MPs have stepped up the pressure on Lloyds Banking Group over excessive pensions for senior staff, demanding the lender justify hefty payments to its chief executive.

António Horta-Osório receives 33% of his salary, or £419,000, as a cash payment in lieu of pension. Investors are increasingly critical of the payments, which they view as backdoor remuneration. Apart from two other board members, the rest of Lloyds staff are offered just 13% of salary.

Frank Field, the independent MP who chairs the work and pensions select committee, and Rachel Reeves, the Labour chair of the business committee, on Thursday released a joint letter to Lloyds about the issue. They warned that the payments contravened pay policy outlined by the trade body that represents UK investment managers and in the official City code.

“As you will be aware, the Investment Association’s (IA) guidelines – as well as the UK corporate governance code – state that pension contribution rates for executive directors should be aligned with those of their workforce,” the letter said. The bank’s chief operating officer, Juan Colombás, and its finance chief, George Culmer, each receive cash payments in lieu of pension worth 25% of their salaries.

The MPs’ letter also asked Lloyds why it chose to increase Horta-Osório’s fixed share award to £1.05m from £900,000, and whether this move was considered to be “in the spirit” of those guidelines. They also asked Lloyds to provide a clear timeline for when it would start to comply with guidelines.

Lloyds reduced its chief executive’s pension payments from 46% of his salary earlier this year. It also capped a portion of his pension which is linked to his final salary, upon his request, although the move only cost Horta-Osório £3,000.

The Investment Association, which manages £7.7tn in assets of 250 members, has criticised Lloyds for breaching guidelines that aim to reduce the payments to less than 25% of existing director’s base pay.

The trade body’s institutional voting information service report on Lloyds now bears an “amber top” warning over the bank’s remuneration report, owing to the size of Horta-Osorio’s pension payments.

The MPs’ have sent a letter to the IA as well, asking whether it has encountered “any resistance” to its guidelines and whether they think pension pay caps should become legally binding.

“We would be very grateful if you would let us know … whether in your view there would be merit in restrictions on executive pension contributions being put into law, rather than guidelines,” the letter asked.

The IA said it would be responding to the MPs “in due course”.

Lloyds declined to comment.