TUC research: Pension pots for FTSE 100 directors worth an average of £3.9 million

Directors of the FTSE 100 firms have amassed pension pots worth an average of £3.9 million, according to research conducted by the Trades Union Congress (TUC).

The national trade union body’s ninth annual PensionsWatch survey, which analyses the pension arrangements of 362 directors from FTSE 100 organisations, shows that the average pension pot for a director’s defined benefit (DB) pension scheme is £3.91 million, providing an annual pension of £224,121.

The biggest pension pot in this year’s survey is worth £21.5 million. The average director’s pension is 23 times the average occupational pension (£9,568), and 34 times the average public sector pension (£6,497).

Despite the move away from DB pensions for most employees, the majority of organisations (58%) still provide these schemes to at least some of their directors. For the first time, however, a minority of directors (145) are in DB schemes.

The survey also claims that directors are able to build up their pension pots much faster than other staff. The most common accrual rate (the proportion of pay that a person receives as pension for each year they have been in the scheme) is 1/30th for directors. The most typical accrual rates for ordinary scheme members are 1/60th to 1/80th.

Many directors receive cash payments instead of participating in their firm’s pension schemes. The average cash payment was £138,436, an increase of £17,530 on last year. The biggest cash payment was £620,700.

Brendan Barber, general secretary of TUC, said: “This survey highlights the real pensions scandal in Britain today.

“Not content with trousering huge pay and bonuses, often without any link to their performance, top directors are also rewarding themselves with seven-digit pension pots. Worse still, some of these firms have cut back or even closed pension schemes for their staff.

“The financial crash has put the issue of pay and bonuses firmly in the spotlight, but fat cat pensions are still shrouded in secrecy. The government must force organisations to disclose directors’ pension arrangements so that they can be scrutinised by both shareholders and staff.”

Darren Philp, director of policy for the National Association of Pension Funds (NAPF), added : “Everybody deserves a good workplace pension. While it is logical that higher earners will accrue larger retirement benefits, more transparency is needed around boardroom pensions.

“Boards need to be more up front about their pension arrangements, and explain special features such as lower retirement ages and more favourable accrual rates.†

“Investors such as pension funds need this information if they are to hold management to account and may have questions about fairness if boardroom pensions are much more generous than those on the shop floor.

“It is also worrying that directors’ pensions are not usually linked to performance. This could mean bosses are rewarded in their retirement despite failure in the job. Pensions must not become a back-door to boosting pay.

“We hope that companies will be more up front about boardroom retirement deals.”

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