Current policy.

The following table sets out our current policy.

BASE SALARY

To help recruit and retain key employees.

To pay at around the mid-market range relative to the FTSE 100, with particular regard to other relevant financial institutions. Regard is given to individual skills and experience.

In specific circumstances (for example, a new appointment) we may set salaries below mid-market range, with a view to reaching mid-market range within two to three years provided the individual has progressed into the role.

Increases in base salary for executive directors broadly follow the base salary budgets for the rest of the organisation.

Normally reviewed by the Committee annually and fixed for the 12 months commencing 1 March, and paid in cash.

PENSION AND BENEFITS

The policy aims to provide competitive post-retirement benefits and reward sustained contribution.

Salary is the only element of pensionable remuneration.

From 2009, increases in pensionable base salary for the defined benefit pension plan have been limited to a maximum of 2.5% each year.

New executive directors receive 15% of base salary into the defined contribution pension plan (they contribute 5%).

Cash alternative in line with the defined contribution levels for executive directors opting for fixed protection above the lifetime allowance or for benefits in excess of the £50,000 annual limit. For executive directors who took enhanced protection in 2006, they are given a cash contribution of 22% of base salary. All cash contributions are subject to normal payroll deductions of income tax and National Insurance.

Normal benefits available to senior managers including car allowance and medical insurance. Legal & General products can be acquired by executive directors on the terms available to other members of staff.

Executive directors are entitled to participate on the same terms as all UK employees in the Savings-Related Share Option Scheme and the Employee Share Plan, both of which are approved by HMRC.

There is no compensation for public policy or tax changes.

ANNUAL BONUS

PURPOSE AND LINK TO STRATEGY

Incentivise executives to achieve specific financial, strategic and personal predetermined goals during a one-year period. Reward ongoing stewardship and contribution to core values. Deferred proportion of bonus, awarded in shares, provides a retention element, alignment with shareholders and the ability to claw back.

OPPORTUNITY

Maximum bonus potential set by reference to market comparators (currently 125% of base salary (175% for CEO LGIM)). On-target bonus of 75% of base salary (60% of maximum of 125% of base salary) for all executive directors excluding CEO LGIM. (CEO LGIM on target is 60% of maximum i.e. 105% of base salary).

PERFORMANCE

In setting bonus targets, the Committee seeks to link targets to areas of the business in which the executive has particular influence and responsibility, while also seeking to maintain a team ethos. All executive directors have objectives related to Group Key Performance Indicators (KPIs), plus individual (where relevant) divisional and strategic targets. The objectives also embrace the importance of customer care, employee engagement and Company culture and values.

Executive directors’ bonus targets were weighted as follows for 2012:

 

Name

Group KPIs

Other financial targets

Other strategic targets

 

Tim Breedon

50%

20%

30%

 

Nigel Wilson

50%

20%

30%

 

John Pollock

40%

30%

30%

 

Mark Gregory

40%

30%

30%

 

Mark Zinkula

20%

40%

40%

 

The targets for 2012 are broadly outlined below:

Group Key Performance Indicators (KPIs)
Common to all executive directors.
The TSR KPI is addressed through the PSP.

Other financial targets

  • Key divisional metrics.
  • Managing capital requirements.


Other strategic targets

  • Building a diversified business.
  • Delivering a positive customer experience.
  • Building a high expectation culture.
  • Risk management.
  • Improving products and services.

OPERATION

Bonus result is determined by the Committee after the year end, based on performance against targets. The Committee has both upwards and downwards discretion to adjust the overall bonus award but may not exceed the maximum potential. Normally, 62.5% of the bonus is paid in cash and 37.5% is paid in deferred shares or nil cost options, subject to continued employment, under the SBP to be held for three years. The deferred element may be subject to forfeiture if the performance which led to a bonus being paid is found to be incorrect or in the event of personal misconduct. As the shares have been earned prior to award, any dividends occurring on these shares are paid to the executives during the vesting period. If the executive has chosen nil cost options no dividends are paid until exercise post vesting. The value of the shares awarded to directors is reported in the year of performance and shown in the directors’ remuneration table.

PERFORMANCE SHARE PLAN (PSP)

PURPOSE AND LINK TO STRATEGY

Incentivise executives to achieve superior returns to shareholders.

Align interests of executives and shareholders through building a shareholding.

Retain key executives over a three-year performance period.

OPPORTUNITY

Executive directors receive annual grants of up to 200% of base salary. The award is made in nil cost options.

PERFORMANCE

TSR was chosen to align outcomes with shareholder interests. The number of shares that vest is dependent on Legal & General’s relative TSR performance over a three-year period as follows:

 

Legal & General’s TSR relative to the comparator group

% of award which vests

 

Below median

0%

 

Median (threshold)

25%

 

Between median and 20th percentile

25%–100%

 

20th percentile or above

100%

 

Vesting condition for half of the award measures the Group’s TSR versus the FTSE 100. Vesting condition for the other half measures TSR versus the insurance constituents in the FTSEurofirst 300 plus any FTSE 350 Life Insurance companies not in the FTSEurofirst 300. The constituents for this group are determined at the date of grant.

The two conditions are measured independently. Performance against TSR conditions is independently reviewed by the advisers to the Committee.

The Remuneration Committee will also assess whether the TSR out-turn is reflective of the underlying financial performance of the Company and may scale back vesting if deemed appropriate. The Committee has discretion only to reduce the level of award and may not increase it. The parameters which the Committee uses in making this assessment include, but are not limited to, market share, partnerships entered into and maintained, cost constraint, capital management, risk and shareholder perception.

Any award vesting may be exercised at the end of the three-year performance period or at any time (excepting close periods) during the two-year period following vesting.

OPERATION

The Committee reviews the quantum of awards made each year to ensure that it is in line with the market.

When making awards, the Committee will also consider wider factors such as Company performance in determining whether to grant at the normal policy level.

The PSP was approved by shareholders in 2004.

SHARE OWNERSHIP GUIDELINES

PURPOSE AND LINK TO STRATEGY

To align the interests of executive directors and shareholders.

OPERATION

The Group Chief Executive is required to build and maintain a shareholding of 200% of base salary and, for other executive directors, 100% of base salary.

Executives are expected to build a shareholding through the vesting of shares under the Group’s share incentive plans. Existing shareholdings and shares acquired in the market are also taken into account.

Although share ownership guidelines are not contractually binding, the Committee retains the discretion to withhold future grants under the PSP if executives do not comply with the guidelines.

The table below shows the relative split of base salary, bonus and PSP for executive directors at target and stretch performance in line with the current policy and for 2013.

Current pay mix

For all executive directors other than CEO, LGIM
(Nigel Wilson, John Pollock, Mark Gregory)

Current pay mix – For all executive directors other than CEO, LGIM [Maximum: Salary 24%, Annual bonus 29%, PSP 47%]; [Target/Threshold: Salary 45%, Annual bonus 33%, PSP 22%] (bar chart)

Read a textual description of the above chart

For CEO, LGIM
(Mark Zinkula)
 

Current pay mix – For CEO, LGIM [Maximum: Salary 21%, Annual bonus 37%, PSP 42%]; [Target/Threshold: Salary 39%, Annual bonus 41%, PSP 20%] (bar chart)

Read a textual description of the above chart

See Policy section on annual bonus and PSP for target and maximum details.