The world's biggest investor has warned companies it will fight oversized pay packets and undeserved pensions in the coming year, marking the latest challenge to how British boardrooms set pay.

Blackrock has written to the chairmen of London-listed businesses about its plan to vote against any big pay rises that are "out of line with the rest of the workforce" or the company's performance without a good reason.

"Executive pay should be strongly linked to performance, by which we mean strong and sustainable returns over the long-term, as opposed to short-term hikes in share prices," wrote Amra Balic, head of investment stewardship at Blackrock.

The company also drew attention to cash payments handed to directors instead of pension contributions, which can run into hundreds of thousands of pounds at a time when many businesses are cutting retirement schemes for employees.

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"We expect pension contributions for executives to be in line with the rest of the workforce for new contracts," it said.

The letter marks a major intervention in the thorny debate around executive pay. Blackrock is a big investor in almost every FTSE company and manages more than $5 trillion ($7 trillion) around the world.

Several major investment groups have also threatened to vote down remuneration plans that companies fail to justify, while Theresa May's government has recently published a paper on reforms to executive pay, including a rule that could force firms to reveal the gap between executive pay and the average company wage.

Balic warned at a parliamentary hearing in December that Blackrock would vote against the heads of remuneration committees "if we feel there is a disconnect between pay and performance".

The intervention also comes as British firms begin their fourth year of binding "say on pay" votes, which allow investors to reject remuneration plans. Around half of the FTSE 350 will face this vote at their next annual meeting.

Shareholders have only refused a handful of companies' pay plans since the rules changed, with most warding off rebellion in discussions before the vote. The engineering group Weir was forced back to the drawing board last April after 72 per cent of shareholders rejected its plan to give bosses share options that were not directly tied to how the company performed.

Blackrock has also urged companies to reveal whether they use outside consultants to help set their pay rules, and give explicit reasons for any larger-than-expected bonus awards.

The firm also drew attention to its dislike for "benchmarking", or tying an executive's pay to the amount awarded to similar bosses in the industry - a tactic that can lead to spiralling pay inflation.

"Benchmarking should only be used as a frame of reference for what competitors are paying, rather than as a starting point for negotiations," said Balic.