Lloyds defends CEO pay after investor anger at annual investor meeting

* UK's biggest retail bank criticised for CEO pension perks

* Cuts to CEO pay package not enough, lawmakers say

* 92% of investors voting at AGM back pay report

* Fresh shareholder questions on handling of HBOS fraud (Confirms final AGM vote result, clarifies number of fraud victims compensated)

By Iain Withers and Sinead Cruise

LONDON, May 16 (Reuters) - Lloyds Banking Group has defended the 6.3 million pound ($8.06 million) pay package awarded to chief executive Antonio Horta-Osorio, after criticism from politicians and investor trade bodies.

Horta-Osorio's pay in 2018 has drawn harsh commentary, with particular focus on the generous pension perks that eclipsed those on offer to Lloyds' broader workforce.

Addressing questions at the company's annual general meeting, Lloyds Chairman Norman Blackwell insisted executive awards were "fair" and justified given the bank's turnaround in recent years from the brink of insolvency to becoming one of Europe's most profitable lenders.

"Let me be clear - our view is we should and need to pay for performance," Blackwell said, adding of the bank's senior leadership team that "not many people would do the arduous hours and arduous tasks they do for free".

But one investor accused the bank's bosses of "living in a parallel universe" and said awards to bankers like Horta-Osorio - currently Britain's best paid banking boss - "totally distort the world in which we are living".

Despite the concerns raised, the remuneration report was backed by 92% of investors that cast their votes.

Investors also questioned the lender's handling of a major fraud at the bank's HBOS Reading branch, with at least two accusing Blackwell and fellow executives of lying about the scandal and calling for Blackwell to resign.

In a repeat from last year's event, British television personality Noel Edmonds posed a barrage of questions about the fraud in a heated, 10-minute exchange with the Lloyds chairman.

Edmonds alleges his former entertainment business collapsed as a result of the HBOS Reading fraud and has long threatened legal action against the bank.

"If you don't know how many police forces are investigating Lloyds Bank, then you clearly don't know the extent of the criminality in Lloyds Bank, do you?" Edmonds asked.

"You and many others can make allegations all over the place but criminality has to be proven," Blackwell responded. "There is no countenancing in this bank of any illegality or wrongdoing."

Blackwell said various inquiries into what went wrong were still ongoing and the bank would co-operate with any police investigation.

A Lloyds spokesman said 71 business customers of HBOS Reading had been offered compensation and 98% had accepted those offers.

PAY UNDER SCRUTINY

Horta-Osorio has already waived part of the bank's contributions to his pension pot this year, taking the annual payments to 33 percent of base salary from 46 percent previously.

But that is still more than double the 13 percent contribution made to the retirement pots of less senior Lloyds employees.

Barclays, Standard Chartered and Standard Life Aberdeen all had more sizeable investor rebellions against the pay of senior management in the past few years, although all ultimately secured a majority of shareholder support.

Increased shareholder scrutiny of pay comes as banks provide more disclosure on pay to comply with new reporting rules on company remuneration.

From next year, firms will be obliged to set out the ratio of CEO pay to a median UK employee, and those in the lowest and upper pay quartiles.

The top bosses of Britain's biggest banks were paid on average 120 times more than the median pay of their U.K. employees in 2018, bank filings showed.

At Lloyds, Horta-Osorio was paid 169 times as much as the bank's median paid employee, who earned 37,058 pounds a year.

Blackwell told investors that the bank was committed to narrowing the gap between its lowest paid workers and executives.

($1 = 0.7788 pounds) (Editing by Jane Merriman and Jan Harvey)