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Shell CEO Jeroen van der Veer has built up an annual pension entitlement of £828,923 a year logo

A comfortable retirement awaits – pipe, slippers and a million a year

Phillip Inman
The Guardian, 
Friday September 12 2008
Royal Bank of Scotland’s generosity towards its longstanding US boss, Lawrence Fish, has given him entry into an elite club of executives with annual retirement incomes in excess of £1m.

Fish, who will retire next year from his non-executive role as chairman of RBS’s Citizens Bank, accrued a pension worth £1,036,218 and tops the Guardian’s survey of directors’ pensions. He joins BP’s Lord Browne, who saw his pension entitlement break the £1m mark in last year’s survey.

Cadbury Schweppes boss Todd Stitzer can look forward to a minimum annual pension of £882,000, while Jeroen van der Veer, the chief executive of Shell, has built up an entitlement of £828,923 a year.

The survey calculates pension accrued up to the beginning of this year.

Van der Veer, who is 61, retires next summer, but Stitzer, at 56, has some time to add to his pension. Like most executives, both benefit from gold-plated schemes that guarantee to pay two-thirds of their final salary when they retire.

A study by the TUC has put the average retirement payout for FTSE 100 executives at more than £200,000 a year, mainly thanks to their membership of final-salary schemes.

The union body pointed out that bosses have, in recent years, created an increasingly wide divide between the boardroom and the shop floor, and not just in the scale of their pension payouts.

While executive pensions are insulated from the ravages of the credit crunch through their link to final salary, employees’, in the main, are not. The vast majority of workers must contribute to pensions that depend on the stock market for their growth rather than their length of service and final pay cheque.

Pension benefits are also skewed towards directors. In most instances, bosses accrue their pension rights in half the time it takes a worker who also enjoys membership of a guaranteed final-salary scheme. It means a director need only work for a company for 20 years to gain a retirement income of two-thirds of salary, compared with 40 years for a worker.

Also, most workers have seen defined-benefit schemes closed down and face cuts in employer contributions of between a half and a third compared with a dwindling band of their counterparts who have pensions linked to final salaries.

The money-purchase arrangements that are replacing final-salary schemes pay about 20% of final salary, compared with the 66% for guaranteed schemes, according to a recent study by Hargreaves Lansdown. Some firms, including HSBC and the advertising group WPP, have moved away from guaranteeing a two-thirds pension to their directors, but the Guardian study shows a divide remains at most firms, including HSBC and WPP.

At WPP, Sir Martin Sorrell can claim to be a member of a similar scheme to the firm’s workers, but a £400,000 donation to his pension pot in 2007 is far in excess of the payments to staff.

At mining company Xstrata, which has boomed on the back of commodity price rises, executives Mick Davis and Trevor Reid are playing catch-up. Davis, the 50-year-old chief executive, put £1.6m into his pension last year, while Reid, the company’s 47-year-old finance director, was given a £720,366 boost to his retirement fund.

Many executives are also entitled to retire earlier on full pension than staff.

The only woman to enter the top 20 pensions list was Linda Cook, Shell’s gas and power boss and a frontrunner to take over the oil company as chief executive when Van der Veer retires.

She was ranked number 83 on the Forbes list of the world’s most powerful women recently, and, at 48, is already looking forward to a pension of £513,057.

Other winners in the pensions bonanza included the outgoing Unilever boss Patrick Cescau, who is entitled to at least £755,492 annually when he retires next year.


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