The Independent Parliamentary Standards Authority (IPSA) has called for MPs pay to rise to £74,000 in 2015.
The proposed 9.75% increase, up from the current salary of £66,396, comes as the IPSA also launched a consultation on MPs’ pay and pensions.
The consultation, which runs until 20 October 2013, contains the following recommendations:
- A salary of £74,000 in 2015, indexed to average earnings in the whole economy thereafter.
- A new pension scheme that will be based on accruals at 1/51sts, revalued by the consumer prices index (CPI) each year, delivering defined benefits based on career-average salaries rather than final salaries.
- Annual reporting by MPs of their activities and spending.
Sir Ian Kennedy, the IPSA’s chairman, said the package was fair to taxpayers and fair to MPs.
He added: “This package ends the historic peculiarities that have grown up around MPs’ pay, and sets MPs’ pensionson a sustainable footing for the future.
“We are recommending a modern, professional approach, which also means refining the rules on expenses and business costs to rule out MPs claiming for an evening meal.”
This report appears to confirm what many have suspected – that over the longer term the single-tier state pension will create more losers than winners and will produce savings, not increases, in government expenditure.
Together with the likelihood of further increases in state pension age, it reinforces the need for most of those now in their 20s and 30s to save more privately to compensate for the reduction in state pension income they might otherwise have expected to receive.
The one positive for those affected will be that the new pension will be more transparent and easier to understand, thus enabling them to predict with more certainty what their income from the state is going to be and plan around it accordingly.
It is most interesting to note, as the report describes it, that the single-tier pension is the latest step in a long, tortuous and rather circular journey for state pension policy in the UK; a journey which started in the early 1970s with a basic-state pension, equivalent to about £145 a week, and which has finally ended in much the same place.
In between, we have seen a system of earnings-related state pensions, which were first introduced in 1975 and which successive governments have spent over 30 years gradually unpicking as the unsustainable cost of the system became increasingly apparent. The major difference between the proposed single-tier pension and the system that was in place in 1974 is that the new system will be considerably more generous, whether by accident or design, to the self-employed who previously had been excluded from any earnings related top-ups to their pensions.
These reforms were always going to be challenging to implement, given their scale and complexity. There were always going to be losers as well as winners. The bad news is that there are probably further compromises to be made further down the line, particularly in relation to the state pension age. The good news is that it will create a simpler and clearer foundation in which individuals can plan their own retirement savings.
MPs should receive the same treatment as other public sector workers. 4 years without a pay rise, followed by a 1% pay rise and amendments to their pension scheme. That is fair democracy isn’t it. They should be leading by example, not one rule for them and something different for everyone else.