MP’s could receive a significant ‘bonus’ to their pensions worth up to £50,000 in addition to their 10 per cent pay rise.
Independent Pensions consultant John Ralfe said the £7,000 MPs’ pay rise announced last week will boost the pensions of MPs on generous final salary schemes.
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As a result of the increase in MPs’ pay, which is due to rise to £74,000, their generous final salary retirement funds will also receive a boost, bringing MPs with only 14 years service, including David Cameron, a lump sum worth tens of thousands of pounds.
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Mr Ralfe added that the House of Commons pension scheme is likely to cost the taxpayer millions more than expected, thanks to the ten percent pay rise.
The Mail Online reports:
Expenses watchdog Ipsa, which announced the rise in MPs’ pay last week, insists that the overall package of reforms – including changes to payoffs – will be cost-neutral.
But Mr Ralfe told the Financial Times the House of Commons pension scheme is likely to cost the taxpayer millions more than expected because pension contributions will increase with the pay rise.
Altogether, backbench MPs who do not receive a ministerial salary will receive some £90,000 each a year once pay and pensions are totalled, Mr Ralfe said.
Writing in the FT, he said: ‘Like all final salary schemes, an MP’s pension is calculated as a percentage of their salary when they leave the Commons.
‘Prime Minister David Cameron, for example, who was elected in 2001, has earned an inflation-proofed MPs’ pension of £23,500 a year, based on his current salary (he also has a separate pension as a minister), so a 10 per cent pay rise increases it by £2,350.
‘An inflation-proofed annuity, paying £2,350 a year from age 65, would cost around £50,000 to buy from an insurance company.
‘The 10 per cent pay rise is therefore the same as an MP elected in 2001 receiving a £50,000 one-off final salary pension ‘bonus’.
‘The total cost to taxpayers of this bonus for all 450 eligible MPs is therefore around £15 million.’
Last night a government minister who earns £90,000 a year apologised for saying he had to ‘watch the pennies’.
Tobias Ellwood, a junior minister at the Foreign Office was criticised after saying a pay rise for MPs was ‘well overdue’.
His comments came in a letter to Ipsa in which he claimed he spoke for ‘the silent majority’ of MPs who are not independently wealthy.
‘I never expected to be watching the pennies at my age and yet this what I now have to do,’ he wrote.
He insisted he was speaking up for the ‘silent majority’ who thought MPs should get a planned £10,000 pay rise.
But the remarks sparked a furious backlash from people in Bournemouth, where he is an MP.
Now he has issued a grovelling apology, and admitted his remarks fuelled the view that politicians are ‘out of touch’.
Mr Ellwood, the MP for Bournemouth East, revealed his plight in a letter to the Commons’ expenses and salary watchdog IPSA, before it announced last week that all MPs will receive a £7,000-a-year salary hike – taking their pay to £74,000.
Mr Ellwood, who lives with his solicitor wife in a £700,000 converted barn in a Dorset village and rents a London flat, said the pay rise was well overdue and much needed in his case.
The junior Foreign Office minister wrote: ‘I know I speak for the silent majority (who are not millionaires) to say this increase is well overdue. I never expected to be watching the pennies at my age and yet this is what I now have to do.’