FTSE directors’ pension pots average record £3.9m

TUC PensionsWatch shows top pensions rise along with big jump in FTSE chiefs’ pay as real wages for workers decline

The directors of the largest 100 British companies are in line for average annual pension payments of £224,000 each, according to a survey today.

The report shows 362 top directors have built up final salary pensions worth £568m and the average pension pot transfer value is at a record high – £3.91m compared with £3.8m last year. Directors also retire earlier than their staff. The most common age is 60, while for ordinary scheme members it is 65 and expected to rise.

The highest earning pensioner among current FTSE 100 directors will be the former chief executive of oil group Royal Dutch Shell, who is entitled to £1.2m a year from his company scheme. Jeroen van der Veer, who stepped down from the top job in 2009 but remains on the board, has amassed a pension pot worth £21.6m, the TUC has revealed in its 9th annual PensionsWatch report.

Just before his retirement, Van der Veer declared that pay had little impact on performance, saying: “If I had been paid 50% more, I would not have done it better. If I had been paid 50% less then I would not have done it worse.”

The details of FTSE directors’ pensions comes days after another survey showed that chief executives at the top 100 companies saw pay and bonus packages jump by an average of £1.3m to almost £4.5m last year, the biggest leap in nine years.

According to a study commissioned by the High Pay Commission, the average pay deal for a FTSE 100 boss soared from £3.09m to £4.45m as business leaders were able to enjoy record windfalls from share-based incentive schemes, thanks to a sharp bounce in the stock market.

The benefits reaped from the stock market bubble by FTSE 100 executives have not been mirrored on the shop floor. Annual wage rises stood at 2.2% for the final three months of 2010. Factoring in the rising cost of living – the retail price index stood at 4.8% last December – that means most workers in Britain saw a significant decline in their real incomes.

The TUC survey shows a growing number of bosses receive cash instead of, or in addition to, company pension scheme contributions. Pearson’s long-standing chief executive, Marjorie Scardino, banked the largest cash payment, of £620,700 – nearly 76% of her salary – while Peter Clarke, chief executive of hedge fund Man Group, pocketed £532,000 – 94% of his salary.

Stephen Hester, chief executive of state-controlled Royal Bank of Scotland, received the third largest cash payment, collecting £420,000, or 35% of his salary.

Companies with defined contribution schemes – less advantageous than the final salary schemes gradually being phased out – make much larger contributions to directors’ pensions as a proportion of salary than they do for the average employee.

Directors surveyed enjoyed average company contributions of 22% of their salaries. The average for all employees is 6.7%, while many companies set default contributions even lower, at 3%, according to the Association of Consulting Actuaries.

TUC general secretary Brendan Barber said: “This survey highlights the real pension scandal in Britain today. Public sector workers are rightly furious about being told that their pensions of just a few thousand pounds are ‘gold-plated’ and unaffordable by the same business leaders who stay silent on the multimillion-pound pensions that many enjoy themselves.”

Barber added: “It’s hardly a surprise that these lavish rewards are signed off when directors sit on each other’s company remuneration committees. This culture of mutual backslapping must be tackled by giving ordinary staff members a voice on remuneration committees.”

Barber called on the government to force companies to disclose directors’ pension arrangements so that they could be scrutinised by staff and shareholders.

With more directors opting for cash payments, the TUC says pensions secrecy is increasing. In some cases, retirement cash is listed under other “emoluments”, making such payments harder to detect. “This may result in the number of directors being covered in any review of executive retirement provision shrinking,” according to the report.

Directors still receive 23 times more than the average worker, a figure which has stayed fairly constant since the survey began in 2003. Members of company and public sector schemes receive an average annual pot of £9,568, while the average public sector pension is £6,497.

Darren Philp, policy director for the National Association of Pension Funds, said: “More transparency is needed around boardroom pensions. It is also worrying that directors’ pensions are not usually linked to performance. This could mean bosses are rewarded in their retirement despite failure in the job. Pensions must not become a back-door to boosting pay.”


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