Citiwire blog – MP pensions

by Dr. Ros Altmann

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The MPs final salary scheme at the moment is one of the best pension arrangements in the world. Therefore, MPs may find it hard to understand what it is like for most people in the private sector, who cannot rely on their employer to provide a decent pension – and who are therefore on their own trying to plan for their retirement. As most private sector final salary schemes close, there has been talk of switching the MPs to a defined contribution scheme. This would mean that the taxpayer and MPs themselves will pay into the scheme, but the amount of pension MPs ultimately receive will be determined by the investment performance of the money and the costs of buying annuities on retirement – making the amount of pension unpredictable. They would also need to contribute far more than they currently pay to have much chance of achieving the level of pensions they currently accrue. It may not be ideal that MPs and all other public sector workers are totally immune from the problems that have hit the pensions of so many British workers. Perhaps if the MPs had a vested interest in making the pension system work better, we would finally achieve better pensions policy for everyone. Urgent reforms are needed to help people achieve better retirement income. Highlighting to MPs, first hand, just how expensive, risky and difficult it is to provide decent pensions, might well help to ensure better outcomes for us all.