Top company directors are retiring on pensions that are up to 29 times larger than those of the rest of the workforce, according to the High Pay Commission.
Most executives working at FTSE 100 companies draw an average annual pension of about £175,000, while the median pension for employees in a private sector final salary scheme averages only £5,860 per year.
The report, prepared for the HPC by pay specialists Incomes Data Services, also revealed that about 97% of FTSE 350 firms had kept their formal company-sponsored schemes open for directors, but only a third had done so for other employees, down from 46% in 1997.
But while final salary schemes have widely been replaced with less generous money purchase pensions, directors had been “filling up their pension pots”, the study said. In addition, as tax changes have limited the amount worth paying into a scheme, companies had responded by giving their directors large cash top-ups instead – an average of £160,000 across the top 100 companies.
Deborah Hargreaves, the HPC’s chair, said: “Companies are increasingly paying their executives generous cash supplements instead of pensions to get around restrictions on tax relief introduced in the last few years. Directors are receiving gold-plated pensions while retirement provision for the workforce has been slashed.”
There appeared to be one rule for workers and another for the boardroom, she added.
The average FTSE 100 director had accumulated a pension pot worth £3.6 million, “a sum that can only be dreamt of by an ordinary worker”, the report said.
