The MP's pension fund deficit currently stands at £49.5m having risen from £25.2m in 2002, and the taxpayer will pay the cost of this shortfall.
It has just been announced that contributions from public finance to this fund will rise from 24% to 26.8% to cover the deficit. Taxpayer contributions to the MP's pension fund is already more than four times the amount that currently goes into the average worker's fund.
This announcement quickly follows that on MP pay rises. An MP's salary will rise to £60,277 from £59,095, Cabinet ministers' to £136,677 from £133,997, and the prime minister's to £187,610 from £183,932.
This means that an MP, who is paid £60,277, and retires after 26 years service will receive an inflation proof £40,000 per year.
It is, however, a contributory pension. MP's will now have to contribute 10% of pre tax income for 26 years to receive this pension which is calculated as 26/40ths of final salary. They can elect to pay a reduced rate of 6% per annum, but in this case will receive 26/50th of final salary. This is in comparison with the local government worker who contributes 6% of pre tax income for 40 years to receive a pension calculated as 40/80ths of final salary.
In their fight with the unions, the government seem happy to infer that all local government workers retire at 60 on full pension. In reality the average retirement age is 64.5 years. Of those who retire early, 22% are forced to retire due to ill health. The average pension received is only £3,600, and for women this drops to £1,500. This average is more than 10 times less than an MP, and up to 100 times less than a CBI director.
The '85' rule that is currently at the centre of the public sector pension dispute does not apply to MPs. Instead they have the more favourable '80' rule. This means that they can retire on full pension at 60 years of age if their age and service years total 80 or more. This is a strange situation, since the main argument against the '85' rule is that it fails to comply with age discrimination legislation, however this does not appear to apply where MPs are concerned.
Reference 'PARLIAMENTARY CONTRIBUTORY PENSION FUND' http://www.publications.parliament.uk/pa/cm200506/cmselect/cmfund/979/979.pdf