Two senior MPs have weighed into the row over pensions at Lloyds Banking Group ahead of the lender’s annual meeting, where the size of chief executive Antonio Horta-Osorio’s pay packet will be under the microscope.
Frank Field and Labour’s Rachel Reeves – chairs of the pensions and business committees respectively – have written to the banking giant to raise alarm over the discrepancy between the bank chief’s pension allowance compared to everyday staff.
In their letter, the veteran parliamentarians ask the chair of Lloyds’ remuneration committee why Mr Horta-Osorio’s pension contribution rate stands at 33% of salary, when the maximum a branch worker can receive is 13%.
They also query the contribution rate for Lloyds’ chief operating and financial officers, which stands at 25% of salary.
Mr Horta-Osorio was forced to reduce his lucrative final salary pension in March, following complaints from the Lloyds staff group Affinity, which represents 20,000 employees.
Under his generous remuneration package, Mr Horta-Osorio receives payments in lieu of pension contributions of 33% of salary, amounting to £419,000 this year.
This represents a reduction from 46% of salary, or £573,000, but is still far higher than the average bank worker.
In addition, eyebrows have been raised over the fact that Lloyds increased Mr Horta-Osorio’s pay packet in a way that offsets the reduction in his pension.
He has been awarded a £150,000 increase in annual fixed share payments, taking the total to £1.05 million.
The committee chairs questioned whether this is “in the spirit of the Investment Association’s guidelines”.
The Investment Association, whose members manage £7.7 trillion of assets, has launched an initiative focusing on pension perks for bosses at Britain’s biggest firms as AGM season approaches.
It is asking companies to reduce the gap between the pensions of top executives and staff and will issue a “red-top” warning – the highest and most serious level – on firms which pay newly-appointed directors at rates above the majority of the workforce.
Investors are likely to follow its lead when voting on remuneration deals for top bosses, raising the prospect of several rebellions this year.
The latest move will pile pressure on the lender ahead of its annual meeting on May 16.
Mr Horta-Osorio banked total pay of £6.27 million for 2018.
The chief executive himself oversaw the end of final salary schemes at Lloyds, leaving him the only employee at the bank entitled to the perk until it was axed this week.
The Commons committees have also written to the Investment Association itself with questions on the corporate response to its guidelines.
In March, the Business Committee published a report saying that companies must do more to link top bosses’ pay to that of the rest of their workforce.
The report claimed “huge differentials” in bosses’ pay are “baked into the pay system”, which is propped up by weak remuneration committees.