---

Members' Salaries, Pensions and Allowances

I do not have the figures to hand, but it is a very small number. Only a minority of Members ever go the full distance. The average Member comes in at the age of 42 and leaves at the age of about 52. Very few Members will ever get to the full final salary, and that will not change much because of boundary changes and Members losing their seats. The media think that we backdated the fortieths, but we did not. I would still have to work in the House for 31.5 years to get a full pension. Only those Members who have come into the House most recently since we moved to the fortieths arrangement will not have to work more than 27 years. As I was saying, the 26.8 per cent. headline figure of contributions for us is misleading, because it includes 8.7 per cent., which is the sum per annum that is allowed to make up the estimated deficit of £49.5 million, which has arisen entirely from the contribution holidays. That is not helped by the abolition of the tax relief, which the Government implemented early in their life. Our scheme has been affected by that just as much as anybody else's. That leaves an actual Exchequer contribution for future service of about 18.1 per cent., which is broadly similar to private sector schemes and other public sector schemes, which can quite often be more. For example, the civil service scheme is costing about 19 per cent. So we are not out of line with either the private sector or the public sector. Ours is an unusual scheme in a number of respects. First, ours is virtually the only public sector scheme that is funded by Members' contributions, investment returns—because ours is fully invested—and an Exchequer contribution. So it is unique in that. The other area in which it is unique is that it is not a final salary scheme. It is a scheme based on the salary of the lowliest Back Bencher at the time of retirement. It is true that Ministers or office holders have an additional amount of income and they pay 10 per cent. of that addition into a special account, which then effectively buys them additional years—that is the way it tends to operate—but that applies only for the period, often limited, when hon. Members are Ministers or office holders. They can be very brief careers indeed in some cases. The general public think that Ministers will retire on a pension that is two thirds of their ministerial salary. They do not and they will not, with the exception of the Prime Minister, Mr. Speaker, and, until recently, the Lord Chancellor, although that is now being reviewed. Everybody else retires with a pension that is based upon that of the ordinary Back Bencher. That is unique. When everyone outside says, ““Oh, but you are on a final salary scheme,”” they expect us to have a scheme that is based on our peak earnings in this place, but that is not the case. If an MP—even those who have elected to build up a fortieth straight, which is the newer people coming into this House—was to serve 15 years, which is rather more than the average, they would be entitled to a pension of only £22,500 compared with the enormous figures that are estimated by the media, who are extraordinarily badly informed on these matters. Earlier, I touched on the problem of retained benefits. Those who had pensionable careers before they came to the House are not entitled to their full parliamentary contributory pension fund pension because of the restrictions imposed, although they could go back to a 1/60th scheme, which is one of the recommendations in the SSRB report. Even as we are, MPs will have paid a higher contribution rate, at 10 per cent., than that made by almost all other employees in the private and public sectors. Indeed, executives in the private sector typically pay less than 6 per cent. for far more generous schemes than are available to us. I turn to the report's recommendations. Recommendation 8 relates to the deficit and says that the Government contribution should be limited to 20 per cent. of the payroll. I do not disagree with that, but the Government are suggesting that if they go beyond that, we should either have a full review or any increase in costs should be shared equally between Members and the Government. For the most part, that pattern does not exist outside the House; if there is an agreement that an increase will be jointly funded, it is normally according to the same ratio—for us, that would be 20:10, or two thirds for the Government and one third for us. Recommendation 6 is about retained benefits, and I am happy about it because it provides for an arrangement under which reduced contributions would be payable by those who could not get a full pension. That seems fair; at the moment, people are paying quite a lot of money for something that they cannot get. The review body recommends that any additional cost should be at the Government's expense, because they have been gaining from the contributions. The Government now suggest in the resolutions that the additional cost should be funded by other savings made by scheme trustees. It is true that we propose to make savings, as we have done before—as we did in respect of early retirement and the abolition of the public sector transfer club. We are now considering the problem of early retirement due to ill health, and think that some of the rules on what constitutes ill health need to be tightened. The Government have suggested that the two things be linked, but I personally do not think that appropriate. The trustees started to do that under their own steam. It is likely, in fact, that the savings made will cover the cost, but I am not sure that they should then immediately be grabbed by the Government so that they can avoid complying with the SSRB recommendation. Finally, the Government ask the trustees to consider a whole range of alternatives to the current arrangements. Those include our going to a defined-contribution scheme as opposed to a defined-benefit scheme, and going to a career-average scheme. The latter would not make much difference in our case as we are already on a flat level, linked to the salaries of Back Benchers; we do not have the steep incline that occurs elsewhere. The Government also suggest that we should consider ways of sharing the costs. The trustees are perfectly happy to consider all those proposals and come up with ideas on how they could be implemented. However, the proposals are not without their problems. For example, have Watson Wyatt told the Government that if we closed down the current scheme to new entrants and said that they would all have to be on a money-purchase scheme, there would be substantial one-off costs related to the funding of the existing scheme, because no new money would be coming in from new Members? We will need to discuss such issues in future. We will consider them; we are always ready to do so, although it would have been nice if we had been able to, together with the Government Actuary, somewhat earlier.