Top executives pension contributions
04 July 2019
Pension contributions made by employers for their top executives and other workers are being scrutinised by shareholders and regulative organisations regarding inequality.
With the strengthening of the UK Corporate Governance code in July last year organisations must align executives’ pensions with those available to the wider workforce, or provide an explanation why they are failing to do so. The Financial Reporting Council set these accounting standards and have the force of law for listed companies to prepare annual reports.
The situation was made worse with the introduction of Tapered Annual Allowance (TAA) in 2016, as this meant that large additional cash payments were necessary to maintain the real level of pension benefits executives historically enjoyed. TAA limits tax relief on contributions up to £10,000 per annum, any contributions above this are taxed at the individual’s marginal rate. Contributions over this amount are often given as a cash allowance and these payments attract income tax in a way that pension contributions do not.
To muddy the waters further there is also a gender problem as well as there are fewer women who hold senior positions.
More on this in employee benefits