MPs' pensions to be run by expenses watchdog

MPs have approved plans to have their pension schemes run independently by the expenses body Ipsa.

Commons Leader Sir George Young said it was the "final piece of the jigsaw" in removing MPs' powers to vote on their own remuneration.

But some MPs were annoyed that Ipsa was urged to raise contribution rates in line with other public sector workers.

Ministers are negotiating with unions over changes to bring down the cost of other public sector pension schemes.

Plans to give Ipsa responsibility for MPs' pensions - as well as their pay and expenses - were agreed under Labour, but MPs were asked on Monday to approve it.

The government's motion - which stated that pensions should be "determined independently" and urged Ipsa to introduce a new pension scheme by 2015 reflecting the findings of Lord Hutton's report into other public sector pensions - annoyed some MPs.

It also invited Ipsa to "increase contribution rates" for MPs from 1 April 2012 - when it takes over the pension scheme.

Sir George said it would show that MPs agreed their pay and benefits should be set independently - and that Parliament "must not be insulated from the fiscal circumstances affecting the rest of the country".

He said there would be "justifiable disbelief" if MPs' pensions were treated differently to those of other public sector workers.

But Conservative backbencher Christopher Chope said the government's recommendations to Ipsa pre-empted any consultation it might carry out on a new pension scheme. He said he wanted to recognise that "Ipsa is independent and should reach its own judgement".

Sir George argued Mr Chope simply "does not want members' pension schemes to reflect other public service schemes".

Labour MP Brian Donohoe, chairman of the pension fund, also rejected the government's position, arguing Ipsa "should be fully independent" - but said the watchdog had assured him it would "operate free of government interference on this subject".

And Lib Dem Bob Russell said he had "zero confidence" in Ipsa, which has been criticised by many MPs about the way it runs the new expenses scheme.

"I fear that in the fullness of time members will rue the day they handed their pensions to Ipsa."

MPs have a funded final salary scheme, they pay a fixed contribution and the Exchequer is liable for the balance.

'No endorsement'

They contribute either 11.9%, 7.9% or 5.9% of their £65,738-a-year salaries - the normal retirement age is 65.

Under the changes, Ipsa will determine the rules of the scheme, rather than the government or the Commons, - but it will continue to be administered by the scheme's trustees, Sir George told MPs.

His Labour shadow, Angela Eagle, said her party would not oppose the government's motion and the principle of independently-determined pensions was right. But she said it should not be taken as "any endorsement of the way in which they have so far chosen to pre-empt meaningful negotiations with public sector trade unions" about the disputed changes to wider public sector pension schemes.

The government says the fact that people are living longer means the cost of public sector pensions has been "unsustainable" and changes have to be made to other public sector schemes.

Public sector workers are being urged to pay more into their pensions, work for longer and accept a pension based on a "career average" salary, rather than a final salary - unions are threatening widespread strikes over the proposals.

During Monday's debate Conservative MP Richard Graham warned against changing the government's motion to remove the reference to Lord Hutton's findings, asking how MPs would answer their "constituents in the public services whose pensions are about to be significantly downgraded when they ask him why the parliamentary pension scheme remains the most generous of all?"

Ipsa said later it would take a "methodical and evidence based approach" in looking at MPs' pay and pensions and would hold a public consultation on the issue in the spring, ahead of a final report by the end of 2012.