Work and Pensions Committee

Executive pensions inquiry

Inquiry status: Concluded

Scope of the inquiry

In early May 2019 the Committee wrote to Lloyds Bank Group querying executive pension levels of senior executives compared to the wider workforce, in the wake of reports that Chief Executive António Horta-Osório had “voluntarily” given up a portion of his pension.

The Committee asked why Lloyds chief executive “Mr Horta-Osório’s pension contribution rate stands at 33%, when the maximum employer contribution rate stands at 13% for other Lloyds employees – and the contribution rate for Lloyds’ Chief Operating and Financial Officers stands at 25% of salary.”

The Committees also questioned whether Mr Horta-Osório’s fixed share award increase, to £1.05 million, is “in the spirit of the Investment Association’s guidelines”. The chief executive’s total pay package is worth £6.27million a year.

The Investment Association has developed a “traffic light” rating system to assess corporations against their performance on different themes as part of its Institutional Voting Information Service. The questions to Lloyds were spurred when it was announced that the Group had been “amber topped” by the IA ahead of its AGM and shareholder vote on its proposed remuneration package.

Responding to this inquiry, the Investment Association stated that, under the UK Corporate Governance Code, “pension contribution rates should be aligned to those of the workforce … Investors expect new executive directors to be appointed on this level of pension contribution. The contribution rate for incumbent executive directors should be reduced over time to the contribution rate available to the majority of the workforce …” going on to describe “one likely impediment to companies achieving swift” compliance with IA guidelines is a contractual obligation regarding pensions: but goes on immediately to describe how this “impediment”  is simply and easily circumvented by a director voluntarily giving up contributions, “as demonstrated by HSBC.”

After hearing from Lloyds CEO Chief Executive António Horta-Osório and chair of its Remuneration Committee Stuart Sinclair Rt Hon Frank Field MP, Chair of WPSC, said: “We have just received an even more thorough account of the disconnect between these bank executives and the reality for the majority of their workforce. The executives claim to have heard no complaints – which seems surprising to say the least, given that a union representing Lloyds staff has written to an MP, and spoken out in public.

“What we didn’t hear was a pledge to put things right. I very much hope we will not be back here with Mr Horta-Osório and Mr Sinclair again next year, but that Lloyds’ executives will instead do the right thing long before then.” 

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