DIRECTORS of the UK’s top companies have amassed pensions pots worth an average of £3.8 million, according to the new TUC PensionsWatch survey published Thursday.
The TUC’s eighth annual PensionsWatch survey, which analyses the pension arrangements of 329 directors from 102 of the UK’s top companies, shows that the average transfer value for a director’s pension is £3.8 million, an increase of £400,000 since last year, providing an average annual pension of £227,726.
The highest paid directors in each company have pension pots worth £5.26 million, providing an average annual pension of £298,503. The largest pension pot in this year’s survey is worth over £21 million and would pay out an annual pension worth over £1.3 million.
PensionsWatch shows that the average director’s pension is now 26 times the average occupational pension (£8,736) – a fall on last year but still higher than the pre-recession gap.
The survey shows that despite companies continuing to move away from defined benefit (DB) schemes for ordinary staff, the majority (54 per cent) of top directors are still in DB schemes and many directors are in more than one scheme.
Nearly two thirds of companies (63.5 per cent) provide DB schemes for at least some directors. The most common accrual rate was 1/30th – far more generous than the 1/60th to 1/80th typical for the majority of ordinary scheme members.
For directors in defined contribution (DC) schemes, the average company contribution was £134,760 and the average contribution rate was 19 per cent, around three times the rates normally available to employees (6.7 per cent).
Many directors not participating in company schemes receive cash payments instead. Nearly one in three directors (31 per cent) received cash payments either in place of participation in a company scheme or as top-ups. The average cash payment was £120,906 and the highest in the survey was £420,000.
A further 25 directors also received payments into personal pensions plans, worth an average of £181,072.
While ordinary workers are facing the prospect of working longer, with the government planning to raise the state retirement age to 66 in 2016, most directors in DB schemes have a pension age of 60.
Several of the companies included in this year’s survey have announced changes to group pension schemes for staff, including scheme closures.
The TUC is calling for greater clarity in the reporting of pensions, including the mandatory disclosure of accrual and contribution rates, so that shareholders are able to scrutinise directors’ pension arrangements and ensure that they are fair and reasonable.
The TUC also believes that directors and employees should be members of the same schemes and enjoy the same benefits, as is the case in the public sector.
Companies should make clear any preferential treatment for directors so that staff know about the pension arrangements of their bosses, says the TUC.
TUC General Secretary Brendan Barber said: ‘Employers often tell us that decent staff pension schemes are no longer affordable.
‘Directors’ representatives are in the vanguard of those attacking public sector pensions. Yet greed is still good in the nation’s top boardrooms where directors continue to reward themselves with seven figure pension pots.
‘Top bosses justify their pensions, pay and bonuses as rewards for success. Yet many companies refuse to fully disclose these lavish arrangements either to shareholders or to their own members of staff.
‘While boardrooms are still paved with pensions gold, most staff now get no employer pension support, and even the minority who do, have seen big cuts in pensions provision as schemes have closed or had benefits reduced.
Companies should offer all their staff the same pension arrangements and put an end to this unfair two-tier pension system.
In its conclusion the PensionsWatch survey states that ‘PensionsWatch demonstrates the significant pensions packages offered to directors of major companies.
‘The report shows that generous accruals in Defined Benefit schemes remain the norm for senior directors, the clear majority of whom can look forward to retiring on a full pension at age 60, if not earlier.
‘On the basis of these findings, the TUC is reiterating its call for directors and employees to be members of the same pension schemes, on the same terms.
‘Since directors earn more than their employees and therefore accrue greater pension benefits on the same terms, there cannot be a justification for offering a differential approach.
‘Different arrangements for directors and employees risk undermining good workplace relations.
‘There should also be greater clarity and reporting on pensions, with a requirement for companies to disclose more detailed information, particularly on accrual rates and contribution rates.
‘This would enable investors to scrutinise more effectively the awards made to directors.
‘In addition, companies should make clear any differential treatment for directors in relation to employees.
‘Improved disclosure of directors’ pensions entitlements could be addressed by the current BIS consultation on narrative reporting, which includes questions on remuneration.
‘Recommendation 37: The remuneration committee report should state whether any executive board member or senior executive has the right or opportunity to receive enhanced pension benefits beyond those already disclosed and whether the committee has exercised its discretion during the year to enhance pension benefits either generally or for any member of this group.
‘The remuneration committee report should state whether any executive board member or “high end” employee has the right or opportunity to receive enhanced benefits, whether while in continued employment or on termination, resignation, retirement or in the wake of any other event such as a change of control, beyond those already disclosed in the directors’ remuneration report and whether the committee has exercised its discretion during the year to enhance such benefits either generally or for any member of this group.
‘Given greater information, shareholders – particularly the large institutional investors such as pension funds or insurance companies – would be better equipped to scrutinise pensions provision for directors and engage with companies in order to ensure fair and proportionate rewards packages.
‘The TUC’s guidance for pension scheme trustees makes specific reference to the scrutiny of directors’ pensions.
‘The report also notes the shift to DC provision in staff schemes. It should be reiterated that the TUC wishes to retain and encourage DB provision.
‘However, where DB is not possible, we would rather employers adopt risk-sharing approaches than pure DC pension provision. Therefore, where employers would otherwise switch to DC provision, measures that would encourage them to opt for risk-sharing are to be welcomed.
‘The TUC’s recommendations, drawn from the findings of this report, are:
‘• Directors and staff should be members of the same schemes, on the same terms.
‘• There should be fuller reporting on company pension provision for directors and employees, including mandatory disclosure of accrual and contribution rates.
‘• Clearer information on pension arrangements should be made available to investors.
At a time when workers pension schemes are either being wound up or being slashed beyond recognition, and when workers are being told that they will have to work till they drop, the TUC exposure of the early retirement, and luxury living provisions that the employers continue to make for themselves are welcome.
We are definitely not all together in this economic crisis situation, the gap between the working class that is being made to make all the sacrifices, and the bosses that continue living off the fat of the land is growing.
The TUC conclusions and its demands to resolve this crisis of capitalism by workers and employers being in the same pension schemes is therefore laughable, and proves once again the idiocy of Fabianism.
The only solution to the pensions crisis is a revolutionary solution, that is the working class taking power, abolishing the employing class and moving to a planned socialist economy whose aim will be a society in which ‘from each according to his ability, to each according to his needs’ is the rule.