’s gross salary cost $100 $100Government pension contribution (8 percent) $8 -Government worker’s salary cut of 8 percent - ($8)Total Government cost before other deductions(payroll tax, social insurance) $108.0 $92 ($16)Result: Government gains an additional $16 to spendImpact on Pension FundWorker’s pension contribution 8 percent $8 -Government pension contribution 8 percent $8 -Net contribution to pension fund $16.0 - ($16.0)Result: pension fund loses $16 of contributions