David Prosser: Another way to reward the fat-cat directors

Outlook: So the waterbed principle applies to executive pay too.

An update from the independent High Pay Commission reveals that one effect of the requirement for greater transparency among Footsie companies about directors' salaries has been for rewards to be focused in other parts of the remuneration package – in particular, pensions. Pay may have been squished down a bit, in other words, but pensions have popped up in their place.

The headline figures are that the average FTSE 100 director is in line for a pension worth £175,000, 29 times more than the rest of the workforce. And while two-thirds of guaranteed final salary pension schemes have been closed to the rank and file, 97 per cent of FTSE 350 companies have kept such plans for their directors. A case of do as we say, not do as we do.

One implication of the High Pay Commission's report is that any attempt to tackle the disparity between executive pay and what most workers receive will fail if it is focused narrowly on salaries.

Another is that companies are not required to be transparent enough about executives' retirement benefits. One reason why there has been less anger about pensions for board members is that they are less explicitly declared in annual reports. It is certainly harder to compare like with like, and there is no requirement for companies to explain why provision varies among different groups of staff.

One further thought: company directors are enjoying a disproportionate share of the enormous taxpayer subsidy for private pension provision. Since they get so much more in both pay and pension benefits than their staff, the cost of giving them pensions tax relief is also so much higher.

There have been some attempts to restrict this break already, with those on the 50p rate of income tax not entitled to claim tax relief at their highest marginal rate. But there is plenty of scope for extending those restrictions – in the name of both fairness and austerity.