UK - The differences in pension benefits among senior employees are being overlooked by HR directors, according to a report from Watson Wyatt.
The consultants claimed failing to recognise variations in pension benefits within a company could have a negative impact on executive recruitment and morale.
The report was looking at the fact most companies have executives in a final salary scheme, working alongside others who, having joined more recently, are members of a money purchase pension plan, which tends to be less generous. In addition, some of the final salary generation could be affected by the pensions cap introduced in 1989, while others may have opted out of pension plans altogether in return for a cash allowance.
Sue Bartlett, senior executive pay consultant at Watson Wyatt, said: “All these differences make comparisons between different generations of executives very difficult and competitor benchmarking harder still.
“Consequently, most companies tend to leave understanding of their pension differentials in the too hard box, but they are wrong to do so.”
Watson Wyatt warned pension differentials of executives within a company could create tensions.
Bartlett added that when HR directors were benchmarking their companies pay against others, it was difficult to know if the other companies’ salary levels or total cash pay had been inflated to correct shortfalls in other benefits such as pensions.
She said: “Companies are beginning to address the issue and are asking for pensions to be included in benchmarking reviews. It is only once a company is aware of how much of an issue there is among its own executive population, and how it compares with its competitors, that it can start to look at ways to deal with the problems these differences can cause.”
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