Lloyds Banking Group is proposing to slash its chief executive’s pay by £220,000 and spend £20m to raise retirement benefits for the rest of staff – only months after defending the boss’s bumper remuneration package.
The bank is consulting shareholders over plans to cut António Horta-Osório’s pension package, which earlier this year was worth nearly half of his £1.3m base salary before being trimmed to 33%. That compared with 13% offered to the rest of staff.
The proposals would mean the banks’s contribution to the chief executive’s pension being cut further, to 15% of salary from July 2020. Retirement benefits for the group’s 65,000 workforce would be raised to the same level, costing roughly £20m a year.
The changes, if approved, mean Horta-Osório’s £419,000 pension package would be cut by more than half to about £190,000. It is understood that the bank is not planning to raise other parts of his pay package to offset the loss.
It signals a U-turn by Lloyds, which has previously defended his pay package despite mounting criticism from politicians, shareholders and City lobby groups, who have been agitating for pension payments to be brought in line with the rest of staff.
In June, executives were summoned to appear before the work and pensions committee by MPs, who accused the bank’s bosses of “boundless greed”. Horta-Osório defended his pay package by saying it was lower than offered to rivals at banks such as HSBC, while the bank’s remuneration committee chair claimed staff saw the boss as a “winner” and didn’t “resent the money” pocketed by the chief executive.
Horta-Osório’s total pay package last year, including bonuses and other incentives, was worth more than £6m.
Lloyds earlier this year cut his pension payments from 46% to 33% of salary. It also capped a portion of his pension, which is linked to his final salary, upon his request, although that move only cost Horta-Osório £3,000.
The Investment Association has been urging companies to bring executive pension pay below 25% of salary but has ramped up the pressure by setting a two-year deadline for companies to comply with the UK corporate governance code and bring executive salaries in line with the rest of the workforce.
The bank’s chief operating officer and chief financial officer are also given cash worth 25% of their salaries in pension payments. It is expected that their pay packets will also be cut if the proposals are approved.
Commenting on the news, which was first reported by the Financial Times, a Lloyds spokesman said: “In line with the regular three-year review of the group’s remuneration policy, we are consulting shareholders on all elements of the policy, including pension allowances.
“As stated before, the group will continue to support the guidelines set out by the Investment Association and, once approved by the board, the proposed new remuneration policy will be presented to shareholders for approval at the 2020 AGM.”
The proposals follow similar moves by Standard Chartered, which bowed to investor pressure earlier this month with plans to halve the £474,000 pension payout for its chief executive, Bill Winters, from January.
The changes proposed by Lloyds were welcomed by the trade unions representing staff. Rob MacGregor, a national officer for Unite, said: “Unite is clear that the changes announced today represent a progressive step in the right direction by Lloyds Banking Group and the union can only hope that it is the first of many such measures the employer will take when it comes to supporting employees and their pensions.
“The issue of income in retirement is for many, particularly younger members of staff, a remote and distant one but it’s an issue that needs to be tackled head-on.”