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ACA calls for MP pensions to move to career average

The Association of Consulting Actuaries is calling for MPs pensions to move to a career average structure with regular reviews of retirement age.

ACA gave both evidence last week to the Senior Salaries Review Board’s review of Parliamentary pensions.

The trade body said that any significant revision of MPs pensions should await a wider review of public sector pensions which is likely to take place after the general election next year.

ACA said the review will need to go beyond the scope of earlier reviews of Parliamentary pensions and look at what the taxpayer should be expected to contribute going forwards to the pensions of public sector employees in both funded and unfunded arrangements.

Its main recommendations are that MPs should move to a career average structure as opposed to the existing final salary structure. ACA says the proposed changes should apply to the future service of all MPs as well as new entrants from the next general election.

It also says that the 2009 pension tax changes for those on higher incomes will impact on a considerable number of MPs with income over and above their Parliamentary salaries, rendering contributions into the Parliamentary scheme tax inefficient.

It suggests that the opportunity could be taken in this review to offer MPs the option of a cash alternative equivalent to the value of the Exchequer contribution.

ACA chairman Keith Barton says: “These interim proposals represent about the limit of genuine risk sharing currently available, whilst retaining a DB approach, which we continue to favour given the volatility associated with DC and DB’s greater operating efficiency.

“We have reiterated in our evidence the ACA’s recommendations on how wider risk sharing, requiring changes in current legislation, which presently restricts its application, could be implemented.

“Risk sharing reforms could provide additional flexibility in the running of both private and public sector funded schemes, like the Parliamentary scheme.”


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