UK - Members of the UK Parliament (MPs) have been told their contributions to the £367.2m (€402m) Parliamentary Contributory Pension Fund (PCPF) will rise after the latest actuarial report revealed the pension deficit had increased to £50.9m as a consequence of improved longevity.

The latest actuarial report, published by the Government Actuary's Department (GAD), follows the prime minister's order for the Senior Salaries Review Board (SSRB) to conduct a "fundamental review" of the PCPF. (See earlier IPE article: UK considers switch to DC for ministerial pensions)

In a statement to parliament, Harriet Harman, the leader of the House, revealed the triennial valuation had shown a funding level of 87.8%, while the underlying cost of accruing benefits jumped from 27.4% in 2005 to 32.2% of members' pensionable payroll, because people are living longer.

Harman said GAD's recommendation - which the government is required to follow under law - is that the state contributions "should be at the rate of 31.6% of payroll from 1 April 2009", up from the 26.8% paid since April 2006.

Harman said the report showed improved longevity assumptions had offset better than expected investment returns and lower salary growth over the three years to April 2008, causing the scheme deficit to increase from £49.5m to £50.9m.

The SSRB review is expected to report to government later this year with analysis of the options to cap the Exchequer contribution to 20% of payroll, although Harman confirmed the scheme trustees and the House of Commons would be consulted on any proposed changes.

Harman revealed the government's "preferred option to achieve the cap on the Exchequer contribution" includes increasing member contribution rates for those receiving an accrual rate of 1/40th of final salary from 10% to 11.9% of salary - equivalent to a £60 a month increase - and from 6% to 7.9% for accruals of 1/50th.

The government also intends to extend the cap on MPs' accrual - set at two-thirds of final salary - to include MPs over age 65 who joined the scheme before 1 June 1989, to ensure the state contribution remains within the recommended cap.

Brian Strutton, national secretary of the GMB union, said the announcement showed a "pragmatic approach to public sector cost pressures" as the changes mean MPs will "contribute up to 2% more which will keep the taxpayer cost down to 20% and allow for a longer-term review".

But Steve Webb, shadow work and pensions secretary for the Liberal Democrats, said if the increase in Exchequer contributions goes up "it will be a spectacular own-goal for MPs".

He warned: "The pensions of MPs and other well-paid public sector workers have to be brought in line with reality. With members of the public losing their jobs and seeing their pensions plummet, MPs cannot insulate themselves from the harsh realities of the recession."

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