The most popular DC contribution rate towards a director’s pension is 25 per cent of their salary, with 30 per cent the next most common rate. The revelation has provoked speculation that some employers are agreeing to meet any tax charges suffered by directors for breaching the annual or lifetime allowance.
Cash payments to directors in lieu of pension contributions have also increased, now standing at an average of £173,217 a year, up £8,292 on last year. Several directors received cash payments of over half a million pounds, including one director who got £980,000. The average cash payment to directors was worth 29 per cent of their salary.
Two in five directors covered by the TUC survey are still entitled to some DB pension entitlement. The average pension pot for a directors’ pension is £4.74m.
The union organisation’s PensionsWatch 2013 report examines the pension arrangements of 294 directors across FTSE 100 companies.
The TUC is concerned that while pay and bonuses are now under much closer scrutiny, the complicated arrangements for reporting directors’ pensions make it hard for shareholders and the media to find out how much their pensions are worth. It wants to see greater clarity in the reporting of pensions, including the mandatory disclosure of accrual and contribution rates.
TUC general secretary Frances O’Grady says: “As pensions are not performance-related there can be no justification for this stark divide in company pensions. Some directors are collecting millions while schemes are scaled back for ordinary staff.
“With millions of people joining workplace pension schemes over the next few years, this sharp divide will come under ever closer scrutiny. It’s time companies created a level playing field when it comes to their pension schemes.”
