Top execs go for cash ahead of tax changes

According to Hewitt Associate’s Report on FTSE 100 Directors’ Remuneration 2010 , 24 of the FTSE 100 have cash only pension plans for directors.

This is up from 5 in 2009, and compares to just 16 FTSE 250 firms offering equivalent propositions.

Average company contributions to these cash only plans are higher than for DC schemes, with FTSE 100 directors taking on average 29% from employers, compared to 20% for pensions.

The report states: “The pensions landscape is undergoing fundamental changes. The move from defined benefit to defined contribution is accelerating and the National Association of Pension Funds is calling for greater disclosure about executive pension arrangements and to justify any differences from the arrangements for other employees.

“As a result, many companies are once again feeling the need to review their executive pension provision.

“It is difficult at this stage to predict the likely outcome of these reviews. However, it may well prove to be the case that a number of companies close their final salary plans to existing employees, offering defined contribution plans instead but with the option of a cash alternative for individuals caught by the pension tax changes.”

Hewitt New Bridge Street principle consultant Rob Burdett said: “The evolving legislation on pensions is causing companies to review their existing provision.

“It is likely that changes in the tax regime to executive pensions are likely to require most thought and potential re-structuring of that element of pay, with a number of companies moving to simple cash supplements.”