PARLIAMENTARY PENSION SCHEME

Taxpayers will be contributing an extra £25m over the next three years to make up the shortfall in the pension fund for MPs. As with hundreds of company pension schemes the drop in the stock market has blown a hole in the fund and it needs to be filled up. But instead of the scheme members paying extra, the Treasury is to treble payments to the Parliamentary Pension Scheme from 8% to 24% of MPs salaries to meet the gap. Steve Webb, the Liberal Democrats work and pensions spokesman, said the move "does not look right" at a time when constituents' private pensions are doing so badly.

Ben Bradshaw, the Commons deputy leader, said part of the rise in contributions was necessary to meet a deficit in the Parliamentary Pension Scheme of £25m. In 2002 MPs voted themselves an enhanced pension deal, with a rise from one fiftieth to one fortieth of their annual £55,000 salary to be paid per year of service. They argued that the precarious nature of the average Parliamentary career means they deserve a better pension deal. The move, which is likely to infuriate pensioners' groups unable to rely on large hand-outs from the Exchequer, was blamed by the Government yesterday on the stock market. But it also conceded that the more generous pension package for MPs approved by the Commons last year had contributed to the deficit.

He said the main reason for the huge increase was the decision to end the contributions holiday enjoyed by the Treasury for the last 13 years and "disappointing investment returns". He added, "The surplus on the scheme has now been exhausted in this way and Exchequer contributions must revert to a level reflecting the long-run costs." The Commons agreed better pension packages last year, although they might be reflected in the next review of MPs' salaries. David Willetts, the shadow Secretary of State for Work and Pensions, said the pension fund had "come down to earth with a bump". He said it was "mirroring the experience" of many schemes which faced higher contributions because of stock market losses and higher taxes on pension funds.

Mr Webb said, "I think that we as MPs should have no better, no worse position when this sort of thing happens, as our constituents in private sector funds. What's happening to them is that in some cases, workers are having to put more in or are seeing their benefits reduced as well as employers putting more money in. What's happening for us is the whole of the amount of the shortfall is being met by the taxpayer. All I am saying is, at a time when our own constituents' pension funds - particularly in the private sector - are doing very, very badly and Parliament arguably has failed to address that problem urgently enough, it simply doesn't look right for us to expect the taxpayer to meet all of our deficit without us putting anything extra in at all."

Mr Webb said he believed the government was concerned that the MPs "wouldn't wear" being asked to make up the full cost themselves. "I think the same thing has happened again this year," he said. David Willetts, shadow work and pensions secretary, said, "The fund is mirroring the experience of many funded pension schemes, which are seeing increased contributions to make up for the cost of the Chancellor's £5bn a year tax imposed on pension funds in 1997 through the abolition of the dividend tax."

Taxpayers face a £470BILLION “black hole” in pension funding for public sector workers. That's the shortfall between the cash set aside and the money needed to pay pensions for millions of teachers, nurses, doctors, civil servants and bureaucrats. Ex-Bank of England economist Neil Record, who calculated the figure, accused the Government of hiding the full impact of the crisis. He says ordinary taxpayers may have to find £21billion a year to pay the “elite” public sector oldies their inflation-proof pensions. Mr Record, now an investment manager, added, “The liability is enormous. It is larger than the National Debt of £435billion and almost five times bigger than the private sector gap.”

The shortfall will grow as workers live longer and public sector jobs boom under Labour. More than a quarter of all workers are now on the public payroll. Mr Record said private sector workers struggle to pay for their own retirement while subsidising state employees who still get enviable final- salary-linked deals. Tory shadow trade secretary Stephen O’Brien described the crisis as a “timebomb”. He said, “The huge problem, in private and public sectors, is evidence of how Labour has failed current and future pensioners.”

Just a few days after more than a million local council workers went on strike to protest at government plans to scrap a deal allowing them to retire at 60, forcing them to work until 65, it was revealed that taxpayers will have to pay another £1.2million-a-year so MPs can boost their generous pension scheme.

Dave Prentis, of Unison, said, "The hypocrisy of these MPs is breathtaking. We can only hope they are just a little bit embarrassed at the timing of this announcement, given that the Deputy Prime Minister has just cut the pensions of more than half a million local government workers. It really is one rule for MPs and another for the rest of us."

The final salary pension scheme enjoyed by MPs has developed a black hole because growing life expectancy means retired MPs are claiming from the fund for longer. As a result, the Government Actuary has announced contributions from the public purse will increase by 2.8%. The black hole in the £279million pension scheme has now grown to nearly £50million, up from £25million four years ago.

Someone who has been an MP for 30 years could retire on almost £45,000-a-year. For every £30,000 workers in the private sector have to save to afford the same pension as an MP, Parliamentarians must put aside just £6,000. MPs also gave themselves a 2% annual pay rise. (Source: Daily Mirror, Mar/06)

Government Cabinet Ministers will enjoy retirement on 'gold-plated' pension packages worth £25million. The largely taxpayer-funded packages, which will let ministers retire at 60, were revealed just days before the rest of the country is expected to be told to work until 68.

The multi-million Cabinet pension pot will fund annual payouts of more than £50,000 for senior ministers - with the Prime Minister set to receive £123,000 a year. By contrast, millions of Britons face financial hardship in retirement. The average worker, with a £40,000 company pension pot, will get just £1,600 a year to add to a £75 weekly state pension which has itself been condemned as inadequate by campaigners.

Despite being stripped of his department, John Prescott still enjoys a package worth £1.5million, paying out £50,000 a year. In total, the 15 most senior ministers have a pension fund equivalent to £25million. The figure is higher than the £20million the Government put into the Financial Assistance Scheme, which gives a lifeline to 85,000 retired workers left with no pension after the collapse of company schemes.

Even backbench MPs, who earn £60,277, can expect to retire on a pension of £40,000. Their pensions are still calculated on the basis of their final salary, even though thousands of firms have had to close such schemes because they are just too costly. An MP's pension also accumulates more quickly, building up at a rate of 1/40th of salary each year, while the rate for ordinary workers on final salary schemes is 1/60th.

To qualify for a full pension, which is two-thirds of their final salary, MPs therefore have to work for only 26.6years, or two-thirds of 40. Workers elsewhere have to put in 40 years. Taxpayers have already been asked to provide an extra £1.2million a year to plug a black hole in MPs' pensions. Well, they weren't asked, it was just taken. (Source: Mail on Sunday, May/06)