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The painful pension facts must be made public

Memo to the chief executive from the finance director: "This year for the first time we are going to have to include in the annual report some meaningful information about your pension. I know this is embarrassing but it cannot be helped - new transparency and all that. So what would you prefer? Either we can report the extra pension you will be entitled to draw after you are 60, or we can report the capital cost to the pension fund of financing that increase.

"You should of course be aware that after your 75 per cent salary rise last year the first method will show extra benefits worth pounds 150,000 a year when you are 60. The second method will show an additional capital value for your pension of nearly pounds 2m as a result of your pay increase. The public relations department takes the view that whichever disclosure you make, the press will leap on it. But while the first figure will be reported in the business pages of broadsheet newspapers, the second is likely to get you two minutes on News at Ten."

Unfortunately for this hapless finance director the decision could soon be taken out of his boss's hands. Tomorrow, the pensions board of the Institute and Faculty of Actuaries considers its final report on how directors' pensions should be disclosed. What started as a technical exercise to put flesh on the Greenbury committee's recommendations on top pay has ended up splitting actuaries and the City and stirring up a powerful rearguard action from industry.

The CBI, the Institute of Directors and Sir Richard Greenbury himself have all plumped for the low-key disclosure of changes in pension income. Their principle opponent, an organisation not without clout, is the National Association of Pension Funds, which says that it is a fundamental principle that the capital value of a pension earned during the year should be disclosed.

The actuaries have had such difficulty finding a compromise that suits everyone that they may decide to leave the final choice of method to the Stock Exchange and the Department of Trade and Industry, which asked them to look at the matter in the first place. This would be a cop out. Disclosure of capital values is plainly the way forward. The NAPF is right to say the capital cost is the only meaningful number for shareholders, because it shows the ultimate cost of the enhanced pension. For good measure, there is no reason why the pension income should not be disclosed as well.