PENSION FAT CATS
First came outrage over executives’ exorbitant bonuses Now bosses are raking in up to £779,000 EXTRA as...
TOP bosses are under fire for pocketing eye-watering pension payments that dwarf those handed to staff amid growing frustration that they are ignoring calls to curb excessive pay.
A major investigation by The Mail on Sunday has revealed that one in ten FTSE100 chief executives receive pension contributions equivalent to 40 per cent or more of their annual salary. In some cases the payments, which are handed over in addition to their salary, exceed £500,000 a year.
The annual windfalls – which would be enough in one year for most staff to retire on – include one of £779,000.
The practice has been slammed by The Investment Association, which has launched a campaign against the excesses of fat-cat pay. The influential organisation represents leading investors as well as pension funds including Standard Life Aberdeen and Legal & General which have been increasingly concerned about rapidly rising rewards for key executives.
The body has written to FTSE100 company bosses with a series of demands along with a stark warning that pensions are too high and should be reduced to the same level as the ‘majority of workers’.
Chief executives in the firing line include Lloyds Banking Group’s Antonio Horta-Osorio, BP’s Bob Dudley, Alistair Phillips-Davies at energy giant SSE and Alison Cooper at tobacco firm Imperial Brands. All receive pension contributions equivalent to between 40 per cent and 52 per cent of their salary.
One of the most extreme examples is Friedrich Joussen at travel firm TUI who was given £556,873 – 57 per cent of his salary.
Another is Erik Engstrom at information provider RELX who was awarded 66 per cent of his salary – £779,000 – in pension contributions.
The renewed focus on boardroom pay follows the controversial £75million handout to Jeff Fairburn at Persimmon. His bonus this month led to his resignation after a furore that also claimed the scalps of chairman Nicholas Wrigley last year and senior non-executive Jonathan Davie.
The episode has proved embarrassing for the City where there is growing unease at political scrutiny over pay. It follows two decades during which firms have watered down the pension entitlements of their general employees, most of whom are offered less than 10 per cent of their salary in contributions.
A spokesman for The Investment Association said: ‘We’re concerned about companies using pension contributions to jack up the total package and we’ve seen companies using pensions as a way of increasing remuneration.
‘There’s a fairness element to it. The corporate governance code has a requirement in it for companies to align their pension contributions with that of the workforce.
‘There’s no rationale for saying a chief executive or chief financial officer should get a higher pension contribution than the rest. Shareholders are frustrated.’
He said firms are likely to face rising shareholder anger if they fail to comply – most visibly in voting rebellions at annual meetings which can lead to directors being ousted.
However, the companies singled out for criticism remain defiant. BP said Dudley’s pension contribution of £581,880 last year – 40 per cent of his annual salary – was due to complex arrangements spanning Britain, the US and Russia where he once ran BP’s joint venture. It was partly due to an increase in shares held in his retirement fund. A spokesman said: ‘The number reported is not his payment. It’s the increase in his pension fund during the year.’
Imperial Brands said Cooper – who received £494,000 or 47 per cent of her salary – is in the firm’s final salary scheme after 18 years of service.
The company said: ‘Our CEO is treated exactly the same as all of our other employees who are members of the defined benefit scheme we had in place 18 years ago, including the way in which the payment in lieu of retirement benefits is calculated.’
Lloyds said Horta-Osorio’s pension is ‘a contractual arrangement agreed when he was hired from Santander’.