? Half of FTSE 100 directors still in final salary schemes
? Directors earn full pension in 20 years, others take 40 years
Directors in Britain's top 100 companies have accumulated final salary retirement pots worth �2.8m on average, according to figures that reveal a widening gap between the pensions awarded to boardroom executives and the shop floor.
Incomes Data Services (IDS) said about 46% of FTSE 100 directors were still accruing final salary benefits in generous schemes that typically pay two-thirds of final salary as a retirement income.
A pot of �2.8m could buy an employee a pension annuity worth more than �170,000 a year, IDS said.
The figures are bound to fuel resentment among workers, most of whom must save in cheaper schemes that pay only a fraction of their last pay cheque. Only about 800,000 private sector workers are able to join final salary schemes and most existing members have seen their benefits frozen.
Company directors, like MPs, have among the most generous schemes in the G20 group of richest nations, with guaranteed benefits worth two-thirds of final salary accrued at an accelerated pace. Many directors can earn their full pension after only 20 years service, while it takes MPs just 26 years. Most workers take between 35 and 40 years to accrue a full pension.
Public sector workers, who are expected to go on strike on Thursday over government cuts to pension benefits, will fall further behind following a decision to uprate their benefits in line with a lower rate of inflation.
IDS found that FTSE 100 companies contributed on average �159,762 a year, equivalent to 25% of annual salary, to the defined contribution (DC) plans of directors denied a final salary pension.
IDS pointed out that company contributions to FTSE 100 directors' pension schemes are significantly higher than the �50,000 annual limit on contributions to pensions that attract tax relief for this financial year.
There is also a lifetime allowance for a personal pension of �1.8m, after which pension income is taxed at 50p in the �1.
The tax limit has sparked a surge in directors requesting cash payments in lieu of retirement contributions, to invest outside their pension plan in property and other assets.
IDS said the median value of cash in lieu payments to FTSE 100 chief executives is �160,810 a year. The figure for all FTSE 100 board directors stands at �141,250 a year, equal to 25% of salary.
Steve Tatton, editor of IDS's Executive Compensation Review, comments: "Until recently, executive directors have been cushioned from the worst effects of the deteriorating pension provision faced by most employees. However, both the last and new governments promoted tax changes aimed at reducing the benefit from 'top hat' schemes.
"While pension provision for board directors have remained generous, much of the workforce over the last few years have been going through a process of having the value of the payments into their scheme reduced."
Source: http://www.guardian.co.uk/business/2011/jun/29/pensions-gap-ftse-100-boards-workers
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