The Parliamentary Pensions (Amendment) (No 2) Regulations 2009

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Parliamentary Pensions (Consolidation and Amendment) Regulations 1993 (S.I. 1993/3253), which were made under the Parliamentary and other Pensions Act 1987 (c.45) (“the 1987 Act”) and set out a pension scheme for Members of Parliament, Ministers and holders of certain offices.

The Regulations come into force on 1st January 2010, but regulations 2 to 7 take effect from 1st April 2008 and regulations 8 and 9 take effect from 1st April 2009. Section 2(4)(b)(i) of the 1987 Act authorises the making of provisions taking effect from a date earlier than the date the Regulations are made. Regulations 8 and 9 do not apply in respect of any person who has ceased to participate in the pension scheme before 1st January 2010.

Regulations 2 to 7 provide for the introduction of a new rate at which Members of Parliament and office holders may contribute to the scheme and accrue pension under the scheme. Currently, Members and office holders may pay contributions of 10% of salary to the scheme, and accrue pension at a rate of one-fortieth of final salary for each year of pensionable service, or they may pay contributions of 6% of salary and accrue pension at a rate of one-fiftieth of final salary for each year of pensionable service. With effect from 1st April 2008, these Regulations introduce an option for members to pay contributions of 5.5% of salary in return for a pension accrual rate of one-sixtieth. Members and office holders in service on 1st January 2010 have a one-off option to select whether they wish to accrue pension at the fortieths, fiftieths or sixtieths accrual rate. They can choose whether their selected option takes effect on 1st April 2008 or 1st April 2009 (or, if later, their date of joining the scheme). Members and office holders who join after 1st January 2010 may select their accrual rate when they join.

Regulations 2 to 7 also increase the contributions which Members and office holders are required to pay to the scheme. With effect from 1st April 2009, the 10% contribution rate increases to 11.9%, the 6% contribution rate increases to 7.9% and the 5.5% contribution rate increases to 5.9%.

Regulations 8 and 9 apply the scheme’s maximum pension limit of two-thirds of final salary to all scheme members, in relation to service accrued after 1st April 2009. This will affect Members and office holders who joined the scheme before 1st June 1989 and remain in service after reaching age 65. They will cease to pay contributions and accrue benefits when they reach the maximum pension limit, in the same way as other Members and office holders. This change will not affect benefits accrued before 1st April 2009 or any Member or office holder who leaves service before 1st January 2010.

Regulation 10 provides for the pension scheme trustees to collect additional contributions from Members and office holders who do not exercise the option to reduce their contribution rate as a result of the changes made by regulations 2 to 7.

An impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.