Investors curb fat cat pensions

BRITAIN’S top companies have been told to bring pensions for bosses into line with contributions for workers or risk a backlash from shareholders.

New guidelines from the Investment Association, whose 250-plus members manage over £7.7trillion of assets, mean blue chip companies must set a credible plan for directors by the end of 2022.

Those firms whose existing directors are paid more than 25 per cent of salary as a pension contribution will be given the highest level “red top” warning – ahead of their next annual meeting unless they demonstrate they are on track to comply.

Pension payments for executives have come under increasing scrutiny from investors this year, leading to a quarter of FTSE 100 companies vowing to pay all new directors pensions in line with the majority of the workforce.

Research from advisers Willis Towers Watson found that 40 per cent of FTSE 100 companies had cut pension contributions for directors this year. Among reducing provisions for new hires, the median contribution fell from 25 per cent to 12 per cent of salary.

Andrew Ninian of the IA said: “Providing directors the same pension contributions as the rest of the workforce is fundamentally an issue of fairness.

“We welcome the strong progress a number of companies have made towards bringing executive pension contributions in line with their workforce.

“Shareholders want to see that progress continue, with the aim of pension payments for executives being in line with the majority of the workforce by the end of 2022.”

He added: “Our new guidelines require companies to show they are serious about that ambition and set out a credible action plan to deliver it.

“Companies with high executive pension payments who don’t provide that plan risk facing further shareholder rebellions in their 2020 AGMs.”