Eddie Obeid will be stripped of his annual $120,000 parliamentary pension following his sentencing for misconduct in public office as a former NSW Premier declared it "a great day for NSW".

Obeid, a former Labor powerbroker and cabinet minister, was on Thursday sentenced to a maximum of five years in jail with a non-parole period of three years following his conviction in relation to lobbying over commercial leases at Circular Quay in which his family held an interest.

In response, Premier Mike Baird announced MPs convicted of a serious offence during their time in office will lose their parliamentary pension, even if they quit before charges are laid.

Presently MPs convicted of a serious offence - punishable by at least five years' imprisonment - can keep their pensions if they are not charged while in office.