MPs’ pay & pensions

We were made responsible for determining MPs’ pay and setting the level of any increase in their salary in 2011, under the terms of the Constitutional Reform and Governance Act 2010.

We are also responsible for the oversight of the MPs’ pension scheme.

Read more about MPs’ current pay.

IPSA response on a ‘redress payments process’ for members of the MPs’ pension scheme who are affected by IPSA’s response to the McCloud judgment.

In 2023, IPSA made changes to the MPs’ pension scheme in response to the McCloud judgement, to eliminate any age-related unfairness arising from the public sector pension reforms which took place in 2015. Impacted members have been offered a choice of whether to accrue benefits in the legacy final salary (FS) section or the reformed career average (CARE) section over a specified ‘relevant period’.

Because the MPs’ pension scheme sits outside of the legislation which has implemented McCloud changes across other public service pension schemes, it also does not benefit from provisions which will ‘smooth’ the tax treatment for members of other schemes. IPSA has worked with HM Treasury and HM Revenue & Customs to address this issue, and in particular the risk that members face adverse tax charges specifically as a result of a change to their benefits, which would not have otherwise arisen. On the advice of HM Treasury, we proposed a system of ‘redress payments’ which would mitigate these adverse tax impacts on members.

The consultation on this proposal was held between 19 October and 17 November 2023. We are grateful to all those who took the time to respond. Following the consultation, the IPSA Board agreed to proceed with the creation of a redress payments process, in line with the proposals set out in the consultation.

On 16 December 2024, IPSA laid before the House of Commons a set of revised pension scheme rules (HC 559), which established the arrangements for redress payments with responsibility for administration of the payments falling to the PCPF Trustees.

IPSA has continued to work with the PCPF through our joint implementation project to agree appropriate timings for the redress process, balancing practical considerations against the desire to provide affected members with certainty about their position as soon as possible. As implementation has progressed, we have worked with the PCPF to ensure that the Trustees have sufficient flexibility and discretion in the scheme rules to address unforeseen circumstances.

We have also continued to engage with HM Treasury, to confirm the funding mechanism for the redress payments; our intention remains that the payments should not adversely impact on the pension fund itself. We were pleased to see a commitment from the Government in the Autumn Statement 2023 that it would legislate to facilitate these redress payments through new tax regulations for the tax year 2024/25. We expect HMRC regulations to be laid later this financial year.

When the MPs’ pension scheme introduced a CARE section in 2015, it also introduced a cost control mechanism (or cost cap).

This is similar to what is in place in other public service pension schemes which aims to control the cost of pension benefits to the public purse by ensuring those costs remain within a pre-determined cost "corridor".

The MPs’ scheme uses a simplified version and does not look at past benefit costs, unlike the other public service schemes.

The cost control mechanism sets out the expected parameters of cost for future benefits. To ensure that the cost is controlled there is a ceiling and a floor applied which are 3% above or 3% below the employer cost cap. If, when the Scheme actuary tests the mechanism, the projected costs are greater than +/-3% of the employer cost cap, then that triggers a decision around what changes to make to member contributions. This widened corridor from +/-2% to +/-3% following consultation in February 2022, reduces the regularity of breaches occurring.

Since its introduction, we have consulted twice on the mechanism, first in March 2021 and subsequently in February 2022. This third consultation aims to bring in an extra level of assurance into the MPs’ scheme by further aligning it with the intention for the wider public service pension schemes in considering the country’s longer-term economic outlook.

Consultation: MPs’ pensions – updates to the cost control mechanism

In October 2023, IPSA launched a consultation about changes to the MPs' pension scheme in response to the McCloud judgment and proposed a redress payment process.

The proposal provides a similar outcome for members’ tax treatment as for members of other public sector pension schemes affected by the McCloud judgment and would be administered by the Parliamentary Contributory Pension Fund, not IPSA.

A small number of technical issues with the pension scheme rules have also come to light over the course of implementing the McCloud changes. We have included our proposals for addressing them in this consultation. We have also asked a general question about the discretions provided to the pension fund Trustees and whether these should be expanded to provide clarity as to the flexibility for the Trustees to address unforeseen issues.

Consultation: MPs’ pensions and McCloud – Mitigating adverse tax consequences

On 30 March 2023, we published the revised MPs’ Pension Scheme, following public consultations from 12 March 2021 to 13 May 2021 and 10 February 2022 to 18 March 2022.

Those consultations proposed amending the MPs’ Pension Scheme to make certain technical changes to MPs’ pensions including the closure of the Final Salary section, changes to the cost cap valuation “corridor” in line with other public sector pension schemes and to provide information about the changes in response to McCloud.

This new MPs’ Pension Scheme puts those changes in place.

It has effect from 30 March 2023.

A consultation in 2021 considered the principle of whether changes should be made to the MPs’ pension scheme as a result of the McCloud judgment, which identified age-related discrimination in some other public service schemes.

Although the judgment does not apply directly to it, the MPs’ pension scheme contains similar provisions to those in other public service schemes that were the subject of the legal case.

On the basis of that consultation, we concluded it was right to proceed with the proposed changes, which are likely to include two key elements:

  • closure of the final salary (FS) section of the scheme, and

  • an “immediate” rather than “deferred” choice offered to impacted members about the benefits they accrue during a defined “relevant period”

Since then, we have worked on designing the detail of the policy solution, which would ultimately be translated into rule changes to the scheme.

Consultation: Responding to the McCloud judgment

Letter to consultees: Responding to the McCloud judgment

In autumn 2020 we consulted, as we are legally required to do in the year after a general election, on the mechanism for making periodic changes to MPs’ salaries. In doing so we reviewed and confirmed the principles that guide our decisions in relation to MPs’ pay in order to ensure fairness to both MPs and taxpayers. We decided that MPs’ pay should remain unchanged in April 2021 given the extraordinary impact of the pandemic, but we did not decide to make any change to the mechanism we use for determining MPs’ pay in future years. Since 2015 that mechanism has been based on a statistical series showing changes in public sector pay, called AWE KAC9. In our March 2021 report on the consultation, we set out some factors we would consider for the future and indicated that this could lead to a further consultation.

We launched this further, targeted consultation in July 2021. The consultation was about the mechanism IPSA should use to periodically update MPs’ pay at the appropriate time. We proposed that for the next three years we should have some bounded discretion to depart from the AWE KAC9 figure if that was the right thing to do and explained how we would make that judgement at the relevant time.

An important reason for this proposal is that, as the Office for National Statistics and other commentators have pointed out, the effects of the pandemic have resulted in both structural changes in the economy and technical effects on the statistical series, from "compositional" and "base" effects. These changes mean that the average earnings statistics, which are primarily designed to measure the overall pay-bill in the economy, are a less reliable guide than in normal times to changes in individuals’ salaries.

Having considered the responses, we have decided to go ahead with the proposed temporary, bounded discretion. We have accordingly amended our determination on MPs’ pay and on additional pay for committee chairs, which formalise this mechanism.

Consultation report: mechanism for updating MPs’ salaries

In 2015, the Government implemented changes to public sector pension schemes such that they changed from providing benefits on a basis related to the beneficiary’s final salary, to benefits related to “career average revalued earnings” (CARE).

The McCloud judgment subsequently found that those transitional arrangements put in place in some other public sector schemes, but not the CARE scheme itself, constituted unlawful age discrimination under the Equalities Act 2010.

We considered the tests set out in the Equality Act 2010, the Government’s proposed changes to public service schemes and the extent to which those were applicable to the MPs’ pension scheme. We concluded that when the Equality Act tests were applied there were some members who were treated unfairly relative to others during the transition to the CARE scheme and therefore consulted on a proposal that we should make changes in response and some key elements of what the response should be.

Consultation report: The McCloud judgment and MPs’ pensions, July 2021

In 2015, the Government implemented changes to public sector pension schemes such that they changed from providing benefits on a basis related to the beneficiary’s final salary (FS) to benefits related to "career average revalued earnings" (CARE). Provision was made for those closest to retirement to stay in the final salary scheme, and for a further group closer to retirement to transition in later phases after the date on which other members moved across to the CARE scheme to "protect" those closer to retirement when the CARE scheme was introduced from unanticipated changes to pension benefits.

IPSA implemented analogous changes to the MPs’ pension scheme in 2015, as part of its review of MPs’ overall remuneration. Our objective in making the change from FS to CARE was to ensure that MPs’ pension arrangements, which had grown increasingly expensive to provide in the preceding years, were put on a more sustainable basis.

The McCloud judgment subsequently found those transitional arrangements in some other public sector schemes – but not the CARE scheme itself – constituted unlawful age discrimination under the Equalities Act 2010.

In the light of that judgment, the government has consulted on and proposed changes to various public sector schemes to move to a position where all scheme members are treated in the same way regardless of proximity to retirement and to address the position of those who were subject to transitional provisions that the court found to be unlawful.

The legal arrangements for the MPs’ scheme differ in several respects from those for the public sector schemes about which the government has consulted. This means it was for IPSA to determine whether changes were needed to the MPs’ scheme in the light of McCloud and, if so, what those should be. In line with our principles for MPs’ remuneration more broadly, we approached this principally as a matter of fairness, both to MPs and taxpayers. We considered the tests set out in the Equality Act 2010 to arrive at our view of whether changes were needed, and in considering how to make changes we reflected on the approach taken by the government to other public sector schemes, and also on where the specific characteristics of the MPs’ scheme need to be taken into account.

We concluded that when the Equality Act tests were applied some members were treated unfairly relative to others during the transition to the CARE scheme. In our consultation paper and report, we explained how we arrived at that view and the actions we thought were needed to address this unfairness. The approach we proposed would follow the government’s approach for other schemes in giving those who were treated unfairly the choice of whether to be treated as a member of the former FS scheme or the CARE scheme for a period at the end of which the FS scheme would close to future accruals.

Consultation: MPs’ pensions and the McCloud judgment

MPs' Salaries and McCloud summary

We have a statutory duty to review MPs’ remuneration in the first year of each Parliament. We conducted a consultation in October 2020, fulfilling the requirement to do so by December 2020, a year after the last General Election in December 2019.

This consultation ran until 13 November 2020.

This consultation included the proposal that the existing approach to determining MPs' pay could continue. This approach links MPs’ pay to an official statistic on public sector pay that is first published each year in mid-December.

The unprecedented impact of the Covid pandemic has had an effect on public and private sector earnings and that applying the official statistic for public sector earnings growth would result in a salary increase for MPs that would be inconsistent with the wider economic data and would not reflect the reality that many constituents are facing this year.

The IPSA Board therefore decided that the salary for Members of Parliament will remain unchanged for the financial year 2021-22.

Further details can be found in our Interim Chair's letter to MPs, here.

Following the 2017 General Election, we conducted a consultation in May 2018, as required by statute.

After considering the consultation responses, we decided not to change the determinations on MPs' basic salary and additional salary for Committee Chairs. The July 2015 and May 2016 pay determinations will continue for this Parliament. We also decided that an amount equal to two months’ net (take home) salary should be paid in addition to the Loss of Office payments for former MPs who have lost their seats. MPs who stand down at a snap General Election, but not at a planned General Election, will also be entitled to the equivalent of two months’ net salary. Between 2012 to 2015, we conducted a comprehensive review of MPs' pay and pensions.

In July 2019 we published the revised MPs’ Pension Scheme, following public consultations from 10 May to 15 June 2018 and 28 January to 18 February 2019.

Those consultations proposed amending the MPs’ Pension Scheme to make certain technical changes to MPs’ pensions and to provide for improved lump-sum payments to the beneficiaries of any MPs killed in the line of duty. This new MPs’ Pension Scheme puts those changes in place. It has effect from 1 April 2019.

Following the 2015 General Election, we conducted a final consultation in June 2015, as required by statute.

We announced on 16 July 2015 our final decision on MPs’ pay in the 2015 Parliament. We have now implemented all elements of the package.

All MPs will now be paid an annual salary of £74,000, backdated to 8 May 2015. Annual changes in MPs’ pay during this Parliament will be linked to changes in average earnings in the public sector, rather than to those in the economy as a whole as previously proposed. We will review MPs’ pay again in the first year of the next Parliament, as required by statute​.

In December 2014, following a public consultation from 11 July to 20 October 2013 and as part of the reforms announced in December 2013, the new MPs’ pension scheme was laid before the House of Commons.

The consultation proposed amending the MPs’ pension scheme to put it on a par with those available in other parts of the public sector. This new MPs’ pension scheme puts those changes in place. It has effect from 8 May 2015.

In December 2013, following two public consultations, we proposed a modern, professional package for MPs’ remuneration.

There were six main elements to our proposal:

  • to make a one-off adjustment to MPs' pay from £67,060 to £74,000 a year, to reflect that it had fallen behind

  • thereafter, to link changes in MPs' pay to their constituents' pay across the country

  • to reduce MPs' generous pension benefits

  • to scrap resettlement payments for MPs which had been worth up to a year's salary

  • to tighten MPs' expenses further, and

  • to call on MPs to produce an annual account to help constituents to understand their work

As a whole, this package of reform would not cost the taxpayer a penny more. It would bring MPs’ pensions into line with others in the public sector, it would get rid of generous and out-of-date benefits and, after a one-off pay adjustment, it would permanently link MPs’ pay to the pay of the people they represent.

The first wide-ranging consultation on MPs’ pay and pensions, and other elements of their remuneration package, took place in October 2012. This followed extensive evidence gathering, including public opinion polling, focus groups and citizens’ juries.

The resulting consultation was open-ended. It did not make firm proposals, but asked questions about all aspects of MPs’ remuneration. It also provided evidence on how MPs’ pay compared with that of other professions, other representative bodies in the UK and overseas, and with national average earnings over the previous 100 years. The paper also examined alternative pension arrangements in detail.

In October 2011, IPSA was given responsibility for determining a new scheme for MPs’ pensions.

Before conducting our larger review of MPs’ remuneration, we held a small consultation on interim arrangements to be introduced in April 2012.