Remuneration policy statement

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Within Royal London Group, there are a number of firms who are authorised and regulated by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) which need to comply with either the requirements of the FCA Remuneration Code [1] (the Code) and/or the PRA Policy and Supervisory Statements on Remuneration.

The following companies are subject to either the Code or the PRA Policy and Supervisory Statements on Remuneration:

  • Royal London Mutual Insurance Society Limited (FCA No 117672)
  • Royal London Asset Management Limited (FCA No 141665)
  • Royal London Savings Limited (FCA No 191237)
  • RL Marketing (CIS) Limited (FCA No 188391)
  • Royal London Unit Trust Managers Limited (FCA No 144037)
  • Investment Funds Direct Limited (FCA No 114432)
  • Royal Liver Asset Managers Limited (FCA No 197410)
  • RLUM Limited (FCA No 144032)

Royal London has developed its remuneration policies, practices and procedures for these firms to comply with the requirements of the Code, the PRA Policy and Supervisory Statements on Remuneration and all other applicable regulatory requirements.

Royal London’s remuneration policy has four main aims

  • To align executives’ interest with those of our members and customers;
  • To support the delivery of the Group strategy, whilst ensuring adherence to the Group’s risk appetite.
  • To ensure remuneration is competitive for our markets to help the Group to attract and retain talent; and;
  • To ensure fair outcomes for our people, members and policyholders.

Decision Making Process for Remuneration

Royal London Group has a Remuneration Committee made up of Non-executive Directors and advised by independent remuneration consultants. The Committee has overall responsibility for 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 Key Remuneration Principles. The Committee’s Terms of Reference are available on the Royal London website [2].

The Remuneration Committee will receive regular updates from the Chief Risk Officer including an annual report that details how effective Royal London (and its subsidiaries) has been in managing risk within the Group’s stated risk profile.

Pay for performance

Royal London’s remuneration schemes are designed to reward employees for their performance and contribution to the success of their business unit and the Group.

In determining short-term incentive awards, there are three factors which impact the overall level awarded:

  • Royal London Group Performance – how well the Group performs against the Group Customer Value Statements will determine the overall bonus pool which is available;
  • Business Unit/Function Performance – how well the business unit or function performs against its individual scorecard will determine what share of the overall bonus pool the business unit or function receives; and
  • Personal Performance – each employee is awarded a performance rating which reflects their performance and overall contribution to the success of the business, and upon which individual bonus awards are determined.

Remuneration structure

All employees are remunerated with an annual fixed salary and variable payments, which may be a greater proportion of total compensation than fixed salary. All variable amounts are distributed as cash, apart from awards deferred under the Royal London Short Term Incentive Plan and the Royal London Long Term Incentive Scheme where awards are converted into units whose value is based on the Royal London Group European Embedded Value (EEV). Arrangements are in place for elements of the cash awards to be deferred for a period of up to 3 years, or to be made on a three year rolling cycle for some Identified Staff.

Employees in certain roles are eligible to participate in incentive schemes that differ from the Royal London Short Term Incentive Plan. In sales-focussed roles across the Group there are Sales Incentive Plans that use a formulaic approach to determine the variable award, based on a balanced scorecard review of sales performance and other measures. In RLAM a number of Short Term Incentive Plan arrangements exist and are designed to fairly remunerate based on the key purpose of the role. In RLAM any award over a certain threshold are subject to deferral and these track the Royal London Long Term Fund performance. All incentive schemes in Royal London are reviewed annually.

The structure of the remuneration packages for 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. Royal London’s incentive schemes are designed so that they do not encourage excessive risk taking. A full description of the remuneration schemes and the Group Remuneration Committee are contained in the Royal London Group Annual Report and Accounts, a copy of which is available in the Report and Accounts section [3]

Identified Staff

As at 30 June 2018, 87 employees (2017: 52 employees) were designated Identified Staff for the companies listed above. Identified Staff are determined by reference to the Code,  the PRA Policy and Supervisory Statements on Remuneration and the qualitative and quantitative criteria set out by the relevant authorities  on material risk takers. Royal London’s Identified Staff include the 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 e.g. Material Risk Takers (MRT’s).

The Remuneration Committee approves the list of Identified Staff, which is subject to an annual review to ensure that it remains within the risk profiles for each of the respective companies.

Identified Staff Remuneration

The aggregate annual 2017 remuneration of the 87 Identified Staff is £38.1m in respect of the performance period ending 31 December 2017 (2016: £27.3m; 52 Identified Staff for performance period ended 31 December 2016). This is made up of basic salary, allowances, core benefits, employer pension contributions, and incentive pay. Incentive pay includes short term incentive and long term incentive awards[4].

[1] As covered in the SYSC sourcebook of the FCA rules

[2] Royal London Remuneration Committee Terms Of Reference 2017

[3] Royal London Annual Report and Accounts 2017

[4] The Royal London Long Term Incentive Scheme awards are valued at their initial grant value and Royal London Asset Management Long Term Incentive Plan awards are valued at their maximum value at the date of grant.