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Barry, from Telegraph (Ian Cowie) May 11
Gordon Brown's offer to resign as Prime Minister raises important questions about his taxpayer-funded pension - and that of whoever his successor may be, whether he is elected or not.
Nobody expects the former Prime Minister to sleep on a park bench but many people whose retirement plans have suffered since Mr Brown stripped them of their tax-free status in 1997 might be surprised at just how generous the Number 10 Downing Street scheme is.
Regardless of how long he or she serves, any former Prime Minister is entitled to half his £194,250 salary index-linked against inflation for the rest of his life. Mr Brown voluntarily waived his right to this payment - but the entitlement remains in legislation for whoever his successor might be; even if they only hold the post for a few months.
It would cost more than £3.6m for a private sector saver of Mr Brown's age to buy a guaranteed income for life with full inflation-proofing, according to Billy Burrows of annuities specialists Burrows Cummins. Low interest rates and the fact that people are living longer have pushed down index-linked yields to just 2.67 per cent.
However, contrary to a Westminster myth, the Prime Minister's pension is not tax-free. Last March, I wrote to Number 10 Downing street to check. I also pointed out that the Prime Minister had said his pension arrangements should be reformed but nothing seemed to have happened.
A spokesman replied: "Gordon Brown and Jack Straw have entered into voluntary agreements, which means they have refused to benefit from the arrangement regardless of legislation.
"The Government has already announced its intention to legislate to stop the special pension arrangements for future holders of these posts and to formally note the voluntary agreements made by the current Prime Minister and Lord Chancellor . This will bring these roles within the scope of the standard Parliamentary pension scheme for Ministers and MPs.
"Under the old scheme, which the PM has said will not apply to him, there would be no accrual rate - he would simply be paid half of his salary on leaving office.
"However, Gordon Brown announced in January 2008 that he would voluntarily withdraw from these arrangements and take the same pension as other ministers.
"Members of the parliamentary scheme can at present choose to accumulate benefits at a rate of 1/40th or 1/50th of their final salary for each year's service, although the scheme is undergoing a fundamental, independent review by the Senior Salaries Review Board."
I also asked whether the Prime Minister would be affected by new tax restrictions on pension funds worth more than £1.8m and was told: "The Government is currently consulting on the detail of implementing the restriction of pensions tax relief. The Government plans to introduce the new arrangements in respect of pension contributions from April 6, 2011.
"Like everyone else, the Prime Minister's pension would be subject to income tax. It is highly unlikely to reach the value of £1.8m that would make it subject to the Lifetime Allowance tax from April 2011."
Mike Warburton of accountants Grant Thornton commented: "Whatever the outcome of the current negotiations to form a coalition government in this hung Parliament, we now have the prospect of a party leader, elected or otherwise, taking residence in number 10 and finding his or her stay is a short one.
"That will not prevent them immediately qualifying for a 50 per cent index-linked government backed pension for life. It makes the cries in the various political parties' manifestos for 'fairness' ring rather hollow as we all prepare ourselves for a period of austerity."
Rates of pay for the Prime Minister, Cabinet Ministers and other senior Parliamentarians are set out in the House of Commons Information Factsheet M6. This states:
Ministers who are in the House of Commons also receive their salary as a Member of
Parliament (currently £64,766).
Prior to July 1996, they received a reduced parliamentary salary on the grounds that ministerial office impinged on the individual's ability to undertake the full range of an MPs' parliamentary duties.
In July 1996, the Review Body on Senior Salaries (SSRB, successor to theTSRB) recommended in its 38th report that Ministers should receive a full parliamentary salary.
Following a debate on 10 July 1996, the House agreed to accept the recommendation
But it adds:
Current Ministers have agreed not to take the pay rise for 2009‐10, either in their ministerial or parliamentary pay.
So, while the arrangements politicians at large have made for their pay and pensions look generous by the standards of many taxpayers who fund them, Mr Brown cannot be accused of taking all he could. On the other hand, we have yet to see the legislation he proposed to curb the generosity of these benefits.