IA unveils harsher executive pension guidelines

16 Nov 2020

The Investment Association (IA) has written to FTSE 350 firms in regard to modifications to its executive pension guidelines.

Its Institutional Voting Information Service (IVIS) will issue companies with so-called ‘red-top’ warnings if they do not devise plans to align incumbent directors’ pension contributions with the wider workforce by the end of 2022 if they receive 15% if salary or more, says a Pensions Age report.

Beforehand, the IA had established the threshold at 25% of salary. The report adds that new executive directors’ contributions are forecast to continue to be automatically aligned with those of the wider workforce when they join.

IA director of stewardship and corporate governance, Andrew Ninian, said of the announcement: “With coronavirus continuing to hit household finances across the UK, investors expect companies to treat their executive directors and workforce consistently when it comes to pay. Investors will be paying close attention to ensure pay remains linked to the experiences of shareholders, employees and other stakeholders.

“Aligning executive directors’ pension contributions with the rest of workforce is fundamentally an issue of fairness. Investors have already played an important role in bringing about change and today’s announcement will further increase the pressure on those companies that have yet to take action,” he went on to add.

Within the letter, the IA said its members “welcome the leadership” shown by the “significant number” of firms who have lowered their pension contributions voluntarily.

New guidelines will come into effect when the association looks into businesses with year-ends beginning on or after 31 December this year.