UK - A major review of executive remuneration will be prompted by the Inland Revenue's proposed £1.4m lifetime limit, a new survey shows.
The KPMG findings are based on 86 respondents to a survey of board directors at FTSE500 firms.
The research – carried out last month – comprises 16 respondents within FTSE100 firms, 57 within the FTSE350 and 13 within the FTSE500.
More than eight out of 10 FTSE100 board directors fear the proposed cap will affect senior managers, significantly higher than the government’s initial modest estimation of just 5000 people.
And 40% of respondents within the FTSE100 believe the lifetime limit will affect middle management, including director level employees.
Nine out of 10 FTSE350 respondents believe executive directors and senior management will be affected, while just under a quarter expect middle management to be hit by the new rules. The figures were similar across the remaining FTSE500 firms.
KPMG pensions partner David Fairs (pictured) challenged the government’s estimation and said the survey confirmed that the lifetime limit had become a “major business issue”.
He said: “These results back up our own concern that the middle management layer of business will be affected by the new rules, and we could be looking at a figure significantly higher than that suggested by the Treasury.”
Lane Clark & Peacock partner Francis Fernandes said the proposed tax simplification would prompt many high earners to try to renegotiate their pay packages ahead of April 2005.
He said: “For many, avoiding the recovery charge will mean opting for enhanced protection of pension rights built up before April 6, 2005.
“However, to qualify, any further approved pension accrual will need to cease and such individuals will be seeking compensation – perhaps through extra cash – for giving up their pension.”
The survey also showed that nearly two-thirds of the FTSE500 respondents thought the pensions cap would prompt some senior managers to retire early.
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