Quarter of FTSE 100 face revolt over pension perks

Firms warned to pay maximum 15pc of salary in retirement contributions


A quarter of FTSE 100 companies face investor revolts next year over bosses' lavish pensions in a new shareholder spring.

Blue chip firms have been warned by the Investment Association (IA) that they will be hit with rebellions unless they cut executives' pension contributions to a maximum of 15pc of their annual salaries.

Some of the index's best-known members are at risk from the backlash, including pandemic winners such as supermarkets Morrisons and Sainsbury's as well as drugmakers AstraZeneca and GlaxoSmithKline, both of which are working on a Covid vaccine.

It follows growing anger in the City over retirement perks for executives which are out of step with what is paid to ordinary workers. Many firms give their bosses a cash sum towards their pension which equals a higher proportion of their salary than what is on offer for other staff.

The IA - which represents some of London's biggest investors - previously recommended shareholders vote against firms' pay packages if bosses got a contribution of more than 25pc.

It sent a letter to FTSE 350 firms on Monday warning them this will now be cut to a maximum of 15pc. At present, a quarter of blue chips are above this threshold.

Morrison's faced a shareholder revolt this year over the pension offered to its top two executives, who received 24pc of their salaries versus just 5pc for those working on the shop floor. A Morrisons spokesperson said it has "set out a clear commitment to reduce pension allowances for executive directors over the lifetime of our remuneration policy".

Meanwhile, Glaxo has vowed to cut retirement contributions for UK executive directors from 20pc of salary to 7pc by 2023 to bring their benefits in line with the wider workforce.

But the IA wants to see changes made by 2022 and the drugmaker's rules do not apply to its US-based chief science officer Hal Barron. He received pension contributions worth $1.3m (£1m) last year as part of a pay package which totalled $6.3m.

Businesses have been scrambling to curb generous pension payouts for years as powerful City investors demand action, with large companies including HSBC, Standard Chartered, Natwest, BT Group, WPP, Aviva and ­Segro pushing through changes so that they are in line with the IA’s previous guidelines.  

However the latest crackdown means that many will have to change their policies again.

The median pension contribution for FTSE 100 chief executives is three times higher than for the average employee relative to their salaries, according to a report by consultancy LCP published in May. 

Last month the IA said it had recommended a vote against resolutions from 10 blue chip firms because they were paying at least one director more a pension contribution of more than 25pc of salary and had not committed to aligning this with ordinary workers.  

Andrew Ninian, the IA's corporate governance director, said: "With coronavirus continuing to hit household finances across the UK, investors expect companies to treat their executive directors and workforce consistently when it comes to pay.

"Investors will be paying close attention to ensure pay remains linked to the experiences of shareholders, employees and other stakeholders."