Remuneration for employees below board.

General remuneration policy

The Group’s remuneration policy is applied broadly consistently for all employees and, in line with our remuneration principles, is designed to support recruitment, motivation and retention as well as to reward high performance in a framework of approved risk management. Remuneration is considered within the overall context of the Group’s sector and the markets in which the divisions operate. The policy for the majority of employees continues to be to pay around the relevant mid-market range with a competitive package designed to align the interests of employees with those of shareholders, and with an appropriate proportion of total remuneration dependent upon performance.

We define core remuneration as base salary, annual bonus that is closely aligned to performance and other benefits such as pension. There is also a Long Term Incentive Plan that currently measures TSR.

Summary of remuneration structure for employees below Board

Element

Current situation

Any changes

BASE SALARY

We aim to attract and retain key employees by paying salaries which deliver competitive total remuneration, taking into account market pay levels at companies of similar size, scale and scope as well as overall business performance. A key factor is also the ability, experience and performance of the individual.

There is no change to this approach.

For 2013, base salary budgets have been set at 2.5% for all management and staff employees below Board, including LGIM. However, this does not mean a flat increase for everyone. Increases to base salary are in line with position in base salary band and other criteria.

ANNUAL BONUS

The majority of employees have a discretionary bonus scheme based on individual performance against objectives. For the management populations and above, 35% of this bonus is deferred into shares.

There are some bespoke bonus schemes, where business appropriate, but the Remuneration Committee has ultimate discretion over all bonus plans.

Separate plans operate within LGIM consistent with industry practice.

For 2013, ‘annual bonus’ will be referred to as ‘Annual Variable Pay’ (AVP). In the past, deferral has extended to management grade employees which included junior management. Any bonus awarded of £5,000 or above was subject to 35% deferral and therefore deferral extended widely throughout the Company and to an inappropriate level when considering risk. Therefore, deferral has been adjusted and for any discretionary bonus awarded in relation to 2012, progressive deferral will follow the table below. This ensures that deferral is proportionate to the level of responsibility of the employee and allows a higher deferral as bonuses increase.

 

 

Bonus (£000s)

Deferral of portion

 

 

0-25

0%

 

 

25-50

25%

 

 

50-75

35%

 

 

75-100

45%

 

 

100-200

50%

 

 

>200

60%

 

 

The above will exclude LGIM employees where deferral for discretionary bonus is currently set at 25%. This will be reviewed during 2013.

The Company reserves the right to adjust deferral levels for Code staff as deemed appropriate.

PERFORMANCE SHARE PLAN (PSP)

The PSP has been awarded to approximately 30 employees, mainly comprising the Leadership Group.

Where appropriate, grants under the PSP may also be made for new employees who join the Company during the year in key roles.

Participation in the PSP has been extended in the 2013 grant to include other employees in key roles as well as the Leadership Group. This includes employees in LGIM whose roles cross business divisions and whose participation encourages synergy and teamwork across the Company.
Participation in the plan for one year does not guarantee participation in future years.

PENSION

All employees are given opportunity to participate in a Group pension scheme.

No change.

SHAREHOLDING REQUIREMENTS

The Leadership Group is asked to build up a voluntary shareholding of 50% of base salary.

No change.