MPs are gambling with your pension – and handing you the bill for theirs

At March 2022 it had £832m of assets, an average of £400,000 for each of its 2,075 members. But the PCPF’s annual report shows just 1.7pc of assets (£14m) are held in UK equities, with a whopping 60pc in overseas equities.

To add insult to Mr Hunt’s injury, in 2021 UK equities made up 12pc of assets and overseas equities only 50pc – the PCPF trustees made a deliberate switch from UK equities to overseas equities.

This switch was all part of what the Trustees describe as its “strong environmental, social and governance focus”, and to align asset allocation with its environmental, social, and governance (ESG) views. 

The 2023 annual review for members explains that moving to “low carbon equities” and “sustainable multi factor global equities”, reduced “the carbon intensity of the fund’s equity portfolio by more than 50pc”  and “total carbon emissions by 77pc”.

The PCPF’s strategic asset allocation also includes 10pc in “renewable energy infrastructure”, including a UK solar power farm. And, astonishingly, 11pc of assets – £97m – are in high-risk “junk bonds”.

But how much do the pension promises being made to MPs cost taxpayers every year? The 2022 PCPF accounts show an official cost of 12.9pc of salary, after MPs’ own contributions, taking annual pay and pension to £98,000 – £87,000 salary and £11,000 pension.

But the real cost to taxpayers, calculated in the same way as all private sector schemes, is buried in the footnotes. The annual bill, the cost of meeting new pension promises made during the year, is an eye-watering 54pc of an MP’s salary. 

So an MPs’ annual pay and pension is really £133,000 – £87,000 salary and £46,000 pension.

It is some consolation for taxpayers that the special Prime Minister’s pension – half final-salary, payable as soon as they left office regardless of age – has been scrapped. Sir Tony Blair was the last lucky recipient.

Taxpayers should also be relieved that the “official“ funding level showed a £192m surplus in April 2022. 

Not quite so fast, the footnotes show a deficit of over £200m – again calculated in the same way as all private sector schemes – almost £400m worse than the official position.

Understating annual pension costs, and overstating the funding position, is outrageous, and plays right into the “snouts-in-the-trough” view of MPs.

Talk of guaranteed, inflation-linked DB pensions for MPs will stick in the throats of millions in the private sector with DC pensions, and no guarantees, especially those on the minimum 3pc employer contributions.

In 2013, the former minister, Harriett Baldwin – now a trustee of the PCPF, and chairman of the influential Treasury Select Committee – argued in her response to a consultation that MPs should move from DB to DC pensions like “the majority of private sector pension schemes”.

She is spot on. The DB scheme should be closed, and MPs should be moved to a DC pension, with taxpayers putting in 12.9pc of salary, the official DB cost.

As well as reducing cost and risk for taxpayers, this would help to reform other public sector pensions. 

And living in the real DC pension world – individual savings with no guarantees, not a gold-plated DB pension, guaranteed by taxpayers – would certainly help MPs understand their constituents’ pension worries.

John Ralfe is an independent pensions consultant and has advised the work and pensions select committee.