MPs to defy reform of their pensions

MPs will no longer have power to set the terms of their own pensions, after the announcement that this responsibility will be transferred to the Independent Parliamentary Standards Authority (IPSA).

Leader of the House of Commons, Sir George Young, said he would table a motion for MPs to discuss proposed changes, which are expected to follow those recommended by Lord Hutton in his public sector pensions review published last March.

This would include higher personal contributions for MPS and a move to career average earnings as opposed to the existing final salary scheme.

Most MPs earn £65,738 a year, frozen from 2010 salary levels, and they currently have access to the parliamentary final salary pension scheme, which offers a choice of accrual rates. MPs can choose to contribute 11.9 per cent, 7.9 per cent or 5.9 per cent of their salary. These contributions are expected to rise from 1 April 2012, which will be in line with other public sector contribution increases. IPSA will then look to introduce a new scheme, expected to be career average, by 2015.

Sir George said: “We have consistently made clear that parliamentary pensions must be reformed in the light of the Independent Public Service Pensions Commission's findings and subsequent application to other public service schemes. There is no case for MPs being treated differently from other public servants on this issue.

Government has said it is to increase pension contributions by an average of 3.2 percentage points for public sector workers, but those earning under £18,000 will be protected, meaning high earners will pay more. The chief secretary to the treasury, Danny Alexander, has said the highest increases would be capped at five percentage points, which under current conditions would probably be applied to MPs, who earn £65,738 a year.

They will also move from a final salary scheme to to a "career average" scheme. In practice this will only affect ex-ministers, as ordinary MPs have a flat-rate salary.

The government has already accepted that a special case may have to be made for members of the local government scheme which, like the MPs scheme, is self-funded and has a large investment fund.

The MPs' fund, however, is about to go into the red because so many MPs retired at the last election and began drawing their pensions.

Mark Serwotka, general secretary of the PCS union, which has been at the forefront of the strikes against the pension reforms, said: "While the unreconstructed Tory millionaires in the cabinet are seeking to force public sector workers to pay more and work longer for much less in retirement, it seems MPs remain reluctant to see their own pensions cut.

"If this was out of empathy for public servants it would be welcome, but I suspect it has more to do with protecting their very generous arrangements that so far have received little scrutiny.