Santander will cut the pension allowance of its UK chief executive Nathan Bostock by more than £400,000 over the next two years, the biggest reduction in a sector-wide clampdown on executive benefits.
The move by Santander means the UK’s five largest high-street banks will all have lowered their chiefs’ pay by next year.
Mr Bostock’s total pension cut of £436,000 is expected to be the largest among any UK banking executive. His current allowance of 35 per cent of salary is comparable to peers at Lloyds and Barclays, but Mr Bostock’s base salary is disproportionately high, leading to the larger reduction in absolute terms.
As the head of the UK division of a Spanish bank, Mr Bostock earned more last year than Jes Staley, who runs Barclays.
He received a base salary of £1.7m last year, compared with the £1.3m received by Lloyds chief António Horta-Osório, the UK’s best-paid bank chief. However, Mr Bostock is not part of Santander Group’s long-term incentive plan, reducing his potential longer-term earnings. He was paid a total of £4.6m in 2018, compared with £6.3m for Mr Horta-Osório and £3.4m for Barclays chief Jes Staley.
Mr Bostock currently receives a cash lump sum worth 35 per cent of his base salary in lieu of a traditional pension, but people briefed on the bank’s plan said this would be reduced to 22 per cent of salary in 2020, and 9 per cent of salary in 2021. As a result, his allowance will drop by £218,000 a year based on his 2018 pay, and will not be offset by other pay increases.
Corporate governance guidelines introduced this year recommend that executives’ pension contributions are brought into line with those received by the majority of employees.
HSBC and Royal Bank of Scotland have already reduced their executives’ allowances, while Lloyds and Barclays are preparing to announce cuts as part of new remuneration policies that will be voted on at their next annual meetings.
Santander’s policy shift will be confirmed in its annual report early next year, but is not subject to a shareholder vote. Recent appointees including chief financial officer Duke Dayal and retail banking chief Susan Allen are already subject to the lower rate of allowance, according to people with knowledge of their pay.
Santander said: “We are supportive of The Investment Association guidelines around aligning executive pensions with the wider workforce. Our remuneration arrangements will be reported in the usual way in our annual report, published early next year.”
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