October 20, 2019

October 18, 2019

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Investment Association’s Statement on Executive Pensions for 2020 AGMs

The Investment Association (“IA”) has recently published a new statement relating to executive directors’ pension contributions. The guidance is the next step from the IA’s statement in February 2019 and Good Stewardship Guide 2019, which call for executive directors’ paid pension contributions to be in line with the majority of the workforce.

Under the guidance, in respect of year-ends starting on or after 31 December 2019:

  • Any company with an existing director who is paid a pension contribution of 25% of salary or more and has a credible plan to reduce that pension to the same level as the majority of their workforce by the end of 2022, will be given an “amber top”;
  • Any company with an existing director who is paid 25% of salary or more as a pension contribution but no credible plan to reduce the contribution to the same level as the majority of the workforce by the end of 2022, will be given a “red top”; and
  • Any company who appoints a new executive director, or a director changes role, with a pension contribution out of line with the majority of the workforce, or seeks approval for a new remuneration policy which does not explicitly state that any new director will have their pension contribution set in line with the majority of the workforce, will also be given a “red top”.

calculator and numbersCompanies will also be asked to publish the pension contribution rates they pay to the majority of the workforce and explain how that rate has been derived. Companies should also review those rates to ensure they are appropriate for all.

The guidelines are part of a wider pay package, which shareholders take into account when scrutinising companies, and the movement towards greater fairness and fostering good employee relations in companies.

The IA is due to publish its updated Principles of Remuneration in October, which will cover the IA members’ expectations on other areas of the remuneration structure.

© Copyright 2019 Squire Patton Boggs (US) LLP

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Legal Director

Louise Barber practices a wide range of corporate work with particular focus on cross-border public and private mergers and acquisitions (including public takeovers), equity capital markets transactions, joint ventures and corporate goveranance.

Louise's M&A experience includes advising UK, US and European companies on cross-border public and private transactions. Her capital markets experience includes advising on a number of initial public offering and secondary fundraising transactions on both the London Stock Exchange's main market and...

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