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05 August 2007

Survey exposes pension packages enjoyed by FTSE 100 directors
Up to 112 directors of FTSE 100 companies are set to receive a pension worth at least ?200,000 a year - and 26 can look forward to a pension of at least ?500,000 a year - according to Labour Research magazine's annual survey of executives' pension arrangements.

The Labour Research survey found that almost 80 companies in the FTSE 100 still have final salary schemes for some or all of their directors. Typically these schemes have a generous accrual rate of 1/30th of salary per year and so will pay a pension of two-thirds salary after 20 years' service.

The disgraced Lord Browne, the former chief executive of oil multinational BP, tops the premier pension league. Browne, who resigned in May after lying in court over his private life, can look to a happy retirement as he picks up a pension of over ?1 million a year, or over ?20,000 a week. Two other directors - Lawrence Fish of the Royal Bank of Scotland and Howard Frank, vice-chair of cruise ship group Carnival - are rapidly approaching the ?1 million a year pension mark.

Other directors in the FTSE 100 have defined contribution schemes, where the pension is open to fluctuations in the stock market. This means that it is impossible to say how large a pension they will pick up. Nevertheless, the annual contributions made by companies to the schemes (also known as money purchase schemes) can be huge: Mick Davis, chief executive of mining group Xstrata, has had nearly ?989,000 paid into his scheme; and Arun Sarin, chief executive of mobile phones group Vodafone, gets contributions of 30% of his present base salary of ?1.27 million, which works out at nearly ?382,000 a year.

But it is a very different story for the ordinary retiree on an occupational pension. According to government figures in the Pensioners' Income Series 2005-06, the average occupational pension for a single pensioner was ?99 a week and ?192 a week for a pensioner couple. So Sir Fred Goodwin at the Royal Bank of Scotland (bottom of the table below) will get almost 100 times what the average single pensioner receives.

Meanwhile a survey by the National Association of Pension Funds earlier this year found that more than two-thirds of final salary schemes in the private sector are now closed to new members, with one in 10 schemes closing to new members last year.

Neal Moister, researcher for the Labour Research Department, who carried out the survey, said: ?Despite the high profile given to the huge disparity in pensions recently, this survey shows that little has changed. If anything, many of the directors we have looked at have seen their pensions go up considerably in the past year.?

Director Company Annual pension ?000
Lord Browne (1) BP 1,050
Lawrence Fish Royal Bank of Scotland 992
Howard S Frank Carnival 940
Sir Francis Mackay (2) Compass 830
John Sunderland (3) Cadbury Schweppes 762
Todd Stitzer Cadbury Schweppes 737
Jeroen van der Veer Royal Dutch Shell 735
Patrick Cescau Unilever 682
Dr Jean-Pierre Garnier GlaxoSmithKline 652
Michael Bailey (4) Compass 648
Robert Dickinson Carnival 628
Sir Terry Leahy Tesco 627
Sir Julian Horn-Smith Vodafone 605
Paul Dacre Daily Mail & General Trust 598
Dr John McAdam ICI 590
Stephen Green HSBC 586
Charles Sinclair Daily Mail & General Trust 576
Mike Turner BAE Systems 574
James Crosby HBOS 572
Roger Urwin National Grid 564
Paul Walsh Diageo 556
Charles Allen (5) ITV 548
Rudy Markham Unilever 541
David Brennan AstraZeneca 530
Gareth Davis Imperial Tobacco 520
Sir Fred Goodwin Royal Bank of Scotland 510

(1) Resigned May 2007
(2) Retired June 2006
(3) Retired August 2005 but still chair
(4) Retired May 2006
(5) Resigned October 2006

Editor's notes
  • The full article appears in the August edition of Labour Research magazine.

  • Labour Research is published by the Labour Research Department, an independent trade union and labour movement organisation founded over 90 years ago. More than 1,800 trade union organisations, including 55 national unions representing 99% of total TUC membership, are affiliated.

  • The survey results are based on figures from company remuneration reports.

  • Final salary pension schemes are based on members' earnings at or near retirement and guarantee a specified level of pension benefit. The norm is for workplace schemes to pay 1/60th of final pay for each year of membership. Money purchase schemes are based on the contributions made to the pension fund and the investment performance of the assets into which the funds are placed meaning the value of the pension benefit is uncertain.

  • For further details on the National Association of Pension Funds survey go to www.napf.co.uk

  • For further information on the Labour Research survey, contact Neal Moister on 020 7902 9824. For further information on Labour Research magazine, contact editor Nathalie Towner 020 7902 9817.

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