MPs get taxpayer to pour cash into pensions

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As millions of workers were facing having their final salary pension schemes axed, MPs are due tomorrow to formally approve using more public cash to pay for their retirement.

Taxpayers already contribute 26.8 per cent of an MP's pensionable salary into the pot — but under new plans that will rise to 28.7 per cent.

The proposals unveiled by Commons Leader Harriet Harman were hit by a backlash from some MPs.

Lib-Dem work and pensions spokesman Steve Webb said: "At a time when millions of people are seeing the value of their pensions fall or losing their jobs, we simply can't expect the taxpayer to put extra cash into our pensions." MPs, who earn £64,700 a year, paid £4.3 million into their pensions last year, while the taxpayer put in £12 million.

Ms Harman has proposed a cap on the Treasury contribution to politicians' retirement pots. But the taxpayer is being hit with an extra annual bill of around £860,000 to plug a deficit. The shortfall has risen from £49.5 million to £50.9 million.

On the back of the expenses scandal, MPs risk further anger from their constituents, many of whom are struggling to fund their own retirements or are being told that their final salary schemes are being closed.

Ninety-six per cent of blue-chip companies which took part in a survey by PricewaterhouseCoopers said they believe that defined benefit schemes — also known as final salary — are unsustainable.

Separate reports warned that Britain's state pension is among the worst in the western world. But an MP with 20 years' service can expect to receive about £30,000 a year at today's prices after they retire. A person with an average job would have to work for more than 60 years to build up the same pension as an MP has after 13 years.

Under the proposal, MPs will increase their own contributions from 10 per cent of salary to 11.9 per cent for the highest level of pension, paying 1/40th per year of service, and from 5.5 per cent to 5.9 per cent for those accruing pension at 1/60th per year.

A spokesman for the Commons Leader said: "The Treasury contribution remains capped at 20 per cent, but in addition there's 8.7 per cent which is to make up for the shortfall because the Treasury took a pensions contribution holiday in the past."