Our Remuneration Policy
Longer Term Incentives
Longer Term Incentive Policy and Practice
In 2008/10 there are two elements to the long term incentive plan.
Participants in the first element can opt to invest their incentive from both the core and the extended short term incentive plans, retain those shares for three years and remain in the employment of the Group (or rank as a qualifying leaver) during that three year period. The number of shares ultimately released depends on the Group’s annualised growth in EPS in excess of the retail prices index. If that real growth is 0% p.a. (or below) no shares are added to the investment and the participant simply gets the shares which his or her own incentive purchased. If that real growth is 6% p.a. (or above) 200% (250% in the case of the Chief Executive) of shares are added to the investment over and above the shares which the participant’s own incentive purchased. Intermediate positions are determined by interpolation.
There is no equivalent plan for the Chairman.
Participants in the second element are granted conditional shares shortly after the start of the financial year equal to the number of shares secured by a percentage of the participant’s salary. For awards in 2008 for Executive Directors the grant level is based on 133.33% of salary. The number of shares actually released to participants under the plan is dependent on the Group’s annualised total shareholder return (‘TSR’) over 2008/10, compared to the annualised weighted average TSR of a basket of comparator companies from the banking and insurance sectors. No shares are released for relative TSR performance at 0% p.a. (or below). A maximum of 200% of the shares is released for relative TSR performance at 3% p.a. (or above). Intermediate positions are determined by interpolation.
There is an equivalent plan for the Chairman based on a grant level of 100% of fee.
The first element of the long term incentive plan is new and first matured at the end of 2007.
For the 2005/07 plan, the Group’s annualised growth in EPS in excess of the retail prices index was 5.71% p.a. As a result, under the plan, qualifying Executive Directors in place throughout the three year period, who originally opted to invest their short term incentive outcome in the plan at the start of 2005, received a 65.06% share addition to their investment over and above the shares which the participant’s own incentive purchased.
The second element of the long term incentive plan has been in place for a number of years.
For the 2005/07 plan, the performance of the Group fell short of the weighted average of the comparator group in terms of TSR. As a result, under the plan, qualifying Executive Directors in place throughout the three year period, together with the Chairman, received no releases of share grants made to them in 2005, after the three year performance period.