UK - Corporate governance activists have warned companies they will not tolerate "fancy" moves to boost underperfoming directors' pensions when the £1.4m savings limit is introduced.
They fear companies will use a number of opaque techniques to enable executives to side-step the 25% recovery charge the Revenue will levy on anyone who exceeds the limit once the government’s cap takes effect.
But Trades Union Congress policy officer Tom Powdrill warned companies they must be transparent about executive pension packages and that investors would be paying close attention to their practices.
He said: “We expect directors’ pensions to be an issue this year. When you put pressure on executive pensions, it is like a balloon – if you push down on one point, another pops up.
“We’re aware of people trying to avoid the £1.4m limit and we have to be vigilant.”
Pensions Investment Research Consultants’ corporate governance adviser policy manager David Somerlinck agreed.
“We want companies to be as transparent as possible. They need to explain clearly their ongoing obligations to their directors and they’re aware of what institutional investors want.
Somerlinck added: “Institutional investors are much more aware of potential excesses in executive pensions. What we’re calling for and what investors want is simplicity, so you can tell what directors’ pensions are all about.”
And Morley Fund Management head of governance and public policy Iain Richards said: “We are aware of some fancy ideas such as restricted share schemes based around tax frameworks and loan conversion schemes.
“The issue for us is to monitor their development and ensure that the balance of remuneration is appropriate.”
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