date: 7 September 2010
embargo: 00.01hrs Thursday 9 September 2010
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 today (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 £21million and would pay out an annual pension worth over £1.3million.
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 third 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.'
NOTES TO EDITORS:
- PensionsWatch 2010 is available to download under embargo at www.tuc.org.uk/extras/pensionswatch2010.pdf
- According to Government figures, the average occupational pension is £168 per week or £8,736 per year http://research.dwp.gov.uk/asd/asd6/PI_series_0809.pdf
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Issued: 9 September, 2010