A generous second pension scheme enjoyed by Members of the European Parliament is likely to be bailed out by the taxpayer after falling stock markets left it with a deficit of €120 million (£105 million).

Proving that the gravy train does not stop for MEPs when they leave Brussels, the European Parliament has guaranteed their full entitlements under the scheme — which for someone with ten years’ service pays out nearly £30,000 a year on top of their first pension of £15,000.

Critics are furious at a decision to underwrite the controversial second pension, for which the taxpayer already contributes €2 for every €1 paid by an MEP.

The scheme was already in disrepute because MEPs’ contributions are taken automatically from their office expense allowance of €4,202 (£3,700) a month rather than their salary. MEPs are supposed to reimburse this account but there are no checks and it is accepted widely that many do not repay the money, potentially making the pension an entirely taxpayer-funded perk.

Senior MEPs are proposing several changes to the second pension to reduce the deficit, such as increasing the retirement age from 60 to 63 and stopping early retirement at 50. But these are likely to be blocked after the fund chairman, the Conservative former MEP Richard Balfe — who now acts as David Cameron’s envoy to the trade unions — warned that such moves were “not permissible under European law”, in effect leaving the taxpayer with the entire bill.

The row has revived memories of the huge expenses and allowances taken by MEPs, which claimed the jobs of the Conservative leader and chief whip last year.

It comes less than two months before European Parliament elections that are already forecast to have a record-low turnout as a result of widespread apathy towards the Parliament across Europe.

Chris Davies, a Liberal Democrat MEP campaigning for pension reform, said: “While our constituents are feeling the pain, in Brussels we are getting a large dose of painkillers. It would simply be shameful to allow the use of taxpayers’ money to fill a hole caused by the recession.”

British MEPs already receive a main pension, which is the same as that for MPs at Westminster. This is worth up to two thirds of their £63,291 salary, depending on length of service.

Under the voluntary second pension, introduced in 1989, MEPs can put in €1,194 a month, which is supplemented by €2,388 from the European Parliament budget, giving them €1,393 a month for life for every five-year term they have served, up to a maximum of four terms (€5,572 a month).

Not all MEPs have signed up to the scheme — Nick Clegg, the former MEP who became Liberal Democrat leader, refused to do so on moral grounds — but 480 of the 785 MEPs have taken out the pension. The European Parliament has consistently refused to name them, citing the privacy of the individuals, despite criticism from the European Ombudsman.

A leaked note from the bureau of senior MEPs, which runs the Parliament’s administration, dated April 3, has made it clear that “Parliament will assume its legal responsibility to guarantee the right of members of the voluntary pension scheme to the additional pension”, after disclosure of the €120 million deficit, which was up from €30 million the previous year.

The fund is managed independently of the European Parliament by the non-profit Pension Scheme for MEPs based in Luxembourg, which is the administrative centre for all the financial operations of the EU. The board, chaired by Mr Balfe, meets four times a year in Brussels to sign off investment decisions which place the money in stock markets, bonds and property across Europe.

Mr Balfe has written to the European Parliament, warning that it should not impose any changes on MEPs’ rights under the scheme to try to plug the funding gap. “These changes go against the ‘vested rights’ and the ‘general principles of proportionality and the protection of legitimate expectations’ of the members of the scheme,” he wrote.

MEPs will debate their pension scheme at their sitting in Strasbourg next week but are desperate to avoid bad publicity as campaigning is about the start for the European elections.

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