Pensions Gap Widens

The difference or “gap” in pension amounts between top bosses of big companies (specifically those in the FTSE 100, which is like a list of the UK’s 100 biggest public companies) and regular employees is getting wider.

The Numbers:

  1. Over the past year, these top bosses have added an average of £400,000 to their retirement pots, taking the average total up to £4.3 million.
  2. This means when these top bosses retire, they could get an annual pension of around £240,000 on average.
  3. To give a comparison, the biggest pension pot is owned by Sir Frank Chapman, the head of a gas company, and it’s worth a whopping £19.4 million! This could give him an annual retirement income of around £1 million.
  4. On the other side, the average pension for a regular employee from these companies is much lower, just £9,828.

How Does This Compare?

The study found that the pensions of these bosses are growing at a faster rate than the pensions of most employees. In fact, the average top boss’s pension is now 24.4 times bigger than the average employee’s pension.

What People Are Saying:

  • The TUC (a big workers’ union in the UK) says that this is unfair. While ordinary workers see their pensions staying the same or even being reduced, top bosses are getting even bigger pensions. This is especially striking because these top bosses already get massive salaries.
  • The National Association of Pension Funds, which looks out for pensions and retirement in the UK, is also worried. They say that while it’s expected for people with bigger salaries to have bigger pensions, the difference is becoming too big. They’re calling for companies to be more open about how they decide pensions, so that investors and the public can check if things are fair.

The Situation for Regular Workers:

Many ordinary workers have pensions that depend on how well the stock market does (these are called defined contribution or DC schemes). This is a bit like having a savings pot that grows or shrinks depending on how well businesses and properties are doing. Unfortunately, due to issues like the euro crisis and economic troubles in the UK and Europe, the stock market hasn’t been doing great. This means many workers haven’t seen their pension pots grow much.

The TUC highlights a sad fact here: two-thirds of regular workers in private companies don’t get any help from their employers for their pensions.

How Companies Contribute:

Companies, on average, gave £144,508 to these bosses’ pension pots. If you look at it as a percentage of the bosses’ salaries, companies gave about 22% of the salary amount just for pensions.

In comparison, for regular employees, companies only give an average of 6% of the employee’s salary towards their pensions. This 6% is even higher than the soon-to-be-introduced rule that requires companies to give at least a certain amount to all workers’ pensions.

In Simple Terms:

Think of it like this: Imagine two piggy banks – one for the top bosses and one for regular employees. Both piggy banks are for retirement savings. Over time, the bosses’ piggy bank is getting filled up much faster and with a lot more coins, while the regular employee’s piggy bank sees only a few coins now and then. Many people, including some big organizations, are saying this isn’t fair and that everyone should know how and why coins are being put into these piggy banks. They believe that if everyone knows the rules, it’ll be easier to make sure things are fair for everyone.


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