CHARLES THOMSON, chief executive of Equitable Life, is to receive a pay package of almost £1 million if he stays with the mutual until the end of the year, despite presiding over a series of punishing reductions in members’ incomes.

Policyholders described the move as “over-rewarding failure”. Mr Thomson’s earnings will rank alongside those of the chief executives of Britain’s best-performing insurers.

Paul Braithwaite, general secretary of the Equitable Members Action Group (Emag), said: “It’s obscene, relative to the penury inflicted upon policyholders via a death by 1,000 cuts,” Details of the package emerged as the mutual pursued a £3.75 million negligence claim against its former directors and auditors. The case, which started on Monday, is expected to continue until Christmas.

Equitable’s accounts for the year to December 31, showed that the chief executive earned a total package of £659,813 last year, up 30 per cent from 2003.

But this year Mr Thomson will be eligible for three years’ worth of retention bonuses which, on top of his basic salary, discretionary annual bonus, benefits and a one-off payment for remaining with Equitable, will push his package to £903,846. It is likely that he will receive an increase in basic salary, which will boost his pay to almost £1 million.

A spokesman for Equitable Life said: “Charles’s overall package is set by an independent team of non-executive directors and the board takes independent advice in setting the annual package.

“He has one of the toughest jobs in UK financial services and the society is fortunate to have a chief executive of his calibre at the helm.”

The spokesman said that the £68,750 annual retention bonuses, due to be paid for 2003, 2004 and 2005, were needed to secure Mr Thomson’s “continuing commitment through a turbulent time”.

Another bonus of £75,000 will be paid if he stays until December 31. He will also be paid a basic salary of £409,325, benefits of £104,000 and a discretionary bonus of £184,196.

Last year Jonathan Bloomer, the recently ousted chief executive of Prudential, was paid £1.12 million, up just £10,000 on 2003, while David Prosser, chief executive of Legal & General, received £1.4 million, a 16per cent increase on the year before. Vanni Treves, chairman of Equitable, was paid £132,000 last year, up from £125,000 the previous year.

This month Mr Thomson said 2004 bonuses for with-profits policyholders would rise to 3.5 per cent, from 2 per cent, while life policy bonuses would increase from 1.5 per cent to 2.8 per cent. The chief executive said that policy surrenders had halved last year to £835 million.

In recent years, Equitable Life annuitants have seen their incomes drop 40 per cent and face the prospect of more cuts.

• Egg, the internet bank, awarded its directors extra bonuses last year to encourage them to stay while Prudential, its majority shareholder, tried to sell it. Paul Gratton, the bank’s chief executive received a retention bonus of £200,000, bringing his total package for last year to £897,000, according to Egg’s annual report.

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