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MPs Vote Themselves Pension Rise


By: Author Unknown
 BBC News, July 23, 2002


Counting money

Some MPs are opposing the deal

MPs have voted themselves an enhanced pension deal, which will be partly funded by the taxpayer.

The new plan means MPs will not have to serve as long in Parliament in order to receive their full pension.

Members' contributions will increase from six to nine per cent of salary - but the taxpayer would pay up to 40% of the extra costs of 860,000 a year, for the next two years.

Deputy Leader of the Commons, Ben Bradshaw, said it was the government's expectation that costs would be "clawed back" from MPs and that overall there would be no additional cost to the taxpayer.

The move comes at a time of great uncertainty about the future of occupational and private pension schemes.

'Out of touch'

MPs are proposing a rise from one fiftieth to one fortieth of their annual 55,000 salary to be paid per year of service.

They argue that the precarious nature of the average Parliamentary career means they deserve a better pension deal.

But some, including Lib Dem pensions spokesman Steve Webb, have spoken out against the new deal.

"We look as though we are completely out of touch," he told BBC News.

"We know that our own constituents are having real pension problems.

"Whether they are in a company scheme, or a private scheme. It depends on the stock market.

"We as MPs should be leading by example, not asking our constituents to put an extra penny into our already very good pension schemes, but concentrating our energy on tackling the problems that their pension schemes face."

Contribution holiday

Conservative MP John Butterfill, chairman of the MPs' pension trustees, insisted the rise was justified.

"For at least the last 12 years, the government, or the Treasury as employer, has been taking massive contribution holidays.

"Every year during that period they have been putting in less than half the recommended employer's contribution."

The change was voted through by a committee of 20 MPs.

Industry anger

Iain Martin, editor of Pensions Week magazine, said: "There is a feeling within the pensions industry generally that what the MPs have done is a total disgrace.

"It comes at a time when leading unions are threatening to strike over cuts in pension contributions and fears over the collapse in equity prices."

The MPs new pension arrangements will also benefit the mostly Labour members who contributed to a public sector pension before they entered Parliament, Pensions Week claims.

These MPs will be able to transfer into the Parliamentary scheme, and use their years of public sector contributions to allow them to qualify for full benefits sooner than normal.

The magazine claims 91 out of the 267 Labour MPs who entered parliament in 1997 will be eligible to transfer their pension in this way, but new entrants to Parliament will not.

Leaked letter

Tuesday's vote also coincided with a leaked letter suggesting the new scheme was opposed by the senior salary review board, which oversees MPs' pay.

The Daily Mail reported that the head of the board, John Baker, had recommended that MPs should continue to accrue their pensions at the current rate.

According to the Mail, Mr Baker wrote: "The Review Body considered whether an accrual rate of one fiftieth still seemed appropriate when considered alongside the rates available in other schemes, particularly those covering comparator jobs.

"The Review Body concluded that it did and that remains the view."

Unpopular move

The measures were approved by the Standing Committee on Delegated Legislation.

They would enable them to retire on a full pension of two-thirds of their final salary after 27 years at Westminster, rather than the current 33 years.

Leader of the Commons Robin Cook described the proposals as a "sensible compromise" intended to reflect the shorter average length of service undertaken by MPs, which meant only a small number now qualified for the maximum entitlement.


UKs FTSE 100 Index of Leading Shares fell to a six year low on July 22nd, indicating that pensioners of the baby-boom generation may not enjoy similar high returns of the past two decades. Research suggests private pensions are a higher risk than government related plans.

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