Pensions gap widens as directors' funds get ever larger

Firms attacked for making huge payments to bosses while neglecting ordinary staff

The TUC condemned Britain's "two-tier" pension system yesterday as its research showed the pension pot of the average FTSE 100 director swelling more than 10 per cent to £4.3m last year.

Its 10th average PensionsWatch survey, which analyses the pension arrangements of 351 FTSE 100 directors, found the average transfer value of pension pots rose by £400,000, providing an average annual pension of £240,191 – more than 24 times the size of the average occupational pension, which stands at £9,828.

The chief executive of BG Group, Sir Frank Chapman, has accrued the biggest pension pot, at £19.4m, according to the report. AstraZeneca's David Brennan, who quit as chief executive under pressure from shareholders in April, is entitled to the biggest annual payout based on previous service of £978,000 a year, the TUC says.

The increasing largesse of directors' pensions forms a sharp contrast with the fortunes of the rest of the country, with the number of employees saving in employer-backed schemes falling every year. According to the Office for National Statistics, the number of workers in occupational pension schemes fell from 10.1 million to 8.3 million in the decade to 2010. For workers in the private sector the situation is even bleaker, with just 3 million active members of pension schemes two years ago – little more than half the 5.7 million paying into schemes in 2000.

Brendan Barber, the general secretary of the TUC, said: "Companies continue to chip away at the pensions of ordinary workers while awarding their directors solid platinum pensions worth hundreds of thousands of pounds a year. Top executives already enjoy huge pay packages that go up every year irrespective of the success of their company or the state of the economy. These salaries alone guarantee lucrative pensions, so the generous packages uncovered are an insult to the vast majority of workers who are denied such favourable terms."

He added: "The gap between the pensions of top directors and everyone else does not just reflect the excess of the super-rich, but shows just how poor pensions are for ordinary workers in the private sector, where more than two out of three get no employer pension help."

The study also found firms paying far more in contributions to directors' pension pots than those of the average worker. FTSE 100 companies paid an average £144,508 into directors' schemes – contributing around 22 per cent of their salary into final salary scheme. This is nearly four times the size of the average employer contribution rate of 6 per cent into far less lucrative defined contribution pensions now in place for much of the workforce, where contributions are fixed and returns subject to the vagaries of the stock market. Directors are usually also able to retire at 60, compared to the 65 – and rising – average retirement age of the wider workforce.