Pay directors the same pension contributions as their workforce, says the Investment Association

Directors should receive pension contributions in line with the rate given to the majority of the rest of the workforce, according to new Principles of Remuneration published by the Investment Association (IA).

The IA has updated its executive pay guidelines in response to investor concerns that companies are not listening, or responding, to shareholders over pay. The 2018 Principles of Remuneration set out investor expectations and best practice for how companies should pay their top executives in line with the new Corporate Governance Code. This includes that pension-related payments should not be used as a mechanism for increasing total remuneration.

The UK Corporate Governance Code states that pension contribution rates should be aligned with those available to the workforce – IA members consider this to be the rate which is given to the majority of the company’s workforce. The IA therefore suggests that:

  • new executive directors, and directors changing their role, should be appointed on this level of pension contribution
  • contribution rates for incumbent executive directors should be reduced over time to the contribution rate available to the majority of the workforce, and
  • this should be achieved as soon as possible without compensation for the change.