MEP pension fund set to run out of money by 2025

A gold-plated European parliament pension scheme is set to run out of money within two years, putting payouts at risk for almost a thousand members including the Brexiter Nigel Farage and Marine Le Pen, the French far right leader.

Senior MEPs are fighting to avoid a €300mn taxpayer bailout of a special voluntary scheme for European parliamentarians, which includes a host of prominent beneficiaries with a pension pot worth around €375,000 per person.

Members such as Farage, Le Pen and Josep Borrell, the EU’s foreign policy chief, could be invited to leave the scheme voluntarily — or have their benefits slashed. The final salary, or defined benefit, scheme can pay out as much as €5,000 a month.

The bureau, the MEPs who run the parliament’s internal affairs, were presented with three options at a meeting in Strasbourg this week, according to a record of the meeting seen by the Financial Times.

As of December 31 2022, the fund’s assets were €50-55mn. Future pension payment obligations totalled €363mn until at least 2074 and the fund is likely to run out of money in 2024 or 2025. The scheme had 964 current and future pensioners in 2021.

The first option presented was for parliament to plug the funding gap. The second was to sell the remaining assets, hand the proceeds to members and shut it down.

The third was a combination of increased contributions and reduced benefits. Measures could include freezing payouts instead of uprating them with inflation and increasing the retirement age beyond 65.

These are controversial because MEPs were allowed to use office allowances to pay into the scheme, if they opted to join, rather than solely making personal contributions. In total the parliament paid €142mn and the MEPs €71mn.

It was closed to new members in July 2009 when new pay and pensions arrangements were introduced. But parliament agreed to be liable for the future benefits of the voluntary scheme members.

The fund pays out around €20mn a year with the average pension more than €2,000 a month.

Heidi Hautala, a Green member of parliament’s bureau, said: “There is a clear consensus that the taxpayer should not be burdened. A solution must be found.”

She called on better off members to make a “moral choice” to quit the scheme to leave funds to those who needed it.

The liberal Renew group said it had asked for legal advice before taking any decision. “We need to respect the acquired rights, but also taxpayers’ money,” it said.

In 2018 the bureau ordered a deduction of 5 per cent of the pension payments for future pensioners to try to plug the financial hole in the scheme and increased the retirement age from 63 to 65. It also added a 5 per cent levy to contributions.

Brexit-supporting British MEPs were avid users of the scheme.

The European court of Justice in 2011 ruled that the names of members could not be published to protect their right to privacy.

But in a later case the court ruled that MEPs who were members of the voluntary pension scheme and who had voted on certain decisions related to it had a potential conflict of interest and their names should be made public.

Those named included Chris Heaton-Harris, the UK cabinet minister, and Lord Hannan, one of the leaders of the Brexit campaign. Heaton-Harris, Hannan and Farage did not respond to a request to comment.

Only around 20 current MEPs are members and one person briefed on the talks said most newer MEPs want to let it fold. “We called it the Brexiters fund,” the MEP said. “There will be celebrations when it shuts down. It’s a legacy issue that is terrible for parliament’s image.”

Margaritis Schinas, who is now a European Commission vice-president, is among the few to have quit voluntarily.

There have been several legal cases brought by the Luxembourg-based fund to protect the benefits of its members. It was set up in 1992 because French and Italian MEPs had unsatisfactory pension rights, but was open to all.

A parliament spokesperson said that it was able to act after an ECJ ruling in March backed its attempts to cut the deficit.

“While no new measures have been decided at this stage, it is the clear intention of the bureau to act in order to solve the current situation, while minimising any possible impact to the European parliament budget.”

The new pension scheme pays out 3.5 per cent of the salary for each full year’s exercise of a mandate from the age of 63. MEPs earn a post-tax salary of €7,647.13 a month.