Directors’ Report on Remuneration 47
Remuneration policy for executive remuneration package and is designed so that
directors we are in line with FSA’s guidelines on deferred
The remuneration of our executive directors remuneration. Whilst the Society does not fall
comprises salary, an annual performance bonus, within the scope of these regulations, it seeks to
participation in LTIP with returns based on group adopt these principles as a matter of best practice.
performance, together with a contributory pension
and other benefits. Bonus and incentive schemes In general, the committee will ensure that at least
are designed to provide a strong alignment of 40% of the variable remuneration paid to any
interest between the individual and the members of senior employee (including executive directors) is
the Society. Our executive directors are subject to a delivered in long-term pay. If this ratio is not met,
notice period of 12 months. then a portion of the annual bonus payment for
that year will be deferred. For employees whose
Salary variable remuneration is £500,000 or more, the
Salaries are set taking account of several factors requirement will be that 60% be in long-term pay.
including individual experience, responsibilities,
function and sector, along with individual and Any amount deferred will be paid in equal parts over
company performance; they are reviewed (but the following three years. During the deferral period,
not necessarily increased) each year. In order to the value of deferred amounts will be tied to the
provide an external context, the committee reviews value of the with-profits fund, thereby creating a link
a range of benchmarking information on pay levels to ongoing performance.
in organisations of comparable size and complexity
to LV=. Long term incentive plan (LTIP)
The Society operates a long-term incentive plan
Group annual performance bonus (LTIP) for senior employees, which is designed to
Executive directors are eligible to receive an annual ensure alignment between reward and the long-
non-pensionable performance bonus if they achieve term interests of our members. Each LTIP scheme
a number of challenging financial, business and runs for a three year period, with a new scheme
personal objectives. These are all linked to the commencing on 1 January each year.
achievement of our strategic objectives.
It is the role of the committee to approve the
For the executive directors, the scheme for 2012 structure of each year’s LTIP, ensuring that it is
Statements and Reviews
could pay a maximum of 80% of salary (110% in the appropriately designed so as to provide appropriate
case of the chief executive). The maximum payment incentives to individuals to contribute towards the
could only be achieved in the case of exceptional achievement of the Society’s objectives and, at the
individual performance and significant divisional maturity of each scheme, to ensure that outcomes
out-performance. have not been inappropriately influenced by taking
risks outside the corporate risk appetite.
Our annual performance bonus scheme rewards
other employees in the same way on the basis The LTIP is designed to ensure it rewards
of group results, divisional results and personal performance in a manner closely aligned to
Our Businesses
contribution. A performance plan is agreed with members’ interests. This means payment reflects
each executive for the performance year using our medium and long-term targets to grow
a balanced scorecard approach, comprising the Enterprise Value, which is our estimate of the
following goals: market value of the group and is the benchmark
l strategic and financial by which we measure our long-term performance.
l customer and member For the purposes of the LTIP, the Enterprise Value
l risk and compliance of the group is assessed with reference to clearly
l people. defined valuation bases. These valuation bases are
Risk Management
reviewed every three years by independent advisers.
Risk is taken into account when appraising all For any LTIP payments to be made, Enterprise
performance measures and the committee may Value must grow at a minimum stipulated annual
reduce or cancel any bonus payment if it considers growth rate over each year of the scheme, taking
that risk exceeded acceptable levels. Progress and into account the nature of the risks which the group
achievements are monitored at the half year point undertakes. Payments are made after review and
and at the end of the year via a formal performance approved by the Remuneration Committee.
Corporate Governance
development review. In the case of the CEO this is
conducted by the chairman of the board with input Membership of the LTIP is by invitation of the board
from the non-executive directors. and restricted to those few individuals who, by their
roles and position within the group, are best placed
Bonus deferral to influence or directly contribute to our longer-term
From 2013 onwards (i.e. the annual bonus paid growth. Individuals are granted an amount (‘the
in respect of 2012 performance), part of an award’) at the date of joining the scheme, which
executive’s annual bonus may be required to is calculated as a percentage of their salary (up
be deferred. How much deferral is required is to a maximum of 100% in the case of the group
determined by the overall balance of the total chief executive).
Our Accounts