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Bosses to retire on £260,000 a year

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The average FTSE 100 director has accrued a pension that will pay 25 times the average expected employee income of £10,452 a year with most expected to retire at 60. 

 

 

 

 

 By Andrew Oxlade

 

 

 

 

The average FTSE 100 director has accrued a pension that will pay £259,947 a year –25 times the average expected employee income of £10,452 a year. 

 

The TUC’s annual PensionsWatch found that the typical savings pot put aside for bosses had increased by £400,000 on a year ago to £4.73m, and had more than doubled from £2.3m a decade ago. One director, 59-year-old Frank Chapman who resigned his role of chief executive at BG Group in January, had amassed £22.2m which would pay £805,000 a year. 

 

The study examined the pension arrangements of 294 directors at FTSE 100 companies. The vast majority, it was found, are due to retire at age 60. 

 

As companies move away from expensive final salary schemes to defined contribution (DC) schemes, where staff take on investment risk, they are ramping up the amounts paid into these less beneficial schemes for bosses. Two in five directors, however, are still entitled to some final salary pension entitlement. 

 

Average annual employer contributions to directors’ DC pensions increased by £15,872 to £160,380. Several directors received company contributions of more than £500,000, including WPP's Sir Martin Sorrell and António Horta-Osório, the chief executive of the part-taxpayer owned Lloyds Banking Group. 

 

 

The most popular contribution rate towards a director's pension was 25pc of their salary. The wider workforce can normally expect a contribution rate of around 6pc. 

 

Workers saving into the National Employment Saving Trust (NEST) under auto-enrolment will receive an employer contribution of just three per cent. The scheme is currently being rolled out to all companies in an attempt to plug the huge retirement savings gap that will see millions of Britons retire in poverty unless averted. 

 

The TUC said the study showed bosses were "simply finding new ways of rewarding themselves" with the types of arrangement for directors "rarely available" to their workforce. 

 

 

Frances O’Grady, general secretary, said: "Britain’s top bosses already enjoy a level of pay and bonuses beyond common decency. But not content with grabbing an ever larger slice of the UK’s earnings pie, they are adding to the country’s growing inequality with their platinum-plated pensions. 

 

"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." 

 

Companies that have downgraded pension schemes for workers 

 

The report also highlighted further closures of final salary schemes and erosion of pension benefits, disclosed in the annual reports of companies. 

 

Kingfisher, the retailer behind B&Q, closed its final salary pension to new members last summer and Associated British Foods, which operates Primark, Allied Bakeries, Ovaltine and range of other brands, said workers could no longer accrue benefits from its final salary scheme. It opened up a new defined contribution scheme. Fund manager Schroders also did the same. 

 

Credit checking firm Experian switched to operates a defined contribution scheme for its entire workforce but with a contribution rate of 20pc reserved for its directors. 

 

EasyJet, in contrast, closed its defined benefit scheme to its directors and has offered the same basic 7pc contribution rate to its DC scheme for both its employees and members of the board. 

 

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