The group representing some of the UK’s most powerful investors has warned Britain’s biggest companies that they could damage the reputation of business if they don’t cut back on huge pensions packages for failing directors.
The Association of British Insurers (ABI) has sent a letter to FTSE 350 companies warning that “the reputation of business as a whole is tainted by companies that keep such arrangements in place, especially as these add to severance totals when the general market trend is to move away from defined benefit schemes”.
The letter follows an outcry in January when Ian Russell, CEO of Scottish Power, left the job with a financial package worth £5m. This included a £2.7m pension, which will pay him an annual pension of £270,000.
Peter Montagnon, ABI director of investment affairs, called on companies to bring their pensions in line with best practice.
“It’s very bad for the reputation of business generally if large amounts of money are paid to people who have not created value, especially in the form of pensions, at a time when Britons generally are worrying about their own pensions,” he said.
Figures released yesterday by the Office of National Statistics showed that bonuses paid to top flight executives and City finance workers had reached a record £19bn.