A new survey by PensionsWatch reveals that the UK has a two-tier pension system that is rewarding senior directors at FTSE 100 companies’ more than ordinary workers.
The PensionsWatch survey looks at the pension funds of 351 FTSE 100 directors and found that the average value of their overall pension pots increased by £400,000, up ten per cent to £4.3 million in 2011, providing an annual pension averaging £240,191, more than 24 times the average pension income of £9,828.
FTSE 100 companies paid an average of £144,508 into directors’ schemes, valued at 22 per cent of their salary paid into a final salary scheme. This is almost four times the six per cent contribution rate that employers pay into ordinary workers’ pensions, which as defined contribution pensions are less generous and the eventual payout is linked to the stock market.
An increasing number of directors are also opting out of pensions and being offered cash payments instead. The average cash payout was up by £26,000 in2011 to £164,000.
The Chief Executive of BG Group, Sir Frank Chapman, has the largest overall pension at £19.4 million. Former chief executive of AstraZeneca’s David Brennan has landed the biggest annual payout. He receives £978,000 a year based on previous service.
By contrast, the number of ordinary employees saving anything into a pension scheme is falling every year, according to the report, commissioned by the TUC.
It reports that the Office for National Statistics (ONS) data shows the number of employees saving into an occupational pension scheme fell from 10.1 million to 8.3 million between 2000 and 2010.
The TUC said that the massive pension increases of FTSE 100 directors had been ignored by investors during the “shareholder spring” as they focused on pay and because pension entitlements were masked by misleading reporting.
Brendan Barber, the general secretary of the TUC, said: "Companies continue to chip away at the pensions of ordinary workers while awarding their directors solid platinum pensions worth hundreds of thousands of pounds a year.
"The gap between the pensions of top directors and everyone else does not just reflect the excess of the super-rich, but shows just how poor pensions are for ordinary workers in the private sector, where more than two out of three get no employer pension help."
Darren Philp, director of policy of the National Association of Pension Funds, said: "It follows that people who earn more will accrue bigger pensions. But investors may have important questions about fairness if the pensions of directors are disproportionately more generous than those of other staff."
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