‘Boardroom hypocrisy’ over pension schemes
Trade unions are criticising directors for closing generous final salary pension schemes to their employees whilst hanging onto their own.
The TUC has published new research, which shows that almost three quarters (70.5%) of directors at Britain’s top 121 companies still give themselves final salary pensions, while only 13.5 % are restricted to less generous defined contributions schemes.
The TUC report highlights ‘a deep and growing divide between the types of pension benefits that staff can expect and those that are offered to company directors’.
The research found that 58% of companies which have closed their final salary schemes to new members of staff still allow new directors to join the boardroom’s final salary scheme.
Brendan Barber, TUC general secretary commented: ‘This is a case of top directors tightening other people’s belts not their own. It is a straightforward case of boardroom hypocrisy, directors are feathering their own pensions nests. And with pressure on unjustified top pay growing, the worry must be that money is being quietly transferred to generous pensions instead.’
The average final salary scheme fund for directors is now £2.3 million. If the director with the biggest pension at each company is taken alone the average rises to £4.6 million. The TUC points out that these would pay £168,000 a year and £312,000 a year, 27 and 51 times the national average occupational pension respectively.
The TUC argued that directors’ final salary schemes are more generous than those they have closed or still run for their staff.
Ordinary staff members usually build up 1/80th, or in more generous schemes 1/60th, of their salary each year they work. Whereas, director accrual rates are typically 1/40th or even 1/30th in the most generous schemes.
The TUC accused directors of being hypocritical about the arguments they use to close final salary schemes to their employees. Unions maintain that directors commonly claim that final salary schemes do not suit people who move jobs more frequently as well as defined contribution schemes.
However, Mr Barber argued: ‘It is well known that the average tenure of a chief executive is now around three years. As such logically one would expect directors to be more likely to have DC plans than defined benefit schemes.’
