Taxpayer to put more into 'golden' pensions for MPs

Less than 24 hours after the furore over their expenses, Commons Leader Harriet Harman outlined changes to the funding of the pension scheme.

Taxpayers already pay 26.8per cent of an MP's pensionable salary into their pension and this is due to rise to 28.7per cent from tomorrow.

MPs will also be asked to increase their contributions to their pensions.

Gordon Brown appeared to bow to public anger over MPs' final salary pensions today by announcing a review which could see them replaced by a less generous scheme.

Liberal Democrat work and pensions spokesman Steve Webb said: "MPs' and other public sector workers' pensions have got to be brought in line with reality.

"With our constituents losing their jobs and seeing their pensions plummet, we simply can't ask taxpayers to pay more for MPs' pensions." Ms Harman - who did not mention the bigger bill for the taxpayer in her statement to the Commons - emphasised that MPs had already agreed in principle to cap the public's contribution to 20per cent of pensionable salary.

However, this limit does not apply to tackling a shortfall in the pension scheme, which has risen from £49.5million to £50.9million, she added.

This means that ministers are proposing that the taxpayer's contribution should rise but not by as much as the Government's actuaries' suggestion of 31.6per cent.

Ms Harman said the Prime Minister had asked the Senior Salaries Review Body to conduct a "fundamental review" of pension provision for MPs as the Treasury's contribution was likely to rise above the 20 per cent cap in the future.

She added: "The Prime Minister has asked the SSRB to consider the full range of options for reducing the Exchequer contribution and to consider, amongst other things, the merits of defined contribution or money purchase arrangements. We expect the SSRB to report later this year.

"The Government is committed to providing public service pension schemes that are affordable and sustainable in the long-term, consistent with the principle of fairness for all taxpayers and between generations."

She also announced that ministers would consult MPs and the Trustees of the Parliamentary Contributory Pension Fund on any proposed changes to be brought in next month.

She added that the Government's "preferred option" included an increase in member contribution of between six per cent and 11.9 per cent.

This would mean that an MP on an 1/40th accrual rate would pay a net increase of about £60 per month on top of the current contribution of £316 per month, she said.

The total annual contribution based on 2009/10 salary would be about £4,625, she added.

Other restrictions, to maintain the 20 per cent cap, would be imposed on MPs to keep down the bill.