Last year, the Bank of England paid about £520,000 to Mervyn King: a salary of £290,653 and pension contributions of about £230,000. This year, King isn’t eligible for pension contributions, since he’s 60 years old now and that’s the age at which the pension scheme deems that a person has retired. But luckily for him, this is also the year that the recommendations of a review of Bank of England salaries are being put into effect. And according to that review,
the Governor should be paid more, between £375,000 and £400,000, but receive less pension benefits.
Given that King is no longer eligible for pension benefits, that nominal pay rise constitutes, for him and his pension fund, a pay cut of about £130,000. But King has also said that accepting the salary rise would be "inappropriate". Which means he’s just taking his standard 2.5% wage increase, bringing his pay this year to about £298,000: his effective pay cut is over 40%.
Of course, the real money comes not now, but later, after he retires. That’s when he can start accepting lucrative consultancies and non-executive directorships which will make his present pay look positively puny. His decision to forego a £110,000 pay rise for this year, we can be sure, will have no effect on his standard of living whatsoever. In other words, the upside is significant – he gets lots of good press from the decision – while the downside, in practice, is small indeed.