Investors to clamp down on bosses' pension perks

The Investment Association has written to the chairs of FTSE 350 pay committees warning that it will attach a "red-top" warning to annual reports that have no credible plan for pension reform.

The association, whose members manage £8.5tn of assets, wants companies to align executives' pension contributions with their wider workforce if contributions are 15% of salary or more. This lowers the threshold from 2019 when the threshold was 25%. The association wants to equalise the rate between senior executives and their workers by 2022.

Investors have been taking a harder line on pension contributions for company bosses because because they are seen as a backdoor method for paying bosses more. Morrisons and Informa both suffered rebellions at their 2020 annual general meetings over the size of their chief executives's pension payments.

The association said the clampdown reflected investor concern that company bosses should not be paid outsize sums while workers suffer financial pressure and the threat of unemployment during the Covid-19 crisis. Investors have supported listed companies with more than £18bn of new capital since the start of March, it said.

Andrew Ninian, the association's stewardship director, said: “Aligning executive directors’ pension contributions with the rest of workforce is fundamentally an issue of fairness. Investors have already played an important role in bringing about change and today’s announcement will further increase the pressure on those companies that have yet to take action.”

The association said companies should balance the interests of shareholders, employees, suppliers and other stakeholders with the need to incentivise bosses. It warned against "catch-up" awards or big salary increases to compensate for pay restraint during the crisis and said no bonuses should be paid at companies that take government or shareholder support.