Pensions on the decline as a top-level perk

2008

As the cost of funding pensions continues to spiral, fewer British employers are now rewarding the service and performance of their senior executives by ploughing money into substantial retirement funds.

Despite an ageing management population, an analysis by consultancy Watson Wyatt has found that just half of FTSE-350 senior executives are now being rewarded through their pensions.

But it also pointed out this was often because the executive had already exceeded their lifetime allowance, so limiting the value of tax-advantaged pension saving they could have.

Where cash allowances are being offered as alternatives to pensions, these are typically around a quarter of basic salary for senior directors of FTSE-100 companies, it added.

Among FTSE-250 companies the average allowance for CEOs was slightly more than 15 per cent of salary, although allowances of anything between a tenth and 30 per cent were not uncommon, Watson Wyatt added.

The vast majority of FTSE-350 companies had also now either fixed their pension costs for executives or, for half of their current senior executives, had no explicit pension costs at all.

More than a third of such executives received a cash allowance in lieu of accruing further pension provision, it added.

Intriguingly, more than a tenth of senior executives – 13 per cent – had no benefits explicitly linked to retirement provision, meaning they were likely to have negotiated a higher basic salary to compensate for this, Watson Wyatt suggested. Stephen Green, a senior consultant at Watson Wyatt, said: "Whether they are thinking about the shop floor or the boardroom, employers increasingly want certainty about how much pensions are going to cost.

"Only a quarter of FTSE 350 directors are currently building up new defined benefit pensions. Although the cash allowances that many directors receive sound impressive, they fall short of traditional gold-plated executive pensions, and this is particularly so in FTSE250 companies," he added.

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