UK – Pension arrangements for UK MPs should be adjusted to incorporate a greater level of risk-sharing, one of the country’s professional bodies for actuaries has said.
Outlining its submission to a recent consultation on the Parliamentary Contributory Pension Fund, the Association of Consulting Actuaries (ACA) chairman Andrew Vaughan said a risk-sharing design “might pave the way” for other pension funds to implement similar changes.
Vaughan noted that one such risk-sharing arrangement could be for MPs to shift to a cash balance fund – one of the already legal arrangements recently highlighted by pensions minister Steve Webb as a potential defined ambition approach.
“Our concern is that the consultation document, whilst recognising that cash balance plans are a possibility, may not help due to the benefit comparisons that are included in the document,” the chair said.
“However, a modified cash balance plan may be more attractive for MPs and so increase the likelihood of such schemes being introduced more widely in the UK if the MPs were to take the lead.”
The ACA said a move to cash balance might not occur, as any changes to the parliamentary pension system would be in line with changes made to other public sector funds – which the organisation deemed to be simply lower-cost career average pension funds.
The submission added: “With MPs currently earning around £66,000 and potentially more depending on the outcome of the review of MPs’ pay and pensions, the ACA feels risk-sharing designs are more appropriate for MPs than for public sector employees, where Lord Hutton concluded many were not in a financial position to bear such risks.”
Changes to the parliamentary pension fund have been considered repeatedly.
A review published in mid-2010, before Lord Hutton published his findings covering all other public sector pension funds, recommended a shift to career average benefits.
However, at the time, the leader of the House of Commons said the government would await the outcome of the Hutton report before suggesting any changes.