I receive a pension statement today. It’s a remnant from my days at GEC and was never worth very much. Unfortunately the fees and charges for administering the plan (and no doubt paying bonuses to the people who do it) has effectively reduced its value to zero. I hope I don’t end up getting a bill next year! That wouldn’t surprise me. I can see the letter now. “As a result of out diligent management of your pension fund we have managed to limit your losses this year to only 6%. In order to keep your fund at zero you owe use £X. You can choose to pay this to us as a single lump sum or on a monthly basis. If you chose to pay monthly then a credit charge equivalent to 29.9% APR will be added to your bill. Thank you for investing for our future retirement”
Of course our elected representatives have one of the best pension schemes in the world. No worries for them. MPs can choose to make contributions of either 6% or 10% of their gross pay. The effect on their take home pay is much less than that of course as they benefit from relief from tax at the highest rate, and also pay a lower rate of National Insurance. An MP who pays the 6% contributions builds up benefits at 1/50th of their final salary for each year of contributions. If the MP pays 10% they normally build up benefits at a rate of 1/40th. So after a 5 year Parliament the MP can build up a pension of 5/40 or 1/8 of their final salary. Not bad. Retire on half pay after 20 years!
Interestingly all MP’s Staff (who are on a contract of 3 months or longer) are automatically enrolled in a group stakeholder pension (Portcullis Pension Plan) to which the House of Commons contributes 10% of salary. This cost is not taken from the MP’s allowances but is in effect an “extra” 10% paid to staff that does not appear in MP’s expenses claims.
So if an MP is paying his or her partner a £40,000 salary there is another £4,000 hidden away in pension contributions that are not declared to the public. Another nice little earner!