FTSE 100 CEOs scrutinised over pension contributions

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24 May, 2019

FTSE 100 CEOs scrutinised over pension contributions

CEOs at Britain’s largest firms are receiving four times the amount of pension contributions as their employees, a new study reveals. 

According to a new analysis of a gulf that is fuelling frustration amongst shareholders, FTSE 100 chief executives received contributions worth 25% of salary, compared to their employees who only got an average of 6%, the Financial Times reports. 

The report, published on Tuesday by actuarial consultants Lane Clark & Peacock, analysed 83 firms in the FTSE 100 that have defined benefit pensions. It arrived just as investors mount tension over high pensions for top management. 

Of the participating companies, nine of them were found to be contributing over 35% of their wage to CEO pensions. These included firms such as Tui, Standard Chartered and Ashtead. It was found that only 15% of the companies were supplying an equal amount of pension contributions to both workers and company heads. 

A director of The Investment Association – whose associates manage over £7 trillion of assets – Andrew Ninian said: “This is an issue of fairness.

“Shareholders expect directors to receive pension contributions that are in line with the majority of the workforce.”

MPs, investors and regulators have all expressed their dissatisfaction towards the increased pension. Last week, two parliamentary committees requested that investors vote against Lloyds Banking Group’s pay report, scrutinising the pension contributions of chief executive Antonio Horta-Osorio and incoming finance director William Chalmers.

Mr Horta-Osorio’s total salary for 2018 included a payment made to replace pension contributions, worth £573,000, or 46% of his base wage. While this will be reduced to 33% of base salary, most employees at Lloyds are only eligible to 13% as the maximum available contribrution. Mr Chalmers, on the other hand, receives 25% of his base paycheque as pension allowance. 

Frank Field MP, chair of the Work and Pensions Select Committee argued: “When can we hope to see an end to this profoundly unedifying spectacle: handsomely paid executives squirming, with ever-increasing desperation, to justify pension rates several times those of their workforce?”

The LCP report also underlined the increasing gap between FTSE 100 payouts to shareholders and contributions to pension schemes. 

The report revealed that firms paid £90 billion of dividends last year, roughly seven times as much as the £13 billion contributed towards their defined benefit pension schemes, and increasing a multiple of six times in 2017. 
The UK Pensions Regulator has mounted its efforts, in a bid to make healthy companies get rid of their pension deficits more quickly. 

The analysis also triggers worry that the FTSE 100 balance sheets could be weakened by up to £100 billion, as a result of the projected changes to international accounting rules.

“Depending on what the new rules say, they could affect most or all UK companies, rather than just a handful at present.”