Ordinary workers with private pensions must work for decades longer than their MPs to achieve the same income in old age.
An average worker earning £37,430 would have to work for 52 years to secure the same retirement income as an MP working for 20 years thanks to their taxpayer-funded, gold-plated pensions, according to calculations by investment firm AJ Bell.
MPs earn a basic salary of £91,346 plus expenses and pocket generous defined benefit public sector pensions that pay out a guaranteed and inflation-proof income in retirement.
By contrast, these schemes are almost extinct in the private sector, where most workers pay into a defined contribution scheme – a retirement pot whose value is linked to investment performance.
The so-called gold-plated pensions paid to politicians and public sector workers put them at an advantage in terms of enjoying a decent living standard in old age.
AJ Bell’s analysis shows that it would take an MP 10 years to accrue a pension worth £367,000 – for yearly retirement payments of £17,911 – compared to 39 years for the average worker.
After 20 years, the value of an MP’s pension will have hit £735,000, translating to an annual income of £35,822. It would take an average worker 52 years to save the same amount.
Laith Khalaf, of AJ Bell, said: “MPs pay quite high pension contributions and have low job security. But a fairly short shift in Parliament can still deliver some perky pension benefits.
“The MPs’ scheme is less generous than it was but it still earns the moniker gold-plated when you consider how long it would take the typical worker to build up a similar retirement income.
“There are relatively few MPs compared to nurses, teachers or civil servants, so the overall cost of the scheme compared to other public sector pensions is tiny.
“The concerning part of the scheme is that its generosity detaches MPs from the reality facing most pension savers – and yet they are the ones who decide the rules which govern everyone else’s retirement savings.
“Perhaps if MPs and ministers faced the same pension choices as their constituents, they might be more sympathetic to their needs.”
The public sector pensions bill to taxpayers is set to surpass £36bn this year, after Sir paved the way for above-inflation pay rises in April.
The total value of pensions already guaranteed to workers including doctors, soldiers, civil servants and teachers has reached nearly £5 trillion, projections suggest.
This equates to a bill of £173,000 per household to fulfil promises made during decades of lucrative final salary schemes.
Such is the burden on the taxpayer that the government is looking at giving public sector workers a one-off pay rise in return for accepting less generous pensions.
Steven Cameron, of Aegon UK, told the : “These figures show just how huge a gap there can be in pension provision between different groups.
“MPs build up very valuable public sector defined benefit pensions which are simply out of reach of most in the private sector saving in defined contribution pensions.
“Most people – and that may include some MPs – won’t appreciate just how valuable some public sector pensions are relative to private sector pensions.”
MPs earn a basic salary of £91,346 plus expenses (Image: Getty)
The gap is set to widen further after Chancellor Rachel Reeves dragged defined contribution pensions into the inheritance tax net. It means grieving families will face death duty rates of up to 90 percent on retirement savings from April 2027.
However, defined benefit schemes enjoyed by MPs and civil servants will avoid the tax raid because they cannot be inherited. A reduced rate of income, similar to an annuity, can be passed on as income to a spouse or dependant – but will not be taxed under the Chancellor’s plans.
Romi Savova, of pension provider PensionBee said the guaranteed and inflation-linked pensions offered to politicians and retired civil servants means they have been insulated from the worst of the squeeze.
By contrast, she said many other older people are looking to stay in the workplace for longer, while some retirees are now going back to work in order to make ends meet.