September 26, 2019 / 11:09 PM / 2 months ago

UK fund trade body warns companies over existing directors' pensions

FILE PHOTO: A worker arrives at his office in the Canary Wharf business district in London, Britain, February 26, 2014. REUTERS/Eddie Keogh/File Photo

LONDON (Reuters) - Britain’s fund industry trade body has warned companies of the need to have a plan to align existing executive directors’ pension payouts with those of the wider workforce by 2022 or face shareholder dissent.

Changes to the UK Corporate Governance Code to align executive pension contributions with the workforce spurred the Investment Association (IA) to overhaul its Principles of Remuneration and issue initial guidance in February aimed at ensuring new hires’ pensions were in line.

On Friday, the IA issued guidance for companies ahead of the 2020 season for annual general meetings and warned any company which did not have a “credible” plan in place to move existing directors to the less generous schemes would be called out.

Companies with directors who are paid more than 25% of salary as a pension contribution will be given a so-called ‘red top’ warning by the IA’s Institutional Voting Information Service (IVIS) if they do not have a plan to meet the deadline.

IVIS is used by IA members and other institutional investors as a guide on how to vote at company meetings, where pay, bonuses and the re-election of company directors are determined.

“Providing directors the same pension contributions as the rest of the workforce is fundamentally an issue of fairness,” said Andrew Ninian, Director of Stewardship and Corporate Governance at the IA.

“Companies with high executive pension payments who don’t provide (a) plan risk facing further shareholder rebellions in their 2020 AGMs.”

The IA, which represents over 250 asset managers, collectively overseeing more than 7.7 trillion pounds in assets, also wanted to see more transparency over pension payouts to the average worker.

“Companies will now also be asked to publish the pension contributions they pay to the majority of their workforce, and review those contributions to all employees to ensure they provide an appropriate pension provision for all,” Ninian said.

Reporting by Simon Jessop; Editing by Kirsten Donovan

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