Boardrooms under fire on gold-plated pensions

NAPF backs report saying staff are short-changed by bosses

The TUC will today attack bosses for enriching themselves with pension pots averaging £3.5m at a time when staff retirement benefits are being slashed. Its research – analysing the pensions of 329 directors from 102 of Britain's top companies – will also show that the highest-paid directors in each company have pension pots worth an average £5.26m, providing an average annual pension of £298,503.

The largest pension pot in this year's "Pensionswatch" survey stands at over £21m, which would pay out an annual pension worth over £1.3million were the benefits to be taken today.

The report also highlights the huge gap between the average director's pension and the average employee pension, based on Government figures. Directors can now expect to enjoy incomes of 26 times the average occupational pension of £8,736. While that is a fall on last year, it is still higher than the pre-recession pension gap.

Significantly, the TUC's concerns over Britain's growing pensions gap will today be backed by the National Association of Pension Funds, the biggest workplace pension body.

Joanne Segars, chief executive, will raise concerns that directors pension arrangements are not linked to performance, by contrast to other parts of their remuneration packages. This raises the spectre of directors reaping substantial rewards for failure. Their generous pension entitlements appear to allow them to run a company into the ground before retiring in luxury.

The NAPF's unhappiness is significant because its members remain substantial shareholders in British companies, with the power to make their voice count if they decide to make an issue of over-generous pensions.

Ms Segars said: "While it is logical that higher earners will accrue bigger retirement pots, we have some real concerns about this issue. Investors may have questions about fairness if boardroom pensions are much more generous than those on the shop floor.

"Special arrangements such as lower retirement ages and higher contribution rates need to be explained. We need much more transparency in this area. Everybody deserves a good workplace pension."

She added: "It is also worrying that directors' pensions are not usually linked to performance. This could mean bosses are rewarded in their retirement despite failure in the job. Pensions must not become a back-door to boosting pay. Investors such as pension funds need more information about these schemes if they are to hold management to account. We hope that companies will be more up-front about boardroom retirement deals."

TUC general secretary Brandan Barber urged an end to what he sees as a "two-tier pension system". He said: "Employers often tell us that decent staff pension schemes are no longer affordable. Directors' representatives are in the vanguard of those attacking public sector pensions. Yet greed is still good in the nation's top boardrooms where directors continue to reward themselves with seven figure pension pots."

He pointed to another part of the research which shows that most bosses (54 per cent) are still in "defined benefit" schemes offering guaranteed sums upon retirement, while the vast majority of staff are stuck with much less generous "defined contribution" arrangements, where the final pension is reliant on investment returns.

Even employees who still have access to defined benefit schemes are increasingly finding this is being cut off with companies now acting to close the schemes to future contributions by existing members, having already closed them to new staff. The survey further found that directors enjoy significantly higher contributions to their pensions than members of staff and frequently have the option of either cash payments or payments into personal pension schemes.