An average worker would need to work 52 years to match the retirement income of an MP who serves for just 20 years, according to an analysis by investment firm AJ Bell.
MPs, earning a basic salary of £91,346 plus expenses, benefit from taxpayer-funded, inflation-proof defined benefit pensions. These pensions, which guarantee a set income for life, are increasingly rare in the private sector.
Private-sector workers rely on defined contribution schemes, where retirement income depends on investment performance. Critics warn this disparity distances MPs from the challenges faced by ordinary pension savers, the Telegraph reports.
AJ Bell’s analysis shows that an MP can build up a pension worth £367,000 in just 10 years, providing an annual retirement income of £17,911, while it would take an average worker 39 years to save the same.
After 20 years, an MP’s pension grows to £735,000, translating to yearly payments of £35,822. Meanwhile, an average worker would need 52 years to accumulate comparable savings.
Steven Cameron of Aegon UK said: “These figures show just how huge a gap there can be in pension provision between different groups.”
Romi Savova of PensionBee added that most workers can never match the security and benefits of defined benefit pensions, even with decades of diligent saving.
The gap is expected to grow wider as Chancellor Rachel Reeves’ plans to subject defined contribution pensions to inheritance tax from April 2027 will not apply to defined benefit schemes, like those enjoyed by MPs.
Critics argue this creates a system where MPs and public sector workers are shielded from tax burdens that will hit private-sector savers.
The public sector pensions bill is projected to surpass £36billion this year. Meanwhile, Labour is considering offering higher salaries to public sector workers in exchange for lower pensions, though unions warn this could force workers to choose between “poverty now or in retirement.”
Despite a shift in 2015 to base MPs’ pensions on average pay rather than final salaries, experts note that inflation-linked guarantees continue to shield retired politicians and civil servants from the worst of the cost-of-living crisis.
Ms Savova added: “Semi-retirement or continued employment well into their later years is no longer a choice but a necessity for many – a stark contrast to the comfortable retirements enjoyed by policymakers.”
