City bonuses soar despite super tax

eFinancialCareers finds payouts up 40 per cent
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The Independent Online

Alistair Darling's 50 per cent "super tax" on bankers' bonuses has done almost nothing to curb the City's culture of excess, with almost half its bankers receiving significant increases, a survey to be published today reveals.

The poll of 694 British bankers and finance professionals carried out by eFinancialCareers found that 57 per cent saw an increase in their bonuses this year compared with last year, with many payments more than doubling.

Across the board, the rise in bonus payments was calculated at an average 40 per cent. Basic pay has also increased sharply, with nearly two-thirds (64 per cent) of respondents saying they had been handed rises, with the average increase coming in at 26 per cent.

The findings threaten to re-ignite the row over City excess at a time when workers in many fields face pay freezes or even cutbacks for the second year in a row. Some 90 per cent of the respondents were eligible for a bonus. Of them, just 3 per cent did not receive one.

The survey provides further evidence of the ineffectiveness of the Chancellor's tax in curbing the City's "bonus culture".

Even the 34 per cent of participants who said their bonuses have decreased or stayed the same, did not judge the tax to be the main reason. The primary cause they cited for the drop was the performance of their firms. Among those who have received a bigger bonus, the majority felt the tax had no impact on them at all.

Many banks have sought to limit the impact of the one-off levy on their London-based staff by spreading it across all their operations. And 19 per cent of respondents to the survey said they believed their employers had taken measures to avoid the charge. The most popular move cited was an increase in basic salary payments prior to the tax's introduction.

The survey also indicates that a push to reform the way bonuses are paid has had a very limited impact. Some 69 per cent of those who received a bonus said they received all their payout in cash. Just 19 per cent said some part was deferred, with only 3 per cent having elements subject to "clawbacks". These measures were supposed to curb the "risky behaviour" that critics say was a major contributor to the financial crisis.

Despite the booming payouts, the mood among those who have received bonuses was gloomy – only 17 per cent said they were very satisfied with their payment. By contrast, 45 per cent were either "somewhat dissatisfied" or "very dissatisfied". Similarly, 40 per cent were dissatisfied with their salary. More than two-fifths said they would seek work outside of the UK in response to recent policy measures.

John Benson, the chief executive of eFinancialCareers.com, said: "What is fuelling the disquiet amongst UK bankers is not so much what they have or have not received, but the increasingly harsh tax regime for high earners in the UK. Indeed, a significant 41 per cent of those surveyed said they intended to seek work outside of the UK as a result of the mounting taxes. This represents a significant human capital threat to the City of London which cannot be ignored."

The survey was conducted online between 18 January and 5 February 2010. Of those who took part, 62 per cent of respondents were front-office professionals, 22 per cent middle-office and 16 per cent were classified as "back-office".

The largest average bonus payments per person this year were paid in wealth management/private banking, trading and debt/fixed income. The largest year-on-year average bonus increases were risk management, equity-capital markets, and commodities, all having more than doubled in size following low 2008 payments. The areas which received the greatest increases in basic salary were fund management and research (both up by 49 per cent), and trading (up 48 per cent).

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