Insurance chiefs receive ?1m pension boost

The bosses of two insurers slammed by MPs for accepting bumper pay rises each saw the value of their pension pots surge by well over £1m last year, it was revealed yesterday.

Richard Harvey, chief executive of Aviva, which trades as Norwich Union, has amassed a pension pot worth £5.6m, according to his company's an nual report. But even that is dwarfed by the £8.2m fund which Legal & General's chief executive, David Prosser, is now sitting on.

The pension top-ups were on top of the £1m-plus salary packages that the two men pocketed in 2003.

News of the pair's good fortune comes just weeks after both men, along with three other insurance chiefs, were lambasted by MPs for enjoying large pay rises at a time when millions of homeowners holding their policies were facing shortfalls on their mortgage endowments. Many people holding the companies' with-profits pension plans have also been hit hard.

At a Treasury select committee hearing, Mr Harvey and Mr Prosser were told that increases in salary of 45% and 56% respectively between 1999 and 2002 were "way out of line" when their policyholders were suffering as a result of deep cuts to policy bonuses and final payouts.

Mr Harvey saw the value of his pension pot boosted to the tune of almost £1.1m last year, lifting it from £4.5m to £5.6m. This means he would receive an annual pension for life of £452,000 when he retires.

He also picked up a £1.1m pay and benefits package last year, which included a basic salary of £718,000 and bonuses of £312,000, which the company said "reflects the outperformance of the Aviva group in 2003".

Mr Prosser, meanwhile, bagged a £1.6m top-up to his retirement nest egg, according to his company's annual report. This was in addition to his total pay, which came in at £1.23m, down slightly on the £1.35m he earned in 2002.

Aviva last month revealed operating profits of £1.91bn after a year in which it took action to cut costs and improve margins. Earlier this year the company said it was shutting down its Hill House Hammond high street insurance broking business, with the loss of 1,600 jobs, and it is also transferring work to India. Legal & General last month reported profits up 9% to £759m and gave an optimistic forecast for the life insurance and savings industry this year.

In the Budget last week, Gordon Brown announced a new £1.5m "lifetime limit" for pension savings. This is the maximum someone will be able to save in a pension while enjoying tax relief.