As investor anger over bumper pension payout increases, pay for FTSE 100 bosses fell to a five-year low last year with a potential to drop further. Median total pay for bosses of the UK's largest listed firms stood at £3.4m in 2018, compared with £4m a year earlier, according to Deloitte. It is the lowest level since 2014, when UK rules first required companies to report a single figure for chief executive pay. That year, median pay packages totalled £4.4m.
The report found that the median increase in base salary for FTSE 100 bosses stayed at only 2 per cent, while nearly a third received no pay rise at all. Bonus payouts remained at similar levels of about 70 per cent of the maximum allowed under each company's pay criteria. Median base salaries reached £868,600 while bonus payments, excluding long-term incentives, averaged £1m.
A notable shift has, however, taken place for pay in lieu of pensions, cash sums of up to 50 per cent of basic salary given to top bosses in lieu of pension contributions, with about one third of FTSE 100 companies cutting pension pay for new executive hires.
The Investment Association, which manages £7.7tn in assets of 250 members, has shamed firms for failing to cut payments to less than 25 per cent of existing director's base pay as a first step. Vice-chairman at Deloitte, Stephen Cahill said, "We have seen many companies come forward as "first movers" in response to new regulatory changes, with 29 companies reducing pensions for new hires. Without a doubt, executive pensions have been the hottest topic of 2019 and we expect this to continue, with a growing focus on incumbent executives receiving the highest pension rates."
Companies like travel firm Tui, banking giant Standard Chartered, supermarket chain Sainsbury's and Diageo, have fallen foul of those guidelines over the past year. Meanwhile, Deloitte said median pay for FTSE 100 chiefs has also been depressed by rules that bar CEOs from cashing in shares until long after they have left the company. If the two trends continue, it could mean pay for FTSE 100 bosses dropping yet again.
Cahill said, “In the coming year we expect to see a further shift in reduced pensions and requirements for executives to hold shares post-leaving. Given current uncertainty in the UK business environment, shareholder pressure and regulatory controls should be balanced with the need to ensure that the UK is able to attract the calibre of talent that can deliver continued prosperity for businesses.”
