Directors' Bumper Pensions

September 6 2006 - Directors of the UK's top 100 companies have amassed pensions worth nearly £1 billion, according to the latest annual TUC PensionsWatch survey.

The TUC's analysis of boardroom pensions shows the average executive can retire at 60 on a final salary pension worth nearly £3 million. The largest director's pension in each company is worth nearly £5 million, over 40 times more than most staff pensions.

The biggest final salary pension in the survey is worth more than £19 million and would pay the director nearly £1 million a year, and five directors have a pension worth over £12 million. One employer paid over £1 million into a director's money purchase (or defined contribution) pension in 2005, and the five biggest payouts to this type of pension top £300 000 annually.

Other key survey findings include:

Defined benefits pensions

• Directors of the UK's top companies share pensions with guaranteed pay-outs (known as defined benefits, DB, or final salary schemes) worth £950 million.
• On average each director's pension is worth £2.7 million.
• The average for directors with the largest pension in each company is £4.9 million.
• The average director's DB pension would pay out more than £168 000 a year, almost 24 times the average occupational pension.
• For the directors with the biggest pension in each company, the average would be over £290 000 a year, over 40 times the average for all employees (£7124).
• The proportion of directors with final salary pensions has remained at over 80 per cent since the survey began in 2003, despite the growth in riskier defined contribution schemes for employees.
• Only around one-third of UK companies have a salary related scheme open for all employees.
• Over three-quarters (77 per cent) of companies allow directors to retire on a full pension at 60.
• Directors' final salary pensions are most likely to build up twice as fast as the most common rate for employees in DB schemes, meaning that it takes staff 40 years, on average, to reach full pension but directors only half that time.

Defined contributions pensions

• Where directors are in money purchase schemes, where the pension will depend on the performance of investments (defined contribution or DC), the average annual employer contribution is £103 000.
• The average for company directors receiving the highest payment in each company is £147 000.
• Employer contributions to directors' DC schemes was, on average, the equivalent of just under 19 per cent of salary, and 20 companies paid 25-35 per cent of salary into pensions, compared to the average for all employees of just 6.6 per cent.
• The highest annual employer contribution to a director's defined contribution pension was £1 077 882, the rest of the five biggest annual contributions range from £298 000 - £360 000.

TUC general secretary Brendan Barber said:

"Britain's boadrooms and business lobby groups have failed to tackle upstairs-downstairs style company pensions. If bosses were in the same scheme on the same terms as staff, they would still build up massive pensions compared to employees but they would be fairer. It would also help reduce their company pension deficits.

"Investors should demand uniform and open reporting of staff and executive pensions from companies and ensure that the funds of shareholders, including thousands of pension fund members, are not being lavished on luxury pensions that have no link to business performance."