Saturday 17 October 2020 12:00 am

FTSE 100 slashes executive pensions following shareholder pressure

Almost all of the companies in the FTSE 100 have pledged to slash executive pension packages in line with their wider workforce, following mounting criticism from shareholders.

Research published today by the Investment Association (IA) showed that 98 per cent of FTSE 100 companies analysed have now either aligned the pension payouts of directors with that of their workforce or committed to doing so. 

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The figure marks a sharp increase since last year, when just three in 10 FTSE 100 companies pledged to cut their executives’ pension payments as part of the 2019 annual general meeting (AGM) season.

The hike comes as companies bowed to shareholder pressure to align their pension packages “as an issue of fairness and to foster good employee relations”, the IA said.

Research showed that 14 companies listed on the FTSE 100 index reduced pension contributions for existing directors during the year, while a further 43 committed to reduce contributions in the near future.

Six FTSE 100 companies said they will increase their workforce rate as part of efforts to align pension contributions across their business.

Lord Callanan, parliamentary under secretary for the Department for Business, said: “No executive should be building up an exorbitant pension fund far and above the majority of their workforce, particularly during this testing time.

“I am really pleased to see the progress the vast majority of FTSE 100 companies have made towards bringing their executive pension contributions in line with the wider workforce, and would urge each and every business on the list to ensure plans are in place by 2022.”

It comes as the UK’s top companies have faced mounting pressure to axe the disparity between pension payments awarded to executives and more junior staff members.

Standard Chartered’s chief executive Bill Withers last year came under fire for telling the Financial Times shareholders were “immature” for focusing on his pension arrangements.

However, the IA noted that there was still progress to be made, with 10 companies on the index being issued a red-top for having at least one existing director receiving a pension contribution of 25 per cent or more with no commitment to align this with the rest of the workforce by the end of 2022. 

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A further two companies were issued a red-top for not committing to align the pension contributions of new directors with that of the workforce.

IA chief executive Chris Cummings said:“Providing directors with the same pension contributions as the rest of the workforce is fundamentally an issue of fairness.

“Given the economic difficulties many people across the UK are facing, it is only right that the majority of FTSE 100 companies are now aligning their executive pension contributions with their workforce.”