MPs' Pension Scheme - 2012 onwards - Commons Library Standard Note

Published 16 December 2013 | Standard notes SN06283

Amended 08 October 2014

Authors: Djuna Thurley

Topic: Members of Parliament, Pensions

The MPs Pension Scheme is a funded final salary occupational pension scheme where Members and the Exchequer share the costs. The Independent Public Service Pensions Authority (IPSA) is responsible for oversight of the scheme.

On 11 July 2013, IPSA published a consultation document on a reform package for MPs pay and pensions. Its proposed reforms to pensions were in line with those for other public service schemes: a new scheme would be introduced from 2015, providing benefits based on Career Average Revalued Earnings (CARE) rather than final salary; individuals would have a normal pension age linked to their State Pension age; and there would be protection for those closest to retirement. IPSA proposed that MPs should meet 40% of the cost of accruing pension benefits, in line with the share that would typically be met by members in the new public service schemes to be introduced from 2015. It estimated that its reforms would reduce the cost of accruing pension benefits from 32.4% of pay to 22.9%. In its Final Report on MPs’ Pay and Pensions published in December 2013, IPSA announced that it intended to proceed broadly as announced in July. One exception was that the share of the cost of accruing benefits to be met by MPs would increase to 46%. This was in order to ensure that the overall remuneration package was cost-neutral.

Short-term reforms already introduced include a switch to the Consumer Prices Index (CPI) for uprating pensions in payment. In addition, contribution rates to the scheme increased in April 2012, although they did not increase again in 2013. The vast majority of MPs now contribute 13.75% of pay.

This note provides an overview of MPs’ pensions and current proposals for reform. The background is covered in more detail in SN 1844 Parliamentary Contributory Pension Fund. The Pensions of ministers and senior office holders are covered in a separate note.

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