The new 'A-day' UK pension rules could give top executives the leverage to negotiate huge pay increases.
The new UK pensions rules, due to come into effect next April, could mean that companies would try to compensate management for the new £1.5 million lifetime cap on pension funds.
Analysts predict pay rises of up to 75 per cent, and general dissatisfaction among shareholders could be expected.
They believe it is unlikely that the Association of British Insurers (ABI) would grant the option of funded or unfunded unapproved pension schemes, which is at present the primary alternative to pay increases.
These pension schemes would effectively act as an IOU, as it would fund a retirement pension or the payment of a lump sum when the employee reaches retirement age.
Michael McKersie, the investment affairs manager at the ABI said that guidance in this pension area is being reviewed by the ABI.
"We are viewing this with an increasingly sceptical mindset," he told the Herald.
Meanwhile, Sue Bartlett, a partner at consultants Watson Wyatt, said shareholders are increasingly hostile to the size of pension costs for directors.
She warned that shareholders might object to companies looking to continue replicating the value of a two-thirds' final salary pension.
A recent Watson Wyatt survey of 190 companies discovered that two-thirds are planning to offer a cash allowance. Nearly 40 per cent consider providing benefits through funded or unfunded unapproved pension schemes.
New UK pension rules could mean huge pay rises for management
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New UK pension rules could mean huge pay rises for management
Tue, 05 Jul 2005
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