Leader - V-cs, please give generously

When pension pots are full, generosity would fit the zeitgeist better than salary top-ups

March 28, 2013

Economic recovery sometimes seems like a mirage shimmering on the horizon, always tantalisingly out of reach regardless of the effort spent to haul it in.

The impression was reinforced by last week’s Budget, which held little promise of a let-up in the economic slump.

At such a time, the question of executive pay is as sensitive as ever, and this week we shine a light - as we do every year - on the sums received by vice-chancellors.

As always, remuneration packages varied significantly in 2011-12: the biggest was £424,000 (for Andrew Hamilton at the University of Oxford) and the average £247,428, including pension and benefits.

Across the sector as a whole, total packages rose by 0.49 per cent, a smaller increase than the 1.1 per cent last year and roughly comparable to the 0.5 per cent rise awarded to all staff.

That restraint is to be applauded although, as with all averages, the figure smooths out the peaks and troughs. The devil is in the detail, and there are individual stories and wider trends that risk at least giving the impression that all are not “in it together”. The individual cases must be assessed on their own merits (or otherwise), and remuneration committees and beneficiaries will no doubt have explanations and justifications.

However, the trend that may give the impression there is one rule for those at the top and another for everyone else is the “switching” that has gone on between pay and pensions.

It still seems likely that those in less elevated positions will feel that executives are being given special consideration

This followed cuts to pension tax relief in 2011-12, which meant that the total amount an individual could pay into a pension while still claiming tax relief fell from £1.8 million to £1.5 million, along with a cut in the annual allowance from £250,000 to £50,000.

The result was that a number of vice-chancellors had “maxed out” their allowance, which led several remuneration committees to alter the balance of packages by increasing salaries and reducing pension contributions. While overall packages have risen by 0.49 per cent, average salary excluding pension has gone up 2.7 per cent.

Those involved may well ask why this is a problem: there is no question of financial impropriety, and the practice is not increasing the financial outlay by universities.

It’s also difficult to argue with the logic on an individual level - why breach pension caps and pass a greater proportion of your university’s salary bill straight to the taxman?

But it still seems likely that those in less elevated positions will feel that executives are being given special consideration, and - more dangerous - that the Treasury, which is known to consider universities to be flush with cash, may also take a dim view.

An alternative might have been for remuneration committees or individuals to use money that could no longer be sensibly put into pension pots for something else entirely.

Another strategy (which some may well have done) could be to donate the extra cash to the university - such generosity is increasingly expected of vice-chancellors as chief fundraisers.

It is not possible to demand selfless behaviour but such gestures would be appreciated by lower-paid staff, a Treasury still deciding where to cut and, perhaps, alumni and a public on whose support universities will rely for future funding.


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