Capital Requirements Regulation (“Article 450 CRR”) Remuneration Disclosure

vintage cash machine

The following disclosures are made in accordance with requirements set out under Article 450 of Regulation of the Capital Requirements Regulation (“CRR” (EU) No 575/2013) in respect of the following entities within the Royal London Group:

  • Royal London Asset Management Limited (RLAM)
  • Investment Funds Direct Limited (IFDL)
  • Royal London Savings Limited (RLS)
  • RL Marketing (CIS) Limited (RL Marketing (CIS))
  • Royal Liver Asset Managers Limited (RLIVER AM)

These remuneration disclosures are based on the financial year end, as at 31 December 2018. This information will be updated on an annual basis.

Remuneration Policy Aims

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 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 Key Remuneration Principles. The Committee’s Terms of Reference are available on the Royal London website [1].

 

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.

 

The Remuneration Committee may ask independent advisors for advice on any matters in relation to the Group Remuneration Policy they determine is necessary.

In 2018, the Remuneration Committee was advised by Deloitte LLP, primarily in relation to executive director and senior management remuneration, variable pay, Remuneration Policy and trends in the external market, and for perspective on regulatory compliance.

Link between pay and 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 (STIP) 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; one such arrangement is the RLAM Growth Participation Scheme (GPS), which is a discretionary award from a pool generated from external revenues. 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 and are capped in line with the Group Remuneration Policy.

 

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 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 [2]

Aggregate Quantitative Remuneration Disclosure - Financial Year ended 31 December 2018

In 2018, 56* individuals were designated as ‘Identified Staff’ for the Group entities highlighted above. Identified Staff are determined by reference to the FCA’s remuneration codes and the qualitative and quantitative criteria set out by the relevant authorities on material risk takers.

Royal London’s 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. The Remuneration Committee approves the list of Identified Staff, which is subject to an annual review to ensure it remains within the risk profiles for each of the respective entities.

In respect of the financial year ending 31 December 2018, the total aggregate remuneration [3] of £27.8m was paid to 56 identified staff* whose actions may have a material impact on the risk profile of these entities. The total aggregate remuneration split between Senior Management [4] and Other Identified Staff is illustrated in the table below.

  Senior Management All Identified Staff
Number of Identified Staff 24 56
Fixed remuneration (£) £5.1m £10.6m
Variable remuneration (£) £5.7m £17.1m
Total £10.8m £27.8m

*This number references the number of named individuals identified for the relevant Group’s entities listed above. It is worth noting that some individuals have been included as Identified Staff under CRD IV multiple times for the Group’s different entities due to the nature of their role and responsibilities e.g. the Chief Risk Officer as the CF28 providing Risk Oversight for each of the entities has been identified for all five entities.

 
The total aggregate remuneration has been provided for the entities listed above as only RLAM and IFDL would be considered distinct Royal London business areas/divisions. The remaining CRD IV entities listed above do not have employees or would not be considered separate business areas/divisions and therefore a decision has been taken not to provide a breakdown of remuneration for business areas

[1] Royal London Remuneration Committee Terms Of Reference 2018

[2] Royal London Annual Report and Accounts 2017

[3] This figure is comprised of basic salary, car allowances, short term incentive, long term incentive awards and annual fees for Non-Executive Directors. 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.

[4] Senior Management refers to any Directors or Executive Committee members for these entities. Annual Fees for any Non-Executive Directors have also been used to calculate fixed remuneration.