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MP pensions are five times more generous than those of private sector workers

MPs pensions
MPs pensions

Constituents must save for 43 years longer than their MP to earn the same pension pay in retirement, analysis reveals.

Politician pensions are now so generous that a worker earning the average wage of £31,000 would have to work for 63 years to earn the same retirement income an MP gets after just 20 years, analysis for The Telegraph by investment service AJ Bell found.

Members of Parliament, who now earn £84,144 a year, pocket gold-plated “defined benefit” pensions that pay out a guaranteed and inflation-proofed income in retirement.

The ‘gold-plated’ pensions, which are still enjoyed by most public sector workers, are much more valuable than the basic pensions on offer to the majority of private sector workers today.

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It comes after pension minister Guy Opperman last month admitted that public sector pensions such as his own were “unsustainable” and needed to be reformed.

pensions minister guy opperman - DAVID MIRZOEFF/PA
pensions minister guy opperman - DAVID MIRZOEFF/PA

Ordinary workers now must build up and invest a savings pot of their own to prepare for retirement, with their employer obliged to pay just 3pc of their wages into their retirement fund.

MPs earn a pension paying £16,500 a year in retirement after just 10 years in the job and a £33,000 income after 20 years. Yet it would take the average private sector worker 49 years to accrue a £16,500-a-year retirement income – making MP pensions five times more generous, the analysis found.

Laith Khalaf, of AJ Bell, said MPs enjoyed an “extremely generous” pension scheme that allowed them to build up sizable retirement incomes in a relatively short space of time.

He said: “One does wonder whether the people making the laws that govern everybody else’s pensions might actually benefit from the experience of what a real world pension is like. As it stands, MPs live in a bit of an ivory tower when it comes to their pensions, while most of us would have to work for a lot longer to get similar retirement outcomes.”

Public sector pension schemes promise to pay a guaranteed income that increases by inflation each year – meaning many retired civil servants are sheltered from the worst of the cost of living crisis.

But with private sector pensions, retirement pay is by no means guaranteed and savers are forced to rely on investment performance.

Workers are now auto-enrolled into private pension schemes, meaning they pay a minimum of 5pc of their salary while their company adds 3pc.

Yet campaigners say workers need to be saving much more to afford to live comfortably in retirement.

Romi Savova, of PensionBee, a pension provider, said: “It would be helpful if MPs looked at their own positions and thought about how to apply it to everyone else.”

Mike Ambery, of consultancy Hymans Robertson, added: “There will come a point in time when constituents will likely ask the question if it continues to be appropriate for MPs to accrue (final salary) pensions.”