Labour attacks 'fat-cat' pension bonanza

Revelations that top executives in the utilities sector are heading for massive pension payouts thanks to their substantial salary increases came in for sharp criticism from the Labour Party, opening a new page in the "fat cat" controversy.

Reacting to actuarial calculations showing that the recent huge pay increases enjoyed by utility bosses since privatisation are resulting in exponential jumps in the sums needed from company pension funds to meet their retirement requirements, Labour called for immediate government implementation of the Greenbury recommendations designed to avoid abuses of executive pay and perks.

Figures from actuaries Lane Clark and Peacock commissioned by the Observer newspaper suggested that 11 company chiefs will each have pounds 1m put into their pensions plans to secure the higher benefits.

Gordon Brown, the shadow chancellor, said: "The Greenbury committee recommended that the full costs of pensions should be published by the privatised utilities. This hasn't happened. It is clear that abuses are taking place and the Government should act now and implement Greenbury immediately."

He said he intended to raise the "appalling sums" due to top utility executives with John Major upon the Prime Minister's return from the Madrid European Union summit

Executives are entitled to retire on two-thirds of their final salary, so the massive recent pay rises have had the effect of dramatically increasing the pension funding requirements. "You only have to look at the level of pay rises to see that these executives are building up very expensive pension promises for their companies," said Bob Scott, partner at Lane Clark and Peacock.

The actuarial firm's calculations took the comparatively modest salary levels enjoyed by utility chiefs before privatisation, and the pension levels they implied, compared with the entitlements in prospect since their bonanza pay increases. British Gas, on these figures, will have to pay pounds 3.4m to cover the much-improved retirement entitlements of its chief executive, Cedric Brown, almost pounds 2m more than was needed before privatisation. Mr Brown last year enjoyed a controversial 75 per cent pay rise which took his salary from pounds 270,000 to pounds 475,000.

The Labour Party's own calculations of the pension effects of Mr Brown's pay increase are even higher. Based on standard pension industry assumptions, it estimates that the cost to the British Gas pension fund has risen from pounds 3.5m to pounds 5.5m.

The pounds 2m increase is so large that it cannot be met out of the contributions of Mr Brown, who is 60, and so will represent a drain on the company's general fund.

Labour claims that only one of the 24 privatised utilities in the top 250 companies has implemented in full the Greenbury recommendation that all companies should publish full details of executive earnings and perks - including pensions - in their annual reports.

Lane Clark and Peacock looked at 31 leading utitilies directors in all, and calculated that their pension entitlements have soared by pounds 16m. It will now cost their companies' pension funds some pounds 25m to meet the total benefits.

Close behind Mr Brown comes Ed Wallis, the chief executive of PowerGen, who is looking forward to an extra pounds 1.4m in his pension package. According to Labour's calculations, David Jeffries, chairman of the National Grid, is in line for an overall pension package worth pounds 2.9m.

One of the key recommendations of the Greenbury committee is that directors be required fully to disclose, along with their pay and share options perks, their pension entitlements.

The idea is that this would immediately reflect pay increases by showing the annual cost of funding the directors' final pension entitlement. "This is going to focus people's attentions on some pretty big figures, whichever way one tries to calclulate them," Mr Scott said.

The two actuarial professional bodies are about to consult their members on the best way of calculating pension entitlements, so that the Stock Exchange can introduce a new disclosure rule. But there is intense lobbying behind the scenes for the adoption of methods that will smoothe out the effects of big pay increases, reducing the embarrassment of sudden large pension figures in annual reports. The new Stock Exchange rule is not expected to take effect before next autumn.

News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
Travel
Fair trade: the idea of honesty boxes relies on people paying their way
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
news
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary