Barclays will join the other big UK banks in cutting the pension allowance of its chief executive, marking a significant win for investors who have pushed the industry to bring the perk into line with benefits for the wider workforce.
Jes Staley is due to earn a cash lump sum of £396,000 in lieu of a traditional pension this year, equivalent to around 34 per cent of his cash salary. But from next year, the allowance is expected to fall by more than £200,000, according to several people briefed on negotiations between the bank and its investors.
The talks with investors are still continuing, but if Mr Staley agrees to the cut it would mean that all of the five large listed UK banks will have made significant concessions on executive pensions following a long-running campaign waged by institutional investors.
“It is absolutely a victory for shareholders,” said one large asset manager that holds shares in Barclays. “We have been pushing for this for more than a year. It is great news that Barclays and other banks are eventually listening to us.”
On Tuesday, the Financial Times reported that Lloyds Banking Group was preparing to cut the pension allowance of its chief executive, António Horta-Osório, by more than £220,000.
This month, Standard Chartered said it would also cut the allowance paid to its two most senior executives by £384,000, following an acrimonious stand-off with shareholders that deepened when chief executive Bill Winters blasted the investor campaign as “immature and unhelpful”.
When added to a reduction in the allowances paid to the CEO of HSBC and the new CEO of RBS, it will mean the perk has been cut by more than £1.2m in aggregate across the five banks.
New measures to restrict pensions tax relief for high earners were introduced in 2016, with the annual allowance tapering down from £40,000 to £10,000 for those with incomes of more than £110,000.
The reforms prompted many large companies to pay their executives a pension “allowance” — a lump sum of cash typically paid as a salary top-up that does not have to be saved for retirement.
However, the Investment Association, a body representing fund managers, recommends that these allowances — which have tended to be worth between 30 and 40 per cent of cash salary — should be brought into line with the wider workforce, who generally have their pension contributions capped at 10 per cent.
Barclays is expected to announce the reduction to Mr Staley’s allowance when it publishes a new remuneration policy in February, which will be voted on at the bank’s annual meeting in the spring, according to one person briefed on the company’s plans.
The reduction is expected to be accompanied by a pledge to pay more generous pensions to the entire workforce, with the typical contribution expected to rise to 12.5 per cent, the person said. Unite, the union representing some Barclays staff, is preparing to announce the uplift to its members in the next few weeks, they added.
The person said Barclays’ pensions overhaul was the result of an internal push to make pay at the lender more equal rather than a response to external investor pressure.
Mr Staley earned £3.4m last year, including a cash salary of £1.18m, a share-based payment of the same amount, and a £1.1m bonus, as well as the pension allowance and other benefits.
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