Mid-cap bosses’ pension pots lag behind blue chip counterparts

The poll of 644 FTSE250 directors - conducted by consultant Lane Clark & Peacock - found the gulf in the pension packages of Britain's mid-cap company bosses and their blue chip peers stood at £180,000.

It found FTSE100 executives receive pension contributions of 46% of salary compared to 26% for their FTSE250 counterparts.

LCP partner Mark Jackson said the gap was primarily due to greater retention of defined benefit schemes within the FTSE100.

He said: "There is a yawning gap between the pensions of FTSE100 and FTSE250 executives - FTSE100 pensions are worth treble in money terms and double when calculated as a percentage of basic salary.

"The main reason is that FTSE250 companies are further down the track in moving from DB to less generous defined contribution pension schemes. As more and more FTSE100 companies turn their back on DB pensions, however, we expect the gap to narrow - the difference between DC pensions for FTSE 100 and FTSE 250 executives is less marked."

Jackson also warned changes to pensions tax relief - with an annual allowance of £30,000-£45,000 proposed in the emergency budget - could cost mid-cap directors up to £33,000 per year.

"If the annual allowance is set at £45,000, the Treasury will need more than 100,000 people like the typical executive in our survey to raise the £3.5bn in new tax revenue," he said.

Jackson added: "Every employer in the UK awaits confirmation of the new level of the annual allowance. Why? Because annual pension savings that exceed it will be taxed twice - first in the year of pension saving and then when the pension is paid during retirement.

"That's hundreds of thousands of employees facing double taxation on their pension saving."

Only ten FTSE250 companies - including Arriva, Britvic and Northern Foods - provide DB-only pensions for all their directors, according to the survey.

Eight firms - including Helical Bar, Rightmove and Xchanging - provide no pension compensation for their directors, while 12 companies offer cash in lieu of pensions to all their directors.

Some 55 companies - including easyJet, Halfords and JD Wetherspoon - provide DC benefits to all of their directors.