Bosses defy calls for pensions restraint

2004

Directors of many large British companies have pensions worth up to 50 times more than those of their employees despite being called on to 'set an example', the TUC has claimed.

The latest TUC PensionsWatch report into the pensions of the UK’s 127 top companies says that many senior executives are still enjoying a no-risk final-salary pensions despite having closed such schemes to their staff, who can now only join a pension with reduced employer contributions and where they individually bear the risk of investment movements.

The report claims that the directors of the UK’s top companies share defined benefit pensions worth three quarters of a billion pounds. On average each director’s pension is worth £2.15 million. The average value for directors with the largest pension in each company is a massive £4.5 million.

The average director’s pension would pay out £169,000 a year if they claimed it now, over 26 times the national average. For the directors with the biggest pension at each company the average is £303,000 a year, nearly 50 times the average for all employees.

More than eight out of ten directors had a defined benefit pension which guaranteed payouts, but only four out of ten still have similar schemes for new employees.

Firms that have closed final salary schemes to new employees include British Airways, Marks & Spencer, BT, Lloyds TSB and Abbey National.

Where directors have riskier money purchase (or defined contribution) schemes, where the level of pension depends on the ups and downs of investments, the average employer contribution is £80,000, around 20 per cent of salary, compared to the average employer contribution to staff pensions of just under 6.5 per cent of salary.

The TUC pointed out that in a speech to the TUC last year, Digby Jones, CBI Director General, had called on employers to "set a good example" on pensions.

"I never condone businesses that do not treat their employees fairly, that flout the rules, which pay money that is not deserved to their directors, that reward failure, or that actually set an appalling example when it comes to sorting out pension schemes…" Jones told the TUC conference last September.

"… we know business must be mindful of the need to set a good example when it comes to, for example, salaries and pensions."

But Brendan Barber, TUC general secretary, said that bosses were ignoring calls for restraint.

"Employees in every sector have seen their pensions under attack in recent years, but few of those making the decisions show any willingness to sacrifice their own pensions," he said.

"Fat cats are still supping the pensions cream, and have taken little or no notice of business leaders or ministers who say they should set an example."