Parliamentary Contributory Pension Fund

Jo Swinson Excerpts

Monday 17th October 2011 Commons Chamber

[Mr Donohoe]

I will explain. That individual would be responsible only for representing the Ministers’ section of the pension fund. A former Minister would have a different contribution rate. I see the Leader of the House agreeing with me on this. The pension fund administers that at present and will continue to do so, but by virtue of the contribution, it will come from the Department that the person was in or from the civil service. The Government are not going to start playing a part in the Members’ pension fund. I hope that that answers the hon. Gentleman’s question.

There was originally a proposal in the Bill that members of the board of trustees could be removed by IPSA. That has now been forgotten, and the eight members of the board will continue to be appointed by this House and no one else. They will continue to be elected or selected from this place or from among former Members. At our trustees’ meeting on Thursday, we thought it sensible to determine that we would lose two members at this stage so that this whole process could be carried out smoothly. Otherwise, all sorts of complications could have arisen. As a consequence, I would like to put on record my appreciation—and that of the other members of the board—for my hon. Friend the Member for Lewisham West and Penge (Jim Dowd) and the hon. Member for Watford (Richard Harrington), both of whom have now withdrawn as trustees.

The increase in contributions is the main point of any argument on this matter. I have already argued, and I want to reinforce the point, that IPSA must be seen in every respect as independent. I see no reason why the House should indicate that it would like our pension contributions to be treated in the same way as those of other public service workers. IPSA has a statutory duty to act independently of Parliament, and by giving such an indication, the House is putting undue pressure on IPSA. It should not be influencing IPSA in that way. IPSA must undertake its role as laid down in statute, and in no other way.

[Jo Swinson (East Dunbartonshire) (LD)]

Surely it is important, however, for the House to make it clear that MPs should not be treated differently from other public sector workers. In particular, we should try to avoid a repeat of the bizarre situation earlier this year in which we had to take back powers to set our own pay because the Senior Salaries Review Body had recommended a pay rise for MPs in a year when the rest of the public sector faced a pay freeze. Any such pay rise would have been entirely inappropriate.

[Mr Donohoe]

I have to disagree with the hon. Lady, and I will tell her why. If we put things out to independent arbiters such as the Senior Salaries Review Body, and they make recommendations after consultation with all sorts of bodies, I would argue that the Government should not intervene. In that case in particular, we should not have overturned that decision. This is where we have gone wrong so many times in the past. In the great number of years that I have been a Member of Parliament, I have seen this happen time and again, and my research leads me to believe that every Prime Minister since 1945 with the exception of John Major has interfered in the conditions of service of Members of Parliament to the detriment of those conditions.

I feel strongly about this—so strongly that, as the arch-enemy of IPSA, I argue on the basis of what I have seen that it is far better for it to have that independence, which is clearly documented in legislation, than to have this constant interference in the conditions of service of Members of Parliament. There has not been a great understanding by the Government of some of the elements of the arguments with IPSA.

Given that pay and pensions are linked, it is only sensible for IPSA to take stock not only of all elements of conditions of service, but of the whole question of pensions, which I have always believed to be deferred income for any individual in employment who has a pension fund.

Other considerations relating to IPSA in consultation with trustees include the fact that it has to wait for a valuation. Here, as I say, the Government have not fully understood the position on Members’ pensions or the calculations of where they should go in respect of any increase in contributions, any increase in the age of retirement or any other element affecting those pensions. Clearly, the results of the 2011 valuation of the scheme will shortly be finalised, which I take as a very strong argument for leaving the decision about increases in contributions, if there are to be increases, to IPSA itself. As far as we are concerned, we are in a cost-sharing scheme, as a result of which we must see what the actuary says about any changes to contribution rates before taking a decision that puts us in line with anybody else. As Members will know, there have been increases to pension contributions over a relatively recent period, which I do not think any other members of the public sector have had to face. I suggest that it is important to take that into account, as we are told it will be by IPSA.

I suggest that trustees would also recommend giving further thought to other cost-saving measures in the scheme to make it simpler and to make the benefits clear in a way that everybody understands. From the discussions I have had with Members of Parliament over the last few weeks, I believe that there has been a misunderstanding of many aspects of the scheme. That needs to be taken into account. We also need to consider, if possible, as a means of getting away from increases in contributions, the whole question of increasing the pension or retirement age. It could be part of the answer to some of the problems we face.

Another misunderstanding is the view that this scheme is expensively funded in itself. Schemes like this should be treated differently from unfunded or notionally funded schemes, as assessing changes to member contribution rates should take into account any excess returns generated by funded schemes from the investment strategy. I understand that the London Pension Fund Authority scheme, which is a funded scheme, might not be subject to the general contribution increase that the Government hope to implement. If there are exceptions there, they can be made anywhere else. I am convinced that an awful lot of negotiations are still to take place, and these will bring to the fore some of the elements of the pension fund that are not best understood.