October 16, 2025
The Bank of England’s Prudential Regulation Authority (PRA) will halve the deferral period for senior bankers’ bonuses—from eight years to four—and allow pro-rata vesting, a move aimed at boosting Britain’s financial sector competitiveness.
London, October 15, 2025 — The Bank of England (BoE) has announced a significant reform to banker remuneration rules, cutting the deferral period for senior executives’ bonuses from eight years to four. The changes, approved by the BoE’s Prudential Regulation Authority (PRA), will also permit pro-rata vesting of bonus components from the moment they are awarded rather than forcing all of them to be deferred. Reuters
Under the new rules, effective October 16, 2025, portions of bonuses will begin vesting immediately on a pro rata basis, meaning that as time passes, more of the bonus becomes claimable. The deferral requirement will now only apply to the outstanding portion until the full four-year period is served. Reuters
Historically, deferral rules were tightened after the 2007–2009 financial crisis to discourage short-term risk taking. Bonuses were often committed years in advance, with regulators using the deferral period as a window to claw back pay in case of misconduct. Reuters+1
However, critics have long argued that the UK’s eight-year deferral made it less competitive compared to other financial centres, where deferral periods typically range from three to five years. This reform is framed as part of a broader push to enhance the City of London’s attractiveness to global talent. Financial Times+1
Industry competitiveness: The shorter deferral could help the UK better compete with financial hubs abroad by reducing time lag in pay realization. Financial Times
Risk & oversight balance: Regulators emphasize that they will maintain robust oversight and still retain the ability to claw back bonuses if misconduct is later discovered. Financial Times+2Reuters+2
Structural change in pay mix: Some of the bonus rules around how much is paid in cash vs. shares will be relaxed, giving firms more flexibility in structuring remuneration. Financial Times+1
Affected population: These changes will apply both to forthcoming bonus awards and to existing bonus entitlements that have not yet fully vested. Reuters
This reform takes place amid pressures on the UK economy—rising borrowing costs, a need to attract and retain financial sector talent post-Brexit, and global competition in financial services. Adjusting bonus deferral regimes is seen as a symbolic and practical step toward regulatory modernization. Financial Times+1
Still, the change is not without risks: critics warn that shortening deferrals could reignite concerns about excessive risk-taking if oversight is not strengthened concurrently. Regulators will likely monitor the effects closely in coming cycles.
