Bosses' pensions up 23% despite downturn

Directors of Britain's biggest firms can look forward to an average of £250,000 a year in retirement, 30 times what workers will receive, according to TUC survey

• Phillip Inman
• The Guardian, Friday 11 September 2009
• Article history

Former RBS chief executive Sir Fred Goodwin, whose pension was cut after controversy about the payout. Photograph: Ben Stansall/AFP

Directors of Britain's top companies secured an average 23% increase in pension payouts in 2008 to almost £250,000 a year, despite most of the firms suffering steep falls in profits.

The gap between the pensions of shopfloor workers and company directors also widened, with the 373 directors enjoying retirement incomes 30 times those of the average worker, compared to 25 times a year earlier, according to the TUC's annual pensions survey.

Brendan Barber, the TUC's general secretary, said the figures revealed how the wealthiest business leaders were feathering their retirement nests regardless of the state of individual companies, the economy or the income due to their workers.

The highest-paid directors in each of the 103 companies surveyed by the TUC are already due to receive at least £333,664 annually, while a select band can look forward to more than £1m a year.

Most of the executives are still several years away from retirement and can expect to see their pension pots increase further. The average pot reached £3.4m, providing an annual pension income of £247,785 a year.

Bob Catell, a US-based director of National Grid, has the largest pension pot in the FTSE 100 with £20.4m. The highest-paid UK national is Stephen Green, the chairman of HSBC, with £17.7m.

Sir Fred Goodwin was awarded a pension pot worth £16.6m before he was ousted as chief executive of Royal Bank of Scotland last year. A row over the size of the payout resulted in Goodwin being paid £342,500 a year, down from the £555,000 agreed at the same time as he was given a tax-free £2.8m lump sum. His pension was paid in addition to a £2.6m bonus for the year when a government rescue of the bank enabled it to avoid bankruptcy.

Increases in executive pensions come at a time of tumbling payouts for most workers, who have seen the value of their occupational pensions slashed in recent years.

Many guaranteed schemes have been closed to new employees and companies are increasingly shutting their schemes altogether to cut costs. In most cases employees are switched into cheaper arrangements. Studies show that most companies pay about 8% to 9% into personal pension style arrangements, compared with the 20% to 30% paid into final salary schemes.

The TUC survey found that directors who joined workers in the cheaper schemes were awarded, on average, 19% of their salary as a pension payment.

Barber said: "With more and more people having their company pension schemes reduced, the lavish arrangements enjoyed by the UK's top bosses – now 30 times the value of ordinary workers' pensions – are nothing short of scandalous.

"Top bosses justify their pensions, pay and bonuses on the grounds that they are rewards for success. But the stockmarket nose-dived in 2008 and yet the directors of these same companies have still managed to increase their pensions by more than 20%.

"If directors truly believe they are worth every last pound of their pensions, they should make their arrangements better known to both shareholders and their hard-working staff, especially to those employees who are seeing their own company schemes slashed."