The CBI in particular have often banged on about public sector worker's pensions, helping create the misleading impression that all employees can go at 60 on full pensions. Well it turns out that most directors have a normal retirement age of 60 too - why isn't the CBI called for that to go up to 65? Plus the majority of them are offered an accrual rate in DB schemes of 1/30ths!
Is there any good reason why directors whould get a better accrual rate than other employees in the same company?
Here is the exec summary of the TUC report:
Key PensionsWatch 2007 findings:
Directors of the UK's top companies share pensions with guaranteed pay-outs (known as defined benefits, DB, or final salary schemes) worth nearly £1 billion (£891 million). On average each director's pension is worth £3 million. The average for directors with the largest pension in each company is £5.3 million.
The average director's DB pension would pay out more than £193,000 a year, 25 times the average occupational pension. For the directors with the biggest pension in each company, the average would be over £320,000 a year, over 42 times the average for all employees (£7,592).
The proportion of directors with final salary pensions is 79 per cent.
59% of companies have closed final salary schemes to new staff in recent years.
38 out of the 49 companies where information is available (78%) allow directors to retire on a full pension at 60.
For companies who reveal the information, directors' pensions grow twice as fast (1/30ths) as the most common rate for employees in DB schemes (1/60ths), meaning that it takes staff 40 years, on average, to reach full pension but directors only half that time.
Where directors are in money purchase schemes, where the pension will depend on the ups and downs of investments (defined contribution or DC), the average reported annual employer contribution is £86,000. The average for company directors receiving the highest payment in each company is £147,000. Employer contributions to directors' DC schemes was, on average, the equivalent of around 20% cent of salary, compared to the average for all employees with a DC scheme and employer contributions of just 5.8 per cent.
The highest annual employer contribution to a director's defined contribution pension was £988,732, the rest of the five biggest annual contributions range from £261,000 - £382,000.