MPs’ pensions five times more generous than for average workers

MPs only have to be elected twice to enjoy a pension that would take their constituents a lifetime to earn, analysis has revealed.

Politicians’ pensions are now so generous that a worker earning the average wage of £31,000 would have to toil for 49 years to equal the retirement income that an MP can build up in just 10 years, according to The Sunday Telegraph’s calculations. Analysis by the investment service AJ Bell shows that MPs earn a pension paying £16,500 a year in retirement after a decade in the job – five times more generous than the average.

MPs, who earn £84,144 a year, have “defined benefit” pensions that pay out a guaranteed and inflation-proofed income in retirement. They are, however, required to contribute 11 per cent of salary to the scheme, while the taxpayer tops up the contributions.

A private-sector worker on the same wage as an MP, who also saves 11 per cent themselves while their company pays in 4 per cent, would need 25 years to equal what the MP can build up over a decade. It would take them 37 years to equal what an MP’s pension can accumulate in just 20 years. The “goldplated” pensions enjoyed by the public sector are much more valuable than the basic pensions on offer to most private sector staff.

Ordinary workers must build up and invest a savings pot of their own to prepare for retirement, with their employer only obliged to pay 3 per cent of their wage into their retirement fund.

Guy Opperman, the pensions minister, last month admitted public sector pensions, such as his own, were “unsustainable” and needed reform.

Public sector pension schemes promise to pay a guaranteed income that increases by inflation each year – meaning many retired civil servants are sheltered from cost of living pressures. But with private sector pensions, retirement pay is not guaranteed. Savers must rely on investment performance.

Workers are now auto-enrolled into private pension schemes, meaning they pay in a minimum of 5 per cent of salary while their company adds 3 per cent. Yet campaigners say workers need to be saving much more.

Laith Khalaf, of AJ Bell, said: “One does wonder whether the people making the laws... might actually benefit from the experience of what a realworld pension is like. As it stands, MPs live in a bit of an ivory tower.”