Third of FTSE 100 companies to cut executives' pensions

Third of FTSE 100 companies to cut executives' pensions

Some 13 FTSE 100 companies have made changes to align their executives' pension payments with their workforce, with 17 others pledging to address the issue in future directors’ appointments.

Analysis published this week (August 28) by the Investment Association showed four companies had reduced pension contributions for current directors this year, while three others appointed new executives with a pension contribution in line with the majority of the workforce.

The report was based on data from the 2019 annual general meeting season.

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Six additional companies made changes this AGM season and reduced contributions for both existing and future directors.

This came after in November 2018 the Investment Association published its principles of remuneration which set out investor expectations on executive pay and highlighted high pension contributions as a key concern.

It stated pension-related payments should not be used as a mechanism for increasing total remuneration, and pension contribution rates for executives should be aligned with those of the workforce.

In February, the professional body announced it would name and shame companies that paid high pension contributions to executives in relation to their staff.

According to Chris Cummings, Investment Association’s chief executive, shareholders have been clear they want pension payments for executives to come down to the same level as the rest of the workforce.

He said: “We have seen a clear step-change on both of those fronts during this year’s AGM season, which is welcomed by shareholders.

“This includes a number of companies and directors that have shown significant leadership by reducing their pension contributions to be aligned with their employees.”

FTAdviser reported in March that HSBC executives will have their pension cash allowance cut following criticism of their remuneration policy.

The bank’s chief executive John Flint received £372,000 a year in contributions to his pension, which amounted to 30 per cent of his base salary. However, HSBC’s regular employees received a maximum of 16 per cent in contributions.

According to a proposal from HSBC’s remuneration committee, the bank executives' cash in lieu of pension allowance will be reduced to 10 per cent.

Mr Cummings added: “Shareholders will continue to focus on bringing executive pensions in line with the majority of the workforce over the next 12 months.

"Companies that do not take on board shareholder concerns risk facing yet more shareholder rebellions next year.”

Business secretary Andrea Leadsom said: “For the first time the UK’s biggest companies will be required to disclose and explain the ratio of their bosses’ pay, and shareholders are already legally required to vote on chief executive pay policy.

“These are both concrete measures to tackle excessive pay and increase accountability in the workplace.”

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