2023 Investment Firm Prudential Regime (“IFPR”) Remuneration Disclosure
The following disclosures are made in accordance with the FCA Prudential Sourcebook for Investment Firms chapter 8 (“MIFIDPRU 8”) in respect of the following non-SNI MIFIDPRU investment firms within Royal London Mutual Insurance Society and it’s subsidiaries (“the Group”), which are subject to the ‘standard’ remuneration requirements:
- Royal London Asset Management Limited (RLAM) and
- Royal London Savings Limited (RLS)
The remuneration disclosure is based on the financial year ending 31 December 2023. This information is updated on an annual basis.
Remuneration decision-making
The Group has a Remuneration Committee (‘Committee’) consisting of Non-Executive Directors advised by independent remuneration consultants. The Committee has overall responsibility for the remuneration policy across the Group companies. The Committee’s primary role is to ensure that the Group’s pay structures are in line with the remuneration policy aims. The Committee’s Terms of Reference are available on the Royal London website [1].
The Committee receives regular updates from the Group Chief Risk Officer, including an annual report that details how effective Royal London and its subsidiaries have been in managing risk within the Group’s risk profile.
The Committee receives independent remuneration advice on any matters they deem necessary. In 2023, the Committee was advised by Deloitte LLP, primarily in relation to executive director and senior management remuneration, variable remuneration, the remuneration policy and trends in the external market including legislative and regulatory developments.
Link between pay and performance
The Group’s incentives are designed to reward colleagues for their performance and contribution to the success of their business unit and the Group.
In determining Short Term Incentive Plan (STIP) awards there are three factors which impact the overall level awarded:
- Royal London Group performance – how well the Group performs against the Group Scorecard will determine the overall STIP funding available and is based on a mix of financial and non-financial measures;
- Business unit/function performance – how well the business unit or function performs will determine what share of the STIP funding the business unit or function receives. RLAM has a separate scorecard to assess performance across the year and measures include financial (profit, revenue and investment performance) and non-financial (people, assurance, customer). In addition, Control Functions have separate scorecards independent from the Group; and
- Personal performance – each colleague is awarded an ‘On-Track’ or ‘Off-Track’ performance rating which reflects their performance and overall contribution to the success of the business and informs their STIP awards. Individual performance is assessed against a range of measures depending on the nature of the role, these include fund performance, sales and behaviours.
A description of the STIP and Long Term Incentive Plan (LTIP), including the financial and non-financial measures in the scorecards, is included in the Royal London Annual Report and Accounts [2].
Remuneration structure
All colleagues are remunerated with fixed pay (salary, pension, and benefits) and variable payments (STIP and LTIP as appropriate), which may be a greater proportion of total reward than fixed salary.
All variable amounts are distributed as cash, apart from awards deferred under the STIP and the LTIP where awards are invested in and converted into units within an RLAM Fund.
Colleagues in certain roles are eligible to participate in incentives that differ from the STIP or LTIP. In sales-focussed roles across the Group there are Sales Incentive Plans that determine the variable award, based on a balanced scorecard. All incentives in Royal London are reviewed annually and are capped in line with the Group Remuneration Policy.
The structure of the remuneration packages for Material Risk Takers and Identified Staff is designed to be in line with the Group’s business strategy, take account of any conflicts of interest and the existing and future capital requirements of the business. The Group’s incentives are designed so they do not encourage excessive risk taking. Further information on incentives is contained in the Royal London Annual Report and Accounts [2].
Risk/Performance adjustments
The Group operates a risk adjustment process. Risk adjustment is any downward adjustment (collective or individual) made to variable remuneration. This includes both the STIP and LTIP along with any other variable remuneration arrangement that may operate from time to time.
There are two types of risk adjustment:
1. Ex-ante risk adjustment
The Group identifies its key current and future risks (which include an assessment of the Group’s position against the following risk appetite categories – Insurance, Capital, Liquidity, Conduct, Legal & Regulatory, Financial Crime, Third-party, Change Management, Operational Resilience, Information Security, Information Technology, Processing and People), monitors and measures them, and uses this assessment to determine whether an adjustment to the STIP pool is required to account for year-on-year changes in risk taken (i.e. where the level of risk taken has materially increased for a certain level of performance achieved, a downwards adjustment would be applied).
Ex-ante adjustments would be made collectively (at a Group wide, business unit or functional level) and based on forecast risks.
2. Ex-post risk adjustment
Ex-post adjustments may be collective (Group wide, business unit or function level) or individual adjustments.
Risk events and issues are identified and monitored continuously by the Group Risk & Compliance and Group Internal Audit functions. This information is collated and used to assess whether a collective or individual adjustment is appropriate based on the issues or events identified throughout the year.
In addition, all of incentive plans contain malus and clawback provisions which enable the Committee to impose further conditions on any variable remuneration opportunity and/or award; or reduce (including to nil) any variable remuneration award (including unvested deferred awards) at any time before the end of the recovery period which is three years (under the STIP) or five years (under the LTIP) from the date of award.
Guaranteed Variable Remuneration
The remuneration policy includes provisions related to guaranteed variable remuneration.
Buyout awards are used, where appropriate, to aid the recruitment of talented individuals by ensuring that they suffer no financial loss as a result of commencing employment with the Group.
They are designed to compensate for the loss of existing awards that will be forfeited on joining the Group and replicate the terms of the awards forgone by the colleague but will be linked to Group performance. At the point a buyout award is put in place, the value of any award should be no more favourable in terms of value or conditions than the award being forfeited.
Guaranteed variable remuneration awards are only permitted in exceptional circumstances, where the capital position of the Group is strong, for one year only.
Severance Pay
Colleagues who leave the Group will be entitled to any contractual payments in line with best practice and any contractual arrangements.
Any severance payments made to colleagues leaving the Group will seek to minimise the cost to the Group, meet the necessary regulatory and legislative requirements and must not reward failure or misconduct.
The following illustrative criteria may be considered for the purposes of determining the amount of a severance payment (but not limited to):
- The reasons for the early cessation of employment;
- The length of an individual’s service with the Group;
- The seniority of the individual’s role within the Group; and
- The potential costs of legal fees and settlement costs of any actual dispute.
Quantitative remuneration disclosures
In 2023, 81 individuals were designated as ‘Identified Staff’ for the Group entities highlighted above.
Identified Staff are determined by reference to the criteria set out in the FCA’s MIFIDPRU Remuneration Code on Material Risk Taker identification.
Identified Staff include Non-Executive Directors, Executive Directors, and members of Committees with oversight of the activities of these firms, senior management and control functions heads and those individuals whose professional activities have a material impact on the firm's risk profile.
In addition to the regulatory categories, The Group also considers the following additional firm-wide criteria including those who pose a material conduct and reputational risk to the firm based on risk taking authority and decision-making responsibility. The Remuneration Committee approves remuneration outcomes for all identified staff annually, to ensure it remains within the risk profiles for each of the respective entities.
In respect of the financial year ending 31 December 2023, total aggregate remuneration [3] of £110.45m was paid to colleagues of these entities. The total aggregate remuneration split between Senior Management [4], Identified Staff and All Staff is illustrated in the table below.
| RLAM | RLS | |||||||
| Senior Management | Other Identified Staff | Other Staff | Total Staff | Senior Management | Other Identified Staff | Other Staff | Total Staff | |
| Fixed remuneration (£) | £4.16m | £9.95m | £41.88m | £55.99m | £2.29m | £0.47m | £2.08m | £4.85m |
| Variable remuneration (£) | £6.21m | £20.61m | £18.75m | £45.57m | £2.89m | £0.23m | £0.93m | £4.05m |
| Total remuneration (£) | £10.37m | £30.56m | £60.63m | £101.55m | £5.18m | £0.70m | £3.01m | £8.89m |
*This number references the number of named individuals identified for the relevant Group’s entities listed above. Some individuals may be included as Identified Staff for both entities due to the nature of their role and responsibilities.
No guaranteed variable remuneration or severance payments were awarded to Identified Staff in 2023.
Footnotes
[1] Royal London Group Remuneration Committee Terms of Reference.
[2] 2023 Royal London Annual Report and Accounts.
[3] This figure is comprised of basic salary, pension related benefits, STIP, LTIP awards and annual fees for Non-Executive Directors. LTIP awards are subject to performance conditions, however have been valued at their initial grant value for the purpose of this table.
[4] Senior Management refers to any Directors or Group Executive Committee members for these entities. Annual fees for Non-Executive Directors have also been used to calculate fixed remuneration.