RAC chief to drive off with £1m payout

Andrew Harrison, the chief executive of the RAC, is to receive more than £1m in salary and bonuses this year as a result of his company's £1.1bn takeover by Aviva, but will have his contract renewed for a final term of only six months once the deal is complete.

Andrew Harrison, the chief executive of the RAC, is to receive more than £1m in salary and bonuses this year as a result of his company's £1.1bn takeover by Aviva, but will have his contract renewed for a final term of only six months once the deal is complete.

According to Aviva's offer document for the motor services group, which was published yesterday, Mr Harrison will receive his full £500,000 salary this year as well as a potential £250,000 bonus. He will also be paid another £250,000 if he accepts Aviva's offer to stay on for a six-month handover period once the deal has been completed in May.

RAC's non-executive directors are also to receive an extra three month's salary as a reward for "additional duties" necessitated by the offer.

The RAC board's pay packages were revealed in Aviva's circular to shareholders.

Separately, The chief executive of Aviva, Richard Harvey saw his total remuneration rise almost 10 per cent to £1.2m last year. According to the company's 2004 annual report, also published yesterday, the largest contributor to Mr Harvey's remuneration rise was a 43 per cent jump in his pension, which is now worth £501,000 a year, and carries a transfer value of £7m, up from £5.6m last year.

Aviva also plans to raise the remuneration of its non-executive directors within the next year, increasing the budget for its non-executives from £1m to £1.5m. The report says: "To be able to continue to pay competitive fees and attract high-calibre directors, a proposal will be put to shareholders at the forthcoming annualmeeting that the limit of aggregate remuneration which can be paid to directors be increased from £1m to £1.5m pa."

Aviva revealed it paid only £542,000 to the 10 non-executive directors in 2004 - well below the £1m it is allowed to spend. Aviva is to cut 1,700 jobs as a result of the takeover. But RAC's senior directors have been offered incentive schemes to stay. If they are still in their post a year after the deal closes, they will receive a bonus of 50 per cent of their salary, and a further 50 per cent ifthey move to an Aviva contract.