UK - A new report by Deloitte has found major inequalities in pension provision for executive directors across and within FTSE 350 companies, with pensions worth anywhere between 20 and 70% of salary.
The research into trends in executive pension practice found pensions have been the “missing link” in executive remuneration. Difficult to analyse and compare, Deloitte says pensions have never really been considered an integral part of the package.
Bill Cohen (pictured), executive remuneration partner at Deloitte, said: “Since the mid 90s there has been much talk about taking a new approach to executive remuneration, which in reality has often included everything but pensions, thereby leaving out a significant element of remuneration.
“Given the substantial values involved, increased interest from shareholders and the impact of the new pension legislation, this omission cannot continue. A good remuneration policy should balance salary, pension and performance linked awards in a way which supports the business strategy and culture of the company.
“For example it may be appropriate for a company to pay lower salaries but have more generous pension arrangements. Or they might have less generous pensions but make higher potential awards linked to performance from which, if company performance is good, an individual can fund his or her own retirement.”
However, according to Deloitte, the research suggests this is not the case with companies with the lowest salaries generally having less generous pension plans and less generous awards and those with the highest salaries having the most generous pensions and bonuses.
In other key findings, 39% of incumbent directors participate in DC plans and 61% in DB plans. But in 60% of companies, new board members will only be offered participation in DC plans. According to the research, directors in a DB scheme typically received higher pensions than those in DC schemes.
Cohen said the new pension legislation that comes into effect next year provided an “ideal opportunity” for companies to develop new remuneration policies that gave pensions greater consideration.
“Remuneration committees should consider the ongoing role of pension provision within the total remuneration framework and will want to ensure that going forward there is a coherent policy which addresses the needs of the individuals and the expectations of the shareholders.”
The Pension Protection Fund (PPF) is consulting on proposals to charge a "risk reflective" levy for commercial defined benefit (DB) consolidation vehicles.
The funding gap across FTSE 350 schemes could be slashed by as much as £275bn if schemes look beyond traditional ways of creating value. Victoria Ticha examines how
There will be "many flavours" of defined benefit (DB) consolidators but consolidation will only be the right answer for a minority of schemes, Alan Rubenstein says.
Work and Pensions Committee (WPC) chairman Frank Field has questioned the regulator on what lessons it can learn from the experience of the Kodak Pension Plan No.2 (KPP2).