Fat cat pensions keep getting fatter
The gap between executive and boardroom pensions and the rest of the workforce is widening, an independent report claims.
The High Pay Commission's independent inquiry into boardroom pensions has revealed that the average annual pension received by a FTSE 100 director with a defined pension is worth £174,963, compared to £5,860 for the average defined benefit private sector pension.
Because of the complexity of pay and pension arrangements at the top end of the pay scale - with many companies making arrangements on an individual basis - the issue of executive pay has been neglected.
The growing gap
Although recent attention has been focused on public sector pensions, the High Pay Commission's inquiry says it findings show there is a "growing gap in the private sector between the retirement benefits that top directors can expect compared to the rest of the workforce".
The report also highlights the trend of pension cash supplements - which are paid in place of standard pension contributions as a way of topping up pensions once the lifetime pension allowance has been reached.
Almost a quarter of FTSE mid-250 directors and a third of FTSE 100 directors received a cash pension supplement on average of £121,500 and £160,817 respectively.
Both FTSE 100 and mid-250 firm directors only contribute 5% on average towards their pensions but receive 17% and 15% employer contributions respectively on top of this.
"This area of top pay is often ignored but it is clear that while the bosses of some of the UK's biggest companies have been very good at reducing their costs by cutting the pensions of their workforce they have also been very good at protecting their own," the report writes.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.