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Members' Salaries, Pensions and Allowances

I share my right hon. Friend's puzzlement. I can only hope that if Messrs. Watson Wyatt or some other distinguished firm of actuaries was asked to perform a similar operation in future, there would be such discussions. Then we could avoid difficulties. The effect of not allowing for the fact that we have no early retirement provisions is to overstate the pension cost by approximately another 1 per cent. The percentage points are really starting to add up. Watson Wyatt assumes in its calculations that MPs' salaries will increase by an average of 4.5 per cent. per annum. I wonder where that assumption came from, given that, since 2002, MPs' salaries have increased by about half that—by about 2.25 per cent. a year on average, and by well below inflation. I do not entirely understand—or understand at all—why Messrs. Watson Wyatt should assume an annual increase of 4.5 per cent. when making their valuations. On that basis, one must look with a fair degree of scepticism at the recommendations and assumptions that Watson Wyatt have made. They have also made wild errors in relation to the costs of schemes for our comparators. With reference to public sector comparators, Watson Wyatt say that the cost of the police scheme is 11 per cent. The police current employer contribution is 24.6 per cent. and police throughout the country are complaining that it is not enough, and that because of the high cost of their pension scheme, they will have to get huge subsidies from their local authorities to be able to maintain their present activity. That demonstrates once again that the methodology and basic assumptions of Watson Wyatt are critical in this. They seem to have based their costs on a similar 1/60th accrual, on the same basis as in the calculation for an MP with the nine years' potential service. However, a chief superintendent is likely to have a career of more than 20 years. That would result in an accrual rate of 1/30th for each year of service between 20 and 30 years. When Watson Wyatt look at our comparators, they seem to get it seriously wrong. Some of the other examples are not quite so badly wrong, but it does not give one a huge degree of confidence in the recommendations that they subsequently draw from the assumptions that they have made. It is important to get it on the record that the parliamentary contributory pension fund—PCPF—is rather a good scheme. It is similar to a number of others in the public sector, but despite what frequently appears in the press, the cash benefits that are provided under the PCPF are not a king's ransom. The average pension in payment to former Members in the last Government Actuary Department's valuation in 2005, excluding what was being paid to widows, was £15,700 per annum, yet if one looks at what is published in the papers, they give the impression that MPs have to do only one or two terms here to be on £25,000 a year. The average pension in payment is £15,700 for Members who have done many more years than that. The GAD estimates that the average pension currently in payment is around £17,000. That takes account of the pension increases in the past two years and the level of pension of Members who will have retired following the election. The average pension built up to date by serving Members is £20,100. All these figures, which are comfortable—much more so than the pensions of many of our constituents—are nothing like the allegations of gold-plated pensions that appear in the national press. The last triennial valuation of the scheme costs by the Government Actuary's Department increased the Exchequer contribution to 26.8 per cent. of Members' salaries. It is being put about that that is the cost of the scheme, but it is not. It is the cost of the scheme, including the amount that the Government now have to put in to make up for the 15 years under successive Governments of contributions holidays that were taken, which created the current deficit of about £49 million.