The top company bosses retiring on £175,000 a year... but the typical worker gets just £6,000



Bosses of Britain’s top companies look forward to an average pension of £175,000 a year, while the average private sector worker will have to struggle by on less than £6,000.

A report has revealed the shocking scale of the pension divide in which company chiefs are retiring on the types of sums their employees can only dream of.

It showed the average FTSE 100 director has amassed a pension nest-egg worth £3.6million.

Huge pensions: Former RBS boss Sir Fred Goodwin, left, receives £342,000 per year, but only after a public outcry, while Eric Daniels has a pension pot of £5m, despite only having ten years' service at Lloyds



And, as if these giant sums were not enough, almost a third of executives are supplemented with additional cash payments averaging £161,000 – because they have filled their pension pots beyond the maximum allowed under generous tax relief rules.

Deborah Hargreaves, chairman of the High Pay Commission, accused bosses of hypocrisy for demanding that ordinary workers suffer cuts to their pension provision while laying up millions to finance a life of luxury in retirement for themselves.

High earners are allowed to hold up to £1.8million tax-free in a pension fund, and can claim tax relief on annual contributions of up to £50,000, recently reduced from £255,000 a year.



But even this is not sufficient to accommodate the vast pension pools being built up by Britain’s best-paid executives, according to research by Incomes Data Services and the High Pay Commission.

Miss Hargreaves said: ‘Directors are receiving gold-plated pensions while retirement provision for the workforce has been slashed. It seems as ever it is one rule for the workforce as it is exhorted to put up with a poorer retirement so companies can stay competitive, and another for the boardroom.’

She said the ‘startling statistics’ were drawn from company annual reports along with data from the Office for National Statistics and the National Association of Pension Funds.

Staggering: Former Barclays chief executive John Varley retired last year with a pension pot of £18.2m - or £645,000 a year

The report added that ‘while the bosses of some of the UK’s biggest companies have been very good at reducing costs by cutting the pensions of their workforce, they have also been very good at protecting their own’.

It stopped short of naming and shaming those with the most excessive retirement pots. However, chief executives retiring this year include Eric Daniels, of state-backed Lloyds Banking Group, who leaves the bank aged 60 with a pension worth more than £5million after just ten years’ service.

This equates to £210,000 a year for life.



John Varley retired as chief executive of Barclays this year at the age of 54 after 28 years’ service with a staggering £18.2million pension cache. This yields him an income of £645,000 a year.

Sir Fred Goodwin, the most notorious example, was originally awarded a £703,000-a-year when he retired aged 50 in 2008. The Royal Bank of Scotland chief executive, who led the bank at the time of its collapse, converted £2.8million of his pot to a lump sum, taking his annual payment to £550,000 then to £342,500 after public outrage.

In contrast, a recent report by the Workplace Retirement Income Commission found millions of private sector workers face a ‘bleak old age’ because many company schemes are expensive and inefficient.

Some 14 million are not saving into a workplace pension at all and could end up dependent on meagre state provision. More than 97 per cent of executive directors in FTSE 350 companies benefit from pension arrangements sponsored by their employer.

But the proportion of ordinary employees who are members of workplace pension schemes has plunged from 46 per cent in 1997 to just over a third now.

The main reason is employers rushed to close down traditional company schemes where pensions are linked to final salaries, replacing them with riskier plans which depend on the stock market. Only a tenth of employees are still in final salary schemes, down from 34 per cent in 1997.