Report of the Board in relation to remuneration policy and practice
continued
10.2 Pension benefits
Details of each Executive Director’s pension and lump sum life assurance entitlement are as follows:
Table 2
| Normal retirement age | Pension as a % of final salary | Lump sum life assurance as a multiple of salary |
|
| Peter Cummings | 60 | 55 | 4 |
| Jo Dawson | 60 | 15 | 4 |
| Phil Hodkinson | 60 | 15 | 4 |
| Andy Hornby | 60 | 23 | 4 |
| Colin Matthew | 60 | 66 | 4 |
Notes to Table 2
Note 1:
Pension is generally based on retirement from service at normal retirement age (age 60) and is based on final salary. Pension and lump sum life assurance is provided from the HBOS Final Salary Pension Scheme (the ‘Scheme’) and otherwise from separate arrangements with the Group.
Note 2:
On death after retirement or after leaving service, a spouse’s or dependant’s pension may be payable. Children’s benefits may also be payable.
Executive Directors who have five years’ service as an Executive Director have a contractual right to retire at age 55 or above with a non-reduced pension and at age 50 or above (but below age 55) with a reduced pension.
Pension increases after retirement are a mixture of guaranteed and discretionary. Scheme provisions vary by individual; at best, the Scheme guarantees to increase pensions in line with the Retail Prices Index, subject to a maximum of 5% p.a. and a minimum of 3% p.a. (no minimum for pensionable service after 31 March 2004). There is an established policy of reviewing pensions on a discretionary basis taking account of increases in the Retail Prices Index. Allowance is made in transfer values on leaving in respect of the guaranteed and discretionary increases outlined above.
Note 3:
The pension entitlements of the Executive Directors included in the Scheme are set out in the table below:
Table 3
| Name (Age) | Accrued Pension at 31.12.06 | Increase in accrued pension during 2006 | Transfer Value | Increase in transer value less Director's contribution | |
| 31.12.05 | 31.12.06 | ||||
| £000 p.a. | £000 p.a. | £000 | £000 | £000 | |
| Sir James Crosby (50) | 572 | 19 [8] | 9,050 | 10,404 | 1,345 [131] |
| Peter Cummings (51) | 299 | 64 [55] | 3,265 | 5,208 | 1,943 [957] |
| Jo Dawson (44) | 67 | 18 [17] | 568 | 897 | 317 [211] |
| Benny Higgins (46) | - | - | - | - | - |
| Phil Hodkinson (48) | 91 | 14 [11] | 1,016 | 1,497 | 475 [172] |
| Andy Hornby (39) | 184 | 35 [30] | 1,236 | 2,019 | 776 [320] |
| Colin Matthew (56) | 375 | 38 [25] | 6,757 | 7,843 | 1,086 [523] |
Notes to Table 3:
Note 1:
The accrued pension at 31 December 2006 is the pension which the Director would have been entitled to receive based on his/her completed pensionable service, had he/she left on 31 December 2006, payable from normal retirement age (age 60) and subject to revaluation increases between leaving and retirement.
Note 2:
The increase in accrued pension is the accrued pension at 31 December 2006 less the accrued pension at 31 December 2005. The amount shown in square brackets is calculated on the basis of the disclosure methodology under the Listing Requirements of the UK Listing Authority.
Note 3:
The transfer values are based on the accrued pensions at 31 December 2005 and at 31 December 2006 and are calculated as at 31 December 2005 and 31 December 2006 respectively based on factors supplied by the actuaries, Watson Wyatt Limited. The transfer values are the notional lump sums which would have been paid to another pension scheme for the benefit of the Director had he/she left service at the respective dates. It is not possible for a transfer value to be paid directly to the Director personally. The amount shown in square brackets is calculated on the basis of the disclosure methodology under the Listing Requirements of the UK Listing Authority.
Note 4:
The Director’s contribution is the personal contribution required, if any, under the terms of the Scheme. The contributions for Sir James Crosby, Phil Hodkinson and Andy Hornby are aggregates of the personal contributions required under the terms of the Scheme, subject to the statutory limit, together with the amounts of salary they gave up as additional pension contributions as outlined in Note 6 to Table 1a. Members of the Scheme have the option to pay additional voluntary contributions; neither the contributions nor the resulting benefits are included in Table 3.
Note 5:
For Peter Cummings (appointed 1 January 2006) and Jo Dawson (appointed 1 May 2006) the opening accrued pensions and transfer values have been calculated at the relevant dates of appointment. For Sir James Crosby (retired 31 July 2006) the closing accrued pension and transfer value have been calculated at the relevant date of retirement.
Note 6:
For those members whose benefits were above the Lifetime Allowance at ‘A-Day’, there will be no further service accrual of benefits and no further Directors’ contributions. This applies to all Executive Directors (except Jo Dawson, until her benefits reach the Lifetime Allowance).
Where there is no further service accrual of pension, Executive Directors receive an annual non-pensionable cash allowance of 25% of salary, payable monthly, in lieu.
Note 7:
Benny Higgins is not included in the Scheme, and simply receives the cash allowance referred to in Note 6 above.
10.3 Share interests
The data in this Section covers all share interests of Directors and not those solely attributable to any shorter period of Directorship.
10.3.1 Shares
The beneficial interests of the Directors and their immediate families in the ordinary shares of the Group are set out below:
Table 4
| Number of shares at 31.12.06 | Number of shares at 31.12.05/ 01.01.06 or, if later, date of appointment | |
|---|---|---|
| Chairman | ||
| Dennis Stevenson | 267,794 | 301,006 |
| Executive Directors | ||
| Peter Cummings | 88,791 | 71,097 |
| Jo Dawson | 52,485 | 51,655 |
| Benny Higgins | 311 | - |
| Phil Hodkinson | 263,094 | 207,648 |
| Andy Hornby | 535,379 | 496,780 |
| Colin Matthew | 356,930 | 213,445 |
| Non-executive Directors | ||
| Charles Dunstone | 100,000 | 100,000 |
| Sir Ron Garrick | 23,980 | 23,268 |
| Anthony Hobson | 7,500 | 6,500 |
| Sir Brian Ivory | 7,000 | 7,000 |
| Karen Jones | 10,000 | - |
| Coline McConville | 5,320 | 5,320 |
| Kate Nealon | 12,879 | 12,879 |
| David Shearer | 10,000 | 10,000 |
Notes to Table 4
Note 1:
Sir Brian Ivory has a non-beneficial interest over 4,500 ordinary shares (2005 - 4,500).
Note 2:
Certain Executive Directors and former Executive Directors will or may receive further interests in the ordinary shares of the Group arising out of the short term incentive plans and the long term incentive plans as set out in Tables 5a, 5b, 6a, 6b, 7, 8 and 9.
Note 3:
As at 27 February 2007, the date of approval of this Annual Report and Accounts, Karen Jones holds an interest in £200,000 4.875% HBOS Treasury Services plc Notes due December 2007. Otherwise, no Director had any interest in the preference shares of the Group or in the loan or share capital of any Group undertaking at the beginning or during or at the end of the financial year. No options to subscribe for shares in other Group companies are granted to Directors of the Group.
Note 4:
There has been no change in the share interests as set out in the table between the end of the financial year and 27 February 2007, the date of approval of this Annual Report and Accounts, other than as set out in Notes 4 and 5 to Table 8.
