Exec pensions of half annual salary exposed

An increasing number of directors in high-profile companies now receive in-lieu-of pension payments worth half their annual salary, the report has found.

Douglas Flint, chairman of HSBC, receives an executive allowance of 50% of his basic salary, which amounts to more than three times the average payment of £120,906 to UK directors at £425,224 a year.

The divergence of money away from pension funds into in-lieu-of-pension payments is a reaction to the £1.5m limit on pension pots, which many have reached already, and are therefore receiving cash rewards instead.

Deborah Hargreaves, chair of the High Pay Commission told PW: “Payments like this are scams directors are using to disguise extra cash because of the cap on pension pots.”

The High Pay Commission is an independent inquiry into top-end pay in the private sector.

Tom Powdrill, head of communications at PIRC, added: “The in lieu-of-pension payments given to directors at HSBC are very high, and it’s not obvious how it will benefit shareholders.

Anything above 30% of a director’s annual salary needs to be justified, but at present, no one is doing this.”

A 2010 Trades Union Congress report on directors’ pay and pensions warned: “Pensions are an important part of executive pay and benefits packages but can also be the most opaque element, with limited information available in the public realm.

"We believe that pensions should be subject to the same level of scrutiny as other parts of directors’ benefits packages.”

HSBC declined to comment.