This note looks at the pension arrangements for ministers and senior office holders, such as the Prime Minister, Lord Chancellor and Speaker of the House of Commons.Jump to full report >>
The Parliamentary Contributory Pension Fund is a statutory, defined benefit pension scheme. It operates on a funded basis, meaning that contributions from employees and employers are paid into a fund, which is invested, and from which pension benefits are paid. The Fund is made up an MPs’ Pension Scheme (which provides benefits for MPs and certain office holders, such as paid chairs of Select Committees) and a Ministers’ Pension Scheme (which provides benefits for Ministers). The Minister for the Civil Service (MCS) is responsible for oversight of the Ministers’ scheme. IPSA is responsible for the MPs’ scheme.
Ministers who are MPs accrue pensions from both schemes. Ministers who are in the Lords have the option of participating in the PCPF in respect of their ministerial salary, but do not receive a salary as a Member of the House of Lords. At present, the main difference between the schemes is that the MPs’ scheme provides pension benefits based on final salary, whereas in the Ministers’ scheme they are based on career average salary. However, IPSA has announced its intention to introduce a career average scheme for MPs from 2015. The MCS has also announced his intention to reform the Ministers’ scheme in the longer term.
Separate arrangements for the pensions for the three great offices of state - the Prime Minister, Speaker of the House of Commons and Lord Chancellor – were abolished for future office holders by the Public Service Pensions Act 2013. The previous arrangements gave entitlement to a pension of half the final office-holder’s salary on leaving office, regardless of length of service. These payments were met through the Consolidated Fund (the Government’s general bank account). Under the 2013 Act, the great offices of state will instead be covered by the Ministers’ Pension Scheme. The pensions of existing office holders will continue to be met from the Consolidated Fund, even where they have signed a waiver and will receive benefits comparable to those provided under the Ministers’ Scheme.
This note looks at pensions for ministers and senior office holders. See also, SN 6283 MPs’ pensions – 2012 onwards and SN 5768 Public service pension reform – 2010 onwards.
Commons Briefing papers SN04586
Author: Djuna Thurley