David Prosser: The secret world of directors' fat cat pensions

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The Independent Online

Outlook It is hardly surprising that the TUC is feeling miffed. The trade union movement has spent more and more of its time in recent years defending the pensions of members from employers seeking to cut the cost of retirement plans. Yet its own research – including the survey it publishes today – repeatedly shows that the very same directors responsible for closing down company pension schemes continue to feather their own nests with generous retirement benefits.

Still, while the figures the TUC presents have plenty of shock value – average directors' pension funds worth £3.8m, executives' pensions worth 26 times more than their staff's, and so on – the real scandal here is how little information is made available to shareholders to help them to judge whether such benefits are justified.

In most respects, the quality of the remuneration section of companies' annual reports has improved out of all recognition in modern times. Comprehensive information is published on what directors earn and the extent to which their performance qualifies them for additional pay, bonuses and shares. The exception is pensions, where the requirements on companies to disclose the benefits awarded to directors are woefully inadequate.

The TUC may not like it, but it is hardly a surprise that highly paid executives are accruing much more valuable pension pots than their staff, or even that they retain membership of more generous schemes that have not been made available to most of the workforce for some time.

However, having accepted the case for greater disclosure on pay, it's remarkable that companies are continuing to get away with giving such scant detail about pensions.

Institutional investors certainly aren't happy with the level of information they are getting. Earlier this year, the National Association of Pension Funds published a long list of the sort of detail it would like to see become mandatory for companies to disclose.

The NAPF points out that while directors often accrue pension benefits more quickly than their staff, companies rarely explain this. Nor do they usually state what the company contributes on behalf of directors, especially when cash payments are offered in lieu of a pension contribution. Even such basic information as the default retirement age for directors is rarely disclosed.

The handsome pension deal offered to Sir Fred Goodwin in return for his resignation from Royal Bank of Scotland following its near collapse two years ago prompted an outcry, but Sir Fred received no more than his contract specified. That row should have been a catalyst for change: instead companies have been allowed to go on concealing the detail of directors' pensions from investors.

Many assume the worst. In the absence of better disclosure, the natural suspicion is that many companies are relying on more generous pension benefits to compensate directors for benefits they have been forced to give up by the glare of publicity.

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