MPs’ final salary scheme should be scrapped, the CIPD has told a review body.
In a submission to the Senior Salaries Review Board (SSRB), the body which reviews MPs’ salaries and benefits, the CIPD said the defined benefit pension should be replaced by a flexible benefit scheme. This would enable MPs to choose the benefits they wished to fund or buy including a personal pension plan.
Charles Cotton, the CIPD’s reward adviser, said that if the final salary scheme was kept, “it should be made more affordable by increasing MPs’ contributions, reducing the accrual rate, capping the pensionable salary and removing the option to buy added years”. The CIPD also recommended “removing the option to transfer benefits accrued in another pension, increasing the normal retirement age and reducing the pension for early retirement”.
The CIPD also said that replacing the current pension scheme with flexible benefit accounts would help attract prospective MPs “from a wider talent pool by offering choice and putting pensions at the heart of a total reward strategy. This will help create a parliament that reflects the society it purports to represent.”
The SSRB’s consultation period runs until the end of July. It will then draft recommendations for reform which will be put to the Prime Minister in the autumn.
10 things you didn’t know about MPs’ pensions:
- MPs get one fortieth of their final salary for every year served in Parliament
- They contribute 10% of their salaries to the Parliamentary Contributory Pension Fund
- As of April 2008 the average length of service of MPs contributing to the fund was 12.2 years
- Those MPs who left Parliament in 2005, before the last General Election, had served an average of 14.4 years
- The fund had a shortfall of £50.9 million in March 2009
- Taxpayers are paying £12.35 million a year into the scheme
- MEPs’ pensions are worth 3.5% of final salary, times every year they’ve served, up to a maximum of 70%. Taxpayers fund it all, MEPs make no contribution
- Members of the Scottish parliament voted in November 2008 to increase their final salary scheme from a 50th for every year served to a 40th.
- Members of the Northern Ireland Assembly (MLAs) voted likewise in April 2009
- UK MPs are paid £64,776, MSPs £55,381, and MLAs £43,101.