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