Politicians like to tell us voters they’re ‘just like us’, but one way in which we clearly diverge is in terms of our pay packets. According to the official parliament website Theresa May can expect to earn £150,402 per year, meaning that she takes home more money than 90% of Brits. Meanwhile her Cabinet Ministers earn around £135,527 per year, with the rest of parliament picking up £74,962 each.
Even though they come with the risk of regular eggings (remember these politicians left with egg on their faces?), these are undoubtedly attractive salaries. But the financial benefits don’t just end there - Corbyn and co get generous pensions, too. Like millions of savers, MPs are putting cash away for their retirement, but what exactly do their parliamentary pots look like?
Defined benefit beneficiaries
MPs save into the Parliamentary Contributory Pension Fund. It’s a defined benefit pension scheme, which pays out based on final earnings at retirement, and the number of years MPs have been a member of the fund.
Nowadays, these defined benefit schemes are a bit of a dying breed. The bulk of Brits now pay into defined contribution schemes, as put simply many employers can’t (or just aren’t willing) to foot the bill for defined benefit pensions. They guarantee a retirement income and bring a little more saving certainty, and they can also prove pretty lucrative - especially if you’re a politician…
18,500 reasons to become an MP
Some digging by the Daily Mail suggests that ten years’ service (around the average tenure) could entitle an MP to £18,500 a year in retirement - a pretty impressive pension by today’s standards.
To put things into context, only by saving a staggering £300,000 into your pension could you expect to generate a similar income, given current annuity rates on the market. And barely anyone has that much saved. It’s estimated the average pension pot for a 55-70 year old only sits at £85,000*.
It’s probably a bit unfair to compare them to us average Joes though, so how do they match up to other aspects of the establishment?
Time for a career change?
One good thing about the credit crunch was that it shone a light on the secretive world of high finance, specifically on bank chiefs’ astonishing pay. At the time of his sacking, former RBS boss Fred Goodwin was due to receive a pension of £703,000 per year, before he was finally forced to accept the more modest sum of £342,500.
In the media industry the Mail’s Paul Dacre is the best paid pensioner, with his gold-plated pension worth around £650,000 per year. Thankfully though you’ll be glad to know the church is a little more frugal - the Archbishop of Canterbury apparently only gets around £21,000 - £28,000 per annum.
Perhaps politicians aren’t so bad after all…
How to kickstart your pension savings
While we wouldn’t necessarily recommend you become a politician, there are lots of other things you can do to boost your pension savings. A pension calculator can help you work out what contributions to make and consolidating your pensions into one plan could help you better manage your retirement fund. Find out more tips and hints on managing your pension on our blog.