Caps on annual and lifetime allowances are leading FTSE100 companies to pay directors cash rather than contribute to their pensions.
Britain’s top 343 directors pocketed a cool £32.7 million last year in cash instead of seeing the money go into their pensions.
The figures were released by the TUC, which monitors FTSE100 retirement plans for senior executives.
The TUC claims company accounts reveal the payments and that the companies decided not to contribute to pension schemes because of government changes capping annual and lifetime allowances.
Breaching the £40,000 contribution rule and lifetime allowance of £1.25 million leads to heavy penalties from HM Revenue & Customs (HMRC).
Retirement packages
The TUC report showed 64% of directors picked up cash as part of their pension plans. This is double the number taking cash top-ups in 2009.
The average pay-out for senior directors was £149,493 or equivalent to 17% of their salaries, but chief executives picked up an average £230,854 in cash, or around 25% of their salaries.
The TUC alleges that as companies have changed from guaranteed retirement payments under direct benefit pensions to less generous direct contribution schemes, directors and senior executives still receive significant retirement packages.
The TUC also explains that FTSE100 companies contribute an average 6.6% of salary into employee schemes, executives and directors see a contribution averaging 12%.
BP chief executive Bob Dudley has the highest accrued defined benefit pension – £1.1 million.
The largest single transfer value was £19.2 million for former Diageo chief executive Paul Walsh. His pension fund is equivalent to a £597,000 a year income.
Financial benefits
Lloyds Banking Group chief executive Antonio Horta-Osorio was paid a £549,390 cash allowance, a £732,000 pension contribution into a defined benefit scheme and £18,170 into a defined contribution scheme.
However, most FTSE100 average pensions were down in value, mainly because older directors who had accrued large funds had retired.
The research revealed the average FTSE100 accrued defined benefit pension was £214,705 a year, which was £45,242 down on last year.
The average for the director with the largest defined benefit pension in each company was £37,672 less than the year before at £293,260.
TUC general secretary Frances O’Grady said: “Most workers are retiring on a lot less money than those of just a generation ago, but the same doesn’t hold true for directors who still receive substantial financial benefits and retire earlier than their employees.”
