Labour attacks 'fat-cat' pension bonanza
Monday 18 December 1995
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.
The Washington Post editor helped Bob Woodward and Carl Bernstein bring down President Nixon
Children's bookseller wins The Independent's new author search
Board creates magnetic field to achieve lift
- 1 Salisbury ranked seventh-best city in the world to visit in Lonely Planet’s Best in Travel 2015
- 2 Disney announces new female-led film Moana
- 3 Banksy has not been arrested: Internet duped by fake report claiming artist's identity revealed
- 4 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
- 5 Russell Brand threatened with arrest after filming outside Fox News headquarters
Chicago voter tells Obama 'don't touch my girlfriend' – Obama stays super smooth
Oscar Pistorius: The brutal prison life that awaits disgraced athlete
Banksy has not been arrested: Internet duped by fake report claiming artist's identity revealed
Ebola outbreak: Nowhere is safe until virus is contained in Africa, claims the top doctor who beat it in Nigera
Raphael Ravenscroft dead: 'Baker Street' musician who played the most famous saxophone solo for just £27, dies aged 60
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Jose Manuel Barroso warns David Cameron against making 'historic mistake' over immigration reforms
Worst Airports of 2014: Poll names Islamabad airport in Pakistan worst in the world
iJobs Money & Business
£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...
£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...
£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...
£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...