FTSE 100 exec pension pay falling
FTSE 100 pension provisions falling and HMRC benefiting for new tax allowance, survey finds
THE PENSION PROVISIONS of top company executives has spiked over the past year, according to a survey of the FTSE 100.
According to consultants Lane Clark & Peacock, the average value of a FTSE 100 executive’s pension provision increased from £225k to £242k since 2011 when the survey was last conducted.
The biggest increase was in median compensation for cash in lieu of pension which has risen from 25% to 30% of basic salary – a measure is used by companies and remuneration committees to benchmark their pension compensation for their own executives.
Mark Jackson, LCP partner and author of the report said: “The benchmark for a cash alternative to pension has risen by 5% of basic salary since 2011 and this, in turn, has prompted an increase in the headline cost of executive pensions to the country’s largest companies.”
The increase comes in spite of the move away from defined benefit (DB) pensions, which prompted a decline in headline pension cost in LCP’s previous annual surveys, LCP said.
According to the report, HMRC is profiting from a new, lower tax allowance which has seen the amount of tax paid by UK-based FTSE 100 executives who cannot fit their pension savings into the annual or lifetime allowances averages £91,000 a year.
From April 2014 the annual allowance will drop from £50,000 to £40,000, with one in two executives with benefits in a tax-registered pension scheme facing an annual charge.
“There are striking pension challenges to come for UK companies and their executives. We will see new disclosure requirements in company accounts from October 2013, moving pension costs for executives out of the small print and into the spotlight, not to mention the next round of Annual and Lifetime Allowance reductions from April 2014,” Jackson said.