MPs’ Pension Scheme

The MPs’ Pension Scheme is administered by the Independent Parliamentary Standards Authority (IPSA), which is also responsible for administering MPs’ pay and business costs. It is a defined benefit scheme.

The MPs’ scheme has implemented a remedy to potential age-related unfairness in response to the McCloud judgment on age discrimination in other public service pension schemes.

The Parliamentary Contributory Pension Fund

Members of Parliament build up pensions in the Parliamentary Contributory Pension Fund (PCPF). The fund is made up of two pension schemes:

• The MPs’ Pension Scheme, which provides pensions to MPs and certain office holders, such as paid chairs of select committees.
• The Ministerial Pension Scheme, which provides pensions to ministers.

IPSA is responsible for oversight of the MPs’ scheme and the Minister for the Civil Service (the Prime Minister) is responsible for oversight of the ministers’ scheme.

Further information about the Ministerial Pension Scheme is available in the Library briefing Pensions of ministers and senior office holders.

The MPs’ Pension Scheme

The MPs’ Pension Scheme is a defined benefit scheme. That means it pays a promised pension based on MPs’ earnings and length of service.

Unlike most of the large public service pension schemes, the MPs’ Pension Scheme is funded. This means that both MPs and the Treasury pay contributions into a fund. This fund is then invested and used to pay the promised pensions. Other public service pension schemes, like the civil service pension scheme, are unfunded. This means that the pensions they provides are paid for by current member and employer contributions and taxation rather than a fund which is invested.

2015 reforms to public service pensions

The MPs’ scheme was reformed in 2015 alongside the main public service pension schemes.

After the 2015 general election, pensions started being based on an MP’s average salary over their career instead of their final salary. Pensions also became payable when former MPs reach their state pension age, rather than at ages 65 or 60 as before.

McCloud judgment on discrimination in public service schemes

Some older members of the MPs’ Pension Scheme were given transitional protections from the 2015 reforms, such as allowing them to continue building up pensions based on their final salary. Similar protections were used in other public service pension schemes.

Following a 2018 judgment in the court of appeal referred to as McCloud, the Government was found to have discriminated against younger members of pension schemes for firefighters and judges by not offering transitional protections to them.

As a result of the McCloud judgment, the Government had to make changes to all public service pension schemes with transitional protections to remedy the discrimination which had taken place and to prevent futher disrimination.

Although the McCloud judgment did not directly affect the MPs’ Pension Scheme, IPSA decided to make changes because the scheme had similar age-related transitional protections. These changes allow all members of the scheme to choose whether the benefits they accrued during the transitional protection period (April 2015 to March 2023) should be based on their final salary or their average salary.

Further information about the McCloud judgment and remedy is available in the Library briefing Public service pensions – response to McCloud.