The current basic annual salary for an MP in the United Kingdom is £65,738. In addition, MPs are able claim allowances to cover the costs of running an office and employing staff, and maintaining a constituency residence and a residence in London.[1] Additional salary is paid for appointments or additional duties - such as the chairing of select committees.
Due to additional allowances it is difficult to calculate the annual basic salary of an MP, but for an MP with no additional responsibilities, who stays for a single term of 5 years, the MP's severance package will raise the taxable salary by over £12,000 per annum (see Allowances below) - giving an effective annual salary of £77,738.
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The basic salary of an MP in the House of Commons was increased to £65,738 as of 1 April 2010.[2][3] Many MPs (ministers, the Speaker, senior opposition leaders, opposition chief whip, etc.) receive a supplementary salary for their specific responsibilities. As of the 1 April 2008 these increments range from £14,039 for Select Committee Chairs to £130,959 for the Prime Minister.
MPs also receive extensive allowances and expenses. Strictly speaking, MPs don't receives these allowances, MPs' staff, landlords, electricity suppliers, insurance companies, etc., receive these allowances. These expenses and allowances are listed below, and have included the paying for, buying and furnishing second homes[4]
MPs receive allowances towards having somewhere to live in London and in their constituency, and travelling between Parliament and their constituency.
MPs will normally receive a pension of either 1/40th or 1/50th of their final pensionable salary for each year of pensionable service depending on the contribution rate they will have chosen. Members who made contributions of 10% of their salary gain an accrual rate of 1/40th.[5] According to a 2009 report in the Daily Mail, state contributions for MPs are more than four times higher than the average paid out by companies for final-salary schemes, however they are not significantly more generous than most public sector pensions.[6]
If an MP stands down during the course of a Parliament for ill health reasons, an ill health retirement grant is payable, calculated in the same way as the Resettlement Grant (as well as an immediate pension based on the service the MP would have accrued if he or she had continued to serve until age 65).[7]
On leaving the House of Commons, an MP will be entitled to what is essentially severance pay.
Resettlement Grant
The Resettlement Grant is the name given to the MP's severance pay package. It may be claimed to help former MPs with the costs of adjusting to nonparliamentary life. It is payable to any Member who ceases to be an MP at a General Election. The amount is based on age and length of service, and varies between 50% and 100% of the annual salary payable to a Member of Parliament at the time of the Dissolution.[8]
In the UK the first £30,000 of severance pay is tax free. The amount retiring MPs, or those who lose their seats receive depends on how old they are and how long they have served in the House. Example. An MP who stays in office for one term (say 5 years) and then leaves office will currently receive tax-free severance pay of 50% of his current salary, or £32,383 at current rates - equivalent to an annual salary increment of over £12,000 at current tax rates and pay scales.[9]
Winding-up Allowance
There is also up to £42,000 on offer to pay for winding up staff contracts and office rent.[10] An allowance of up to one third of the annual Office Costs Allowance was paid for the reimbursement of the cost of any work on Parliamentary business undertaken on behalf of a deceased, defeated or retiring Member after the date of cessation of Membership. On 5 July 2001 the House agreed to change the allowance to one third of the sum of the staffing provision and Incidental Expenses Allowance in force at the time of cessation of Membership.[11]
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