UK - Hermes Pensions Management has defended tenfold pay rises for senior executives and claims they are merited by business performance.
Hermes is owned by BT and is the principal fund manager of its £22.7bn scheme which achieved investment returns of 19.8% over 2003. This was 2.1 percentage points above its benchmark target and 2.8 percentage points higher than the average investment return for the UK’s largest 50 schemes.
The Hermes annual report and accounts show the pay for fund managers Peter Butler and Steve Brown jumped to £1.8m from £141,000 and £136,000 respectively.
But in a bid to stave off criticism, chairman of trustees Tim Chessells highlighted the BT scheme’s investment success and claimed “a large part of this outperformance can be attributed to Hermes”.
He added: “This success has been reflected in the remuneration earned by key Hermes executives in 2003. Senior executive pay is structured to motivate and reward those leading Hermes to achieve medium and long-term objectives that contribute to the performance of clients’ portfolios.”
BT makes annual contributions of 12.2% of pensionable pay and annual deficiency payments of £232m.
Its next actuarial valuation is due on December 31, 2005.
Tenders for first-time fiduciary management mandates will be mandatory, must be conducted on a closed basis, and will apply to any mandate for over 20% of a scheme's assets, the Competition and Markets Authority (CMA) has confirmed.
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