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Resettlement Grant

The Resettlement Grant is the name given to the MPs 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]

For the 2010-2015 Parliament, only MPs defeated in their attempt to be re-elected will get one month’s salary for each year served, up to a maximum of six months or over £33,000. From the start of the 2015 Parliament, it will be replaced by a "Loss of Office Payment", at double the statutory redundancy payment. "For the 'average' MP, who leaves office with 11 years' service, this may lead to a payment of around £14,850."[10]

Winding-up Allowance

There is also up to £42,000 on offer to pay for winding up staff contracts and office rent.[11] 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.[12]

"For the 'average' MP, who leaves office with 11 years' service, this may lead to a payment of around £14,850."