Parliamentary Contributory Pension Fund

Thérèse Coffey Excerpts

Monday 17th October 2011 Commons Chamber

[Mr Donohoe]

I am not in a position to answer that, as it is for the Leader of the House to do so, although I certainly have some sympathy with what my hon. Friend says.

Some of the closest comparators to Members are senior civil servants. Members of the civil service pension scheme and other schemes such as the scheme for staff of the House of Commons and the House of Lords pay either 3.5% or 1.5% contributions, depending on when they joined the civil service. For that contribution, they either build up a pension at the rate of one sixtieth, or one eightieth plus tax-free cash sum—which equates to one sixty-fourth—with a retirement age of 60, or they build up a pension at the rate of one forty-third with a retirement age of 65. That must be taken into account along with everything else in which we will be involved between now and 2015. It is clear from the discussions that have taken place that consideration must be given to all elements of Members’ contributions.

People may think that I only represent the House in this regard, but I have constituents who are aggrieved by what is happening to their pension funds, and I have every sympathy with them. However, I am here almost as a shop steward—I am not sure that that expression is much liked on the Government Benches—to represent Members in the context of their conditions of service. People describe this as a gold-plated scheme, but although it is a good scheme—indeed, I would argue that it is a brilliant scheme—what is not understood is that only a few Members of Parliament retire from this place with a full pension. Of the 650 serving Members of Parliament, only 35 would leave with one today. Another thing that is not understood is that most Members pay for the rate of one fortieth, which means paying 11.9%. So the scheme cannot really be described as gold-plated.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

Does the hon. Gentleman accept that Members may have already contributed to pension schemes before being elected to the House? They do not generally come here at the age of 21.

[Mr Donohoe]

The regulations restrict the level of pension that can be paid on retirement. The limit is generally two thirds of pay inclusive of pensions that people have built up before becoming Members of Parliament. I think that that answers the hon. Lady’s question. As most MPs have other pension entitlements, the restriction means that a number of them are not paid the pension of one fortieth for each year of their parliamentary service. Worse, a small number of MPs who have not transferred their pensions to the fund end up subsidising the Exchequer by continuing to make contributions for a period for which they will receive no pension. That, too, is not best understood by those who criticise us.

I understand that the legislation allows Members to opt out. If there were an increase in the level of the contribution and if I were 45, I should find things very difficult. Given domestic circumstances, not every Member of Parliament is rich, and those who are not would find it difficult to continue to make their contributions. I understand that that also applies to many members of the fire service, for instance. There will be a drift, and if that gathers pace—as it could—the pension fund will suffer and the Exchequer will eventually have to fund more than it does at present. That must be factored into the equation before any change is made.

Our discussions with IPSA suggest—and Sir Ian Kennedy himself has stated—that it has determined that MPs’ conditions of service will be dealt with fairly, that it will work closely with the trustees once the powers are transferred, and that it would welcome proposals from the trustees on how the relationship should work. I have put that on record because it was said. At the trustee meeting Sir Ian attended, he went on to say that IPSA’s statutory independent role will be maintained. Importantly, that includes independence in respect of public perception. I think the public realise that, and I know the trustees will hold them to that point.

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[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I rise to support the motion, and although I appreciate the sentiments expressed by my hon. Friend the Member for Christchurch (Mr Chope), I think his amendment is unnecessary.

I must admit that I never thought I would be talking about my pension. Perhaps because I do not have dependants, I did not immediately rush to the pension scheme booklet to have a look at what I should or should not do, but just went for the default—as most new Members probably did—of 11.9% of my pay. However, I want to ask a few questions that I would like IPSA to bear in mind, and perhaps the Government might respond to them later.

Will the scheme to which we contribute be wound up or frozen? There is a difference, in that the Government might be expected to continue with contributions for the closed scheme in the future depending on its status. As regards any deficit or surplus—I do not know the latest on that—will the Government confirm that any future contributions will not be used to top up any deficit, but that the Treasury will make good the scheme as and when it is closed to new members and fresh contributions from members?

I encourage IPSA to consider schemes that are permanently funded, not unfunded, as it were; what other quasi-public organisations have done; and whether they have used salary sacrifice or similar schemes to ensure—how can I put this?—that the scheme still represents good value for us all. I hope that IPSA will also consider how Members can vary their contribution. I was interested to hear what the hon. Member for Central Ayrshire (Mr Donohoe), the chairman of the trustees, said about how people might unwittingly end up subsidising other Members or, indeed, the Treasury. Some education on that would be helpful. Will the Government also make a statement about bringing forward proposals on the ministerial pension fund and whether any changes will be made to that on the basis of career average earnings or salary at the time of being a Minister? Some parity would be helpful.

I would say to the hon. Member for Blaydon (Mr Anderson) that I do not see the motion as one that beats up public sector workers. I understand his honourable perspective, which leads him to say that we should not accept this if we are not prepared to accept it for the people we represent. I, like other Members on both sides of the House, believe that we cannot make proposals, which were suggested by Lord Hutton, if we are not prepared to follow them ourselves. If we are asking other people to make a sacrifice—I recognise that the hon. Gentleman is not, but those on the Front Benches agree in this instance—it is paramount that we should be prepared to, too.

I appreciate that other Members wish to speak and that there is a very important debate to come, so my final point is that nobody should be surprised by this, either on the Government Benches or elsewhere. If I heard correctly, the Treasury is contributing 28% and our contributions are roughly 12%, and a 40% contribution towards a pension scheme is not sustainable for any organisation. My former employer used to offer contributions into the high 30s and took the decision to close the scheme. We need to ensure that what we do acts as a role model for companies and for the public sector.