MP SALARIES ARE TOO LOW BUT PENSIONS UNUSUALLY GENEROUS

Monday 15 October 2012

Dr Ros Altmann, Director-General of Saga was asked to contribute to the Inquiry by the Independent Parliamentary Standards Authority into MPs pay and pensions. Her response can be summarised as follows:

MP SALARIES ARE TOO LOW BUT PENSIONS UNUSUALLY GENEROUS

 

  • MPs £64,500 salary is inordinately low - should be increased to £100,000
  • Unusually generous pensions and additional benefits should be reformed
  • I suggest the additional benefits be incorporated into a much higher salary
  • I recommend closing current final salary scheme and moving MPs to a new money purchase scheme, with a fixed contribution of £25,000 a year
  • This will control costs and ensure MPs have personal experience of the issues relevant to pension savings for the majority of workers

Her response contained the following comments:

“Setting appropriate levels of senior executive compensation is a high profile, emotive issue and salary benchmarking for a role without proper parallels is not easy. However, in my view, MPs salaries are much too low.

“I do not believe it is reasonable to suggest that MPs should be unconcerned about earning appropriate salaries because their job is a 'privilege'.  They should be properly rewarded for their work, which is so important to all of us.  Of course, we would not want people standing as MPs just to earn high salaries, we would like to think they are motivated by public duty, but that surely applies equally to other senior public officials in local and quasi-Government roles who are paid significantly more than our Members of Parliament.  The current low salary level probably contributed to the expenses scandals which undermined public confidence in Parliament.  This must not happen again. 

“Meanwhile, MPs' pension benefits are virtually the most generous in the country.  They accrue 1/40th of salary each year (if they pay 10% contributions) and can get a pension of half their final salary after only around 20 years as an MP.  Taxpayer contributions to these pensions will be worth at least an extra 40% of salary, amounting to well over £25,000 a year.”

Ros made the following recommendations:

Salary
“It is important that MPs pay reflects their responsibility and compared with senior public sector roles, or high-level corporate executives, MPs £64,500 salary seems inordinately low.  Senior local government roles, corporate managers and senior officials, earn around £80,000 a year, head teachers and senior Directors earn over £150,000. MPs duties are surely more responsible than these roles as they are responsible for our legislation. 

“I suggest a figure of £100,000 for basic pay would be far more appropriate to MPs levels of responsibility, plus a further £5,000-£10,000 a year for those who Chair a Select Committee.  This figure should incorporate and, therefore, replace the current additional benefits such as 'redundancy' payments for MPs leaving Parliament for any reason.  Currently, these pay 50-100% of salary, depending on length of service, with the first £30,000 tax-free, but should be incorporated into a significant salary increase instead.”


Pensions
“I suggest an alternative approach for MPs pensions.  A pension contribution - of £25,000 a year - should be added to MPs base salary, and paid into a new defined contribution scheme replacing the current defined benefit scheme.  This would help MPs better understand the issues facing the majority of the population who will only have DC pensions.  So far, MPs have been cushioned from the pension changes affecting most private workers.”

ENDS

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