Sir, The vote by MPs, to accept a pay rise in line with inflation but to reject changes to expenses, ignores the value of their pensions (July 4).

MPs’ pensions are the most generous in the UK — an annual benefit of 2.5 per cent of final salary, full inflation protection and early retirement provisions — but the official cost to taxpayers, using actuarial smoke-and-mirrors, is only 18 per cent of salary. The real cost, discounting expected pensions at the index-linked gilt rate and using realistic longevity assumptions, is about 50 per cent of salary. An MP’s annual salary and pension is now £93,000, not the official £73,000, without including allowances.

Although ministers have agreed not to accept any pay rise, a Cabinet Minister’s annual salary and pension is already more than £208,000, not bad even for the private sector.

Continuing to understate the real cost of MPs’ and Ministers’ pensions is politically convenient but very damaging to public confidence. A proper public debate on overall pay and benefits can happen only if pension costs are accurate and transparent.

John Ralfe
West Bridgford, Notts

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