Taxpayers forced to fill hole in MPs' pensions
Posted: Sat Apr 01, 2006 2:32 am
Taxpayers forced to fill hole in MPs' pensions
By George Jones and Edmund Conway
(Filed: 31/03/2006)
MPs are to be protected at taxpayers' expense from the pensions crisis that is blighting the retirement of millions of people, the Government announced yesterday.
The parliamentary pension fund - one of the most generous in Europe - is facing the same difficulties as most other public and private schemes.
Its decifit has almost doubled to £49.5 million because of increased life expectancy and reduced investment returns, partly caused by Gordon Brown's £5 billion a year "stealth" tax on dividends.
While people in occupational schemes and millions of local government workers are being told they will have to work longer, taxpayers will foot the bill for the MPs' shortfall.
In a written statement slipped out as MPs left for a two-week Easter recess, Geoff Hoon, the Leader of the Commons, said the Government Actuary, who reports on the pension fund every three years, had ruled that Exchequer contributions to the fund would have to go up from 24 per cent to 26.8 per cent.
The statement coincided with the announcement that MPs and ministers are to have a two per cent staged pay rise, with one per cent on April 1 and the rest in November.
The basic pay of an MP will rise from £59,095 to £60,277 in November, while Cabinet ministers' salaries will go from £133,997 to £136,677. Tony Blair's pay will rise from £183,932 to £187,610.
The Government's attempt to demonstrate that MPs were setting an example in pay restraint was overshadowed by the disclosure that they would have preferential treatment over their pensions. Mr Hoon said the Government was "required" to follow the actuary's recommendations.
The extra £1.2 million a year will cover an increase in the fund's deficit, which has risen from £25.2 million in 2002 to £49.5 million. The new contribution rate for the pension fund, which is worth £278.6 million overall, will come in from April.
Two weeks ago, the Government flatly rejected a recommendation that 85,000 people who had lost all or most of their occupational pensions should be compensated because they had been given "inaccurate and misleading" advice in official literature.
Mr Blair and Stephen Timms, the pensions minister, insisted that the taxpayer could not be expected to bail out people whose pension schemes had collapsed, even though Ann Abraham, the Parliamentary Ombudsman, said there had been maladministration and there was "real suffering and distress".
In marked contrast to the special treatment for MPs, the Government confirmed yesterday that it was pressing ahead with regulations allowing local authorities to scrap a rule allowing some people to retire at 60, without suffering a penalty for retiring early.
Up to a million staff walked out on Tuesday in protest against the pension changes, and further strikes are planned for next month.
At the centre of the dispute is the so-called Rule of 85. This allows council employees to retire at 60 without suffering loss of pension for early retirement, provided their age and years of service add up to 85. The Government claims it must go because of EU rules.
However, MPs will continue to benefit from their own early retirement "Rule of 80". While their normal retirement age is 65, they can draw their full pension from 60, provided their age plus service as an MP totals 80 years or more.
David Laws, the Liberal Democrat work and pensions spokesman, said the increased taxpayers' contribution to the MPs' scheme highlighted the growing gap between public and private sector pensions.
Ros Altmann, a former Treasury adviser, and spokesman for Pensions Action Group, said the decision was "scandalous" after the Government had rejected the ombudsman's plea to help pensioners who lost much of their retirement fund.
Mr Hoon told MPs: "In common with other pension funds, the fund has been affected by the fact that people are living longer."
He said lower than expected investment returns put £5 million on the deficit while changes in life expectancy added £13 million.
One of Mr Brown's first acts as Chancellor was to scrap dividend tax relief, which hit pension funds, including the MPs' scheme, that invested in equity shares.
A Cabinet Office spokesman said that MPs would not have bigger pensions as a result of the latest move.
© Copyright of Telegraph Group Limited 2006.
By George Jones and Edmund Conway
(Filed: 31/03/2006)
MPs are to be protected at taxpayers' expense from the pensions crisis that is blighting the retirement of millions of people, the Government announced yesterday.
The parliamentary pension fund - one of the most generous in Europe - is facing the same difficulties as most other public and private schemes.
Its decifit has almost doubled to £49.5 million because of increased life expectancy and reduced investment returns, partly caused by Gordon Brown's £5 billion a year "stealth" tax on dividends.
While people in occupational schemes and millions of local government workers are being told they will have to work longer, taxpayers will foot the bill for the MPs' shortfall.
In a written statement slipped out as MPs left for a two-week Easter recess, Geoff Hoon, the Leader of the Commons, said the Government Actuary, who reports on the pension fund every three years, had ruled that Exchequer contributions to the fund would have to go up from 24 per cent to 26.8 per cent.
The statement coincided with the announcement that MPs and ministers are to have a two per cent staged pay rise, with one per cent on April 1 and the rest in November.
The basic pay of an MP will rise from £59,095 to £60,277 in November, while Cabinet ministers' salaries will go from £133,997 to £136,677. Tony Blair's pay will rise from £183,932 to £187,610.
The Government's attempt to demonstrate that MPs were setting an example in pay restraint was overshadowed by the disclosure that they would have preferential treatment over their pensions. Mr Hoon said the Government was "required" to follow the actuary's recommendations.
The extra £1.2 million a year will cover an increase in the fund's deficit, which has risen from £25.2 million in 2002 to £49.5 million. The new contribution rate for the pension fund, which is worth £278.6 million overall, will come in from April.
Two weeks ago, the Government flatly rejected a recommendation that 85,000 people who had lost all or most of their occupational pensions should be compensated because they had been given "inaccurate and misleading" advice in official literature.
Mr Blair and Stephen Timms, the pensions minister, insisted that the taxpayer could not be expected to bail out people whose pension schemes had collapsed, even though Ann Abraham, the Parliamentary Ombudsman, said there had been maladministration and there was "real suffering and distress".
In marked contrast to the special treatment for MPs, the Government confirmed yesterday that it was pressing ahead with regulations allowing local authorities to scrap a rule allowing some people to retire at 60, without suffering a penalty for retiring early.
Up to a million staff walked out on Tuesday in protest against the pension changes, and further strikes are planned for next month.
At the centre of the dispute is the so-called Rule of 85. This allows council employees to retire at 60 without suffering loss of pension for early retirement, provided their age and years of service add up to 85. The Government claims it must go because of EU rules.
However, MPs will continue to benefit from their own early retirement "Rule of 80". While their normal retirement age is 65, they can draw their full pension from 60, provided their age plus service as an MP totals 80 years or more.
David Laws, the Liberal Democrat work and pensions spokesman, said the increased taxpayers' contribution to the MPs' scheme highlighted the growing gap between public and private sector pensions.
Ros Altmann, a former Treasury adviser, and spokesman for Pensions Action Group, said the decision was "scandalous" after the Government had rejected the ombudsman's plea to help pensioners who lost much of their retirement fund.
Mr Hoon told MPs: "In common with other pension funds, the fund has been affected by the fact that people are living longer."
He said lower than expected investment returns put £5 million on the deficit while changes in life expectancy added £13 million.
One of Mr Brown's first acts as Chancellor was to scrap dividend tax relief, which hit pension funds, including the MPs' scheme, that invested in equity shares.
A Cabinet Office spokesman said that MPs would not have bigger pensions as a result of the latest move.
© Copyright of Telegraph Group Limited 2006.