The average accrued FTSE 100 directors’ pension pot is worth 25 times the average employee occupational pension according to a survey by the Trades Union Congress (TUC) published today.
The PensionsWatch survey found that the average director now accrues a pension pot of £259,947 per year, in contrast to the average workplace pension which came in at just £10,452.
In total, the average pension pot for a director increased by £400,000 last year to £4.73m. The survey revealed that one director alone amassed a total pot worth £22.2m, reported sister publication Professional Pensions.
The TUC argued that there was no justification for a growing divide in workplace pensions and urged for private sector companies to follow suit of the public sector in ensuring all employees receive the same pension terms and conditions – irrespective of their seniority.
According to the findings, as more directors are moved out of defined benefit (DB) schemes and into defined contribution (DC) schemes, employer contributions as well as cash payments in lieu of pensions have increased rapidly.
Employer contributions into directors’ DC schemes over the last year increased by £15,872 to £160,380, while several directors were in receipt of company contributions of over half a million pounds.
In contrast to employer contributions of 3% for workers enrolled into the National Employment Savings Trust (NEST) scheme under auto-enrolment, directors on average received employer contributions of 25% of their salary, with 30% the next most common rate. The average contribution rate for all workplace pensions is just 6%.
Furthermore, cash payments in lieu of pension contributions also increased, with the average payment £8,292 higher than last year standing at £173,217 – 29% of salary.
TUC general secretary Frances O’Grady raised concern that while pay and bonuses were under much closer scrutiny, the findings showed that much more complex arrangements for reporting directors’ pensions made it hard for shareholders and the media to find out how much their pensions were worth.
“As pensions are not performance-related there can be no justification for this stark divide in company pensions. Some directors are collecting millions while schemes are scaled back for ordinary staff,” she said.
“For decades, companies have been telling employees that decent pensions are an unaffordable luxury. But these rules clearly don’t apply to those at the top.”
O’Grady added: “With millions of people joining workplace pension schemes over the next few years, this sharp divide will come under ever closer scrutiny. It’s time companies created a level playing field when it comes to their pension schemes.”
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