Remuneration disclosure

Our remuneration disclosure for the year ended 31 December 2018

During 2018 Standard Life Aberdeen plc continued its corporate transformation to become a world-class investment company. The integration of the merged business has continued throughout 2018, this has included the introduction of a consistent bonus plan across the Aberdeen Standard Investments (ASI) business.  In addition, the sale of Standard Life Assurance Limited to Phoenix Group Holdings completed on 31 August 2018.

The information included in this disclosure relates to the full 2018 year, therefore information relating to entities sold to Phoenix Holdings are included for the period from 1 January to 31 August 2018.  These entities were subject to the SLA policies up to the transaction date.

Standard Life Aberdeen plc operated a company-wide remuneration policy (the “Policy”) during 2018, approved by the Group Remuneration Committee. The sections on this page set out a summary of the Policy and describe our overarching principles and practice for remuneration.

All disclosures on this page meet the reporting requirements for all Standard Life Aberdeen’s regulated entities and are also in line with the Directors Remuneration Policy, included in the 2017 Annual Report and Accounts and approved by shareholders at the AGM on 29 May 2018.

1. Governance of remuneration
 

The Policy is subject to independent oversight and control by the Group Remuneration Committee (the “Committee”) for Standard Life Aberdeen plc (the “Company”), which is the ultimate parent company of the Standard Life Aberdeen group of companies (the “Group”).

1.1 The committee

During 2018 the Remuneration Committee was made up of independent non-executive Directors: Richard Mully (Chairman), John Devine, Gerhard Fusenig, Kevin Parry, Jutta af Rosenberg and Cathleen Raffaeli (from 1 August 2018).

The role of the Committee is to consider and make recommendations to the Board in respect of the Policy across the Group, including:

  • rewards for the executive Directors, senior employees and the Chairman
  • the design and targets for any employee share plan
  • the design and targets for annual cash bonus plans throughout the Group
  • changes to employee benefit structures (including pensions) throughout the Group.

1.2 Risk management and business strategy

The Group ensures that the Policy is in line with business strategy, objectives, values and long-term interests by including representatives from independent third parties and other operating committees as advisors to the Committee where appropriate. Business unit heads may be consulted if appropriate and provided that any such consultation adheres to the principles and guidelines of regulations that apply to the Group.

The Group ensures that the Policy promotes sound and effective risk management and does not encourage risk taking in excess of the Group’s levels of tolerated risk by regular review of the Policy by the Committee. This ensures that arrangements and awards reflect risk awareness and compliance. In addition, awards are subject to Committee receipt of a report from the Risk and Capital Committee, as appropriate. Individual employee awards for heads of control functions and Material Risk Takers are subject to Committee review and supervision.

The Group appoints an independent remuneration consultant as advisor to the Committee on remuneration design and compliance with regulatory guidance. During the year, the Committee took advice from Deloitte LLP (a member of the Remuneration Consultants Group), who were appointed as external advisors to the Committee on 19 September 2017. The contractual terms for independent third parties are governed by the Group Procurement Policy.

1.3 Conflicts of interest

The Policy is designed to avoid conflicts of interest between the Group and its clients.

The Policy should at all times adhere to local legislation, regulations or other provisions. In circumstances or in jurisdictions where there is any conflict between this Policy and local legislation, regulations or other provisions then the latter prevail. In such case any amendments and the scope of such amendments will be set out in an attached appendix to the Policy and will adhere as closely as possible to the underlying principles of the Policy.

Where the Committee receives input from management on the remuneration arrangements in operation across the Group this never relates to their own remuneration.

Specific measures are in place to avoid conflicts of interest as regards control functions as set out below.

1.4 Control Functions

The Group will ensure that, as appropriate, senior employees engaged in a control function are independent from the business units they oversee and have appropriate authority to undertake their roles and duties.

Where scorecards are used to determine remuneration, employees have a meaningful portion of any bonus based on independent scorecards linked to performance of the respective functions. For control function where scorecards are not used, variable remuneration is determined by the achievement of their own functional objectives.

1.5 Identification of Code Staff

Standard Life Aberdeen identifies individuals who have a material impact on the risk profile of the Company and individuals who have a material impact on any regulated entities or funds managed under the control of the Company (“Code Staff”). The relevant regulated technical standards are taken into account in identifying Code Staff.

The Committee is responsible for undertaking a review of the application of the principles under the relevant technical standard no less frequently than annually.

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2. Remuneration Policy and Practice
 

Our Policy is underpinned by principles which guide compensation-related decisions across the Group. Alignment of reward practices with the guiding principles underpinning our Policy is critical to ensuring the effectiveness of our remuneration approach. The principles which guide remuneration decision making, along with reward practices are set out below.

2.1 Remuneration principles

Throughout the Group the following overarching principles and practices are applied to our Policy:

  • Remuneration design and the basis for awards will be clear, transparent and fair;
  • Remuneration should be aligned with the business strategy; objectives, culture and values and long-term interests of Standard Life Aberdeen;
  • The Policy should promote good conduct which includes sound and effective risk management and not encourage risk taking that exceeds the level of tolerated risk of Standard Life Aberdeen;
  • Total variable remuneration should take account of Standard Life Aberdeen’s financial performance.

Although the above principles apply throughout the Group, given the size of the Group and the scale of its operations, the way in which the Policy is implemented varies by jurisdiction and seniority.

Our compensation structure is designed to contribute to the achievement of short-term and long-term strategic objectives underpinned by the principles above and set out in section 2.2 below.

2.2 Elements of remuneration

Remuneration Framework

Employee remuneration is composed principally of fixed and variable elements of reward as follows:

(a) Fixed reward:

  • Fixed remuneration: base salary.
  • Benefits (including retirement benefit as appropriate).

(b) Variable reward:

  • Employees may receive variable pay in non-deferred cash or in deferred awards delivered either in shares or over interests in SLA funds.  Award structures may vary by role and seniority.
  • In March 2018, heritage Standard Life employees were eligible to receive a final award under the heritage long-term incentive arrangements, in respect of the 2017 performance year. There is no intention to grant awards under these arrangements going forward. For completeness, further details of awards under these arrangements are set out below.

Ratios of fixed:variable remuneration will be set so as to ensure that fixed and variable components of total remuneration are balanced as well as compliant with regulatory guidance, as appropriate. As such, the fixed component is a sufficiently high proportion of total remuneration to allow the Group to operate a fully flexible policy on variable remuneration components including paying no variable remuneration component.

Operation of Remuneration

1. Base Salary

Purpose and link to strategy

To provide a core reward for undertaking the role, positioned at a level needed to recruit and retain the talent required to develop and deliver the business strategy.

Operation

Base salaries are set taking into account a range of factors including:

  • The individual’s skills, performance and experience.
  • Internal relativities and wider workforce salary levels.
  • External benchmark data.
  • The size and responsibility of the role.
  • The complexity of the business and geographical scope.
  • Economic indicators.

2. Benefits (including retirement benefit as appropriate)

Purpose and link to strategy

To provide market competitive monetary and non-monetary benefits, in a cost effective manner, to assist employees in carrying out their duties efficiently.

Any retirement benefits are competitive and flexible and provided in a way that does not create an unacceptable level of financial risk or cost to the Group.

Operation  Benefits provided may be made up of core benefits and extra voluntary benefits (as appropriate).

3. Group Annual Variable Pay arrangements for Eligible Employees1

Purpose and link to strategy To support the delivery of the Group’s annual business plan.
The focus is on the delivery of the annual financial, strategic, customer and people objectives.
Operation of annual bonus plans across the Company – these arrangements are applicable to all bonus arrangements in place across the Group

Performance is measured against a range of key financial metrics together with non-financial metrics which typically include: strategic, client, risk, conduct, and people indicators. A portion of the award is typically based on achievement against individual performance objectives.

Variable pay pools and, where applicable individual awards, are determined at the end of the performance period by the Committee, to ensure that the outcome is fair in the context of overall Group performance measures. The Risk and Capital Committee and the Audit Committee formally advise the Committee as part of this process and the Committee has the discretion to amend variable pay pools, scorecard outcomes and individual awards if it does not consider that these reflect the performance of the Group.

Awards are determined at the end of the 12 month performance period. Performance is assessed against financial and non-financial metrics together with an assessment of personal performance.

Specifically the Committee will review and approve the individual awards for certain defined senior management, control function and Code Staff, including Material Risk Takers.

Where appropriate, bonus awards (cash / deferred shares) are subject to malus / clawback arrangements. Malus applies during the deferral period. Clawback applies for a period of up to five years from the date of the payment of cash bonus.

Operation of the Executive Incentive plan

The executive Directors of Standard Life Aberdeen plc participate in this plan, Further details can be found in the 2017 Directors’ Remuneration Report, within the Annual Report and Accounts.

Following assessment of performance against financial and non-financial metrics (see annual report and accounts for further details):

  • 25% will normally be paid in the form of cash; and
  • 75% will normally be deferred into instruments.

Deferred awards will be subject to underpin performance conditions which will normally be measured based on performance over the three financial years from award (details of the underpin performance conditions can be found in the annual report and accounts). Deferred awards will normally vest in equal tranches on the third, fourth and fifth anniversary of the grant date. Deferred awards are, where appropriate, subject to a holding period to the end of the fifth anniversary of the grant date.

The measures, their respective weightings and targets for the purpose of the underpin performance conditions are set annually by the Committee.

Operation of ASI Variable Pay Plan

The variable pay plan supports the delivery of ASI annual business plan. The variable pay pool will be set by the Committee based on the overall performance of the Company, taking in to account both financial and non-financial metrics. Individual performance is assessed based on achievement against individual performance objectives

In reaching its final funding decision, the Committee exercises its judgement to ensure that the outcome is fair in the context of overall ASI performance, taking into account actual performance against the ASI targets and business performance. The Committee ensures that risks have been adequately reflected and exercises its judgement on awards for

relevant senior management and Code Staff.

Variable Pay awards are be subject to deferral for a period of up to three years with reference to the following thresholds and deferral rates:

Note, increased deferral rates may be applied where required by regulatory requirements.

Operation of Standard Life Bonus plan

Eligible Standard Life employees participate in this plan. The final awards under this plan are expected to be granted in March 2019 in respect of performance in 2018.  The continuation of this plan in 2019 is subject to employee consultation.

Performance scorecard targets are set annually by the Committee.  Individual awards are based on a combination of Company performance against the relevant scorecard and individual personal performance assessed against achievement of annual objectives.

The Committee exercises its judgement to determine awards at the end of the year to ensure that the outcome of the scorecard is fair in the context of overall Group performance, taking into account actual performance against scorecard targets and business performance.

For senior employees, half of any bonus above 25% of salary is payable in deferred shares, subject to the value of this deferral being a minimum 10% of salary. For other employees deferral only applies where required by relevant local regulations and/or at the discretion of the Remuneration Committee.

1. Where it is appropriate for some business functions/units/entities (including those that fall within the scope of AIFMD and UCITS V), business function specific bonus plans may be in place.  All bonus plans operate on the same underlying principles as the Group bonus plan but business function plans may include an element of reward for performance in line with the specific strategy, objectives, values, long term interests and risk position of that particular business unit.

4. Carried Interest Plan - Selected employees

Purpose and link to strategy

These arrangements are designed to reward performance of employees in roles where a carried interest plan is appropriate.

Operation

Selected employees subscribe for carried interest shares in private equity funds established by Aberdeen Standard investments.

5. Other Plans - selected employees

The Committee has approved a further set of principles on the remuneration aspects of responsible business conduct, and fair treatment of clients as well as avoiding conflict of interests for clients. Bonus plans operate under the overarching remuneration principles that apply across the Group but are also subject to these specific principles governing any incentives, which are compliant with the requirements of relevant regulatory standards including MIFID II.

6. Legacy incentive arrangements - Share Based Award Plan for Eligible heritage Standard Life Senior Employees 2 (final awards under this plan were granted in March 2018, in respect of the 2017 performance year)

Purpose and link to strategy

To reward participants for the delivery of the Group’s goals of driving shareholder value through customer experience including measures such as cumulative Group operating profit and cumulative Group net flows.

Operation

Awards granted in the form of shares.

Awards subject to performance measured over a performance period (normally three years) with a subsequent holding period (up to two years) for certain employees. Performance targets were set for each outstanding award by the Committee.

Awards are subject to review by the Committee and the Risk and Capital Committee at the end of the performance period to confirm that vesting of the award is appropriate.

Unvested awards are subject to malus. Vested awards that are not subject to an additional holding period are subject to clawback for two years from the normal vesting date.

Dividend equivalents, or equivalents for other forms of awards, accrue over the performance period and subsequent holding period, as appropriate, on a re-invested basis.

Performance Targets

Vesting of the award granted in March 2018 was based on the following Group and business performance targets:

  • Cumulative Group operating profit performance before tax weighted at up to 100% of the award.
  • Cumulative Group net flows weighted at no more than 50% of the award.

The split between these measures, for each grant, is set annually by the Committee.

2. Where it is appropriate for some business functions/units/entities, (including those that fall within the scope of AIFMD and UCITS V) separate business function long-term incentive have been in place.  The final awards under any such plans were granted in March 2018. All long-term incentive plans operate on the same underlying principles as the Group long-term incentive plan but business function plans may incentivise achievement of performance conditions in line with the specific strategy, objectives, values, long term interests and risk position of that particular business function/unit/entity. Business function long-term incentive plans are reviewed by the Committee.

Under the SLI Long-term Incentive Plan (awards granted to heritage Standard Life Investments employees – with the final award granted in March 2018 in respect of the 2017 performance year), awards were subject to performance measured over a performance period (normally three years).

Performance is measured against performance metrics (which are financial in nature) based on Aberdeen Standard Investments consolidated cumulative three-year adjusted profit before tax performance and vesting is subject to an investment performance gateway (awards only vest if Aberdeen Standard Investment performance (three-year money-weighted average) is above the lower quartile of the money-weighted average of all assets (both captive and third party assets) compared to all asset managers and a risk underpin.

No heritage Aberdeen Asset Management employees were eligible to participate in these plans for 2018.

Additional information for AIFMD and UCITS V: Regulated employees are subject to the Standard Life Aberdeen policies as regulated by the Financial Conduct Authority (FCA)

Where a Group company is an AIFM or UCITS V management company it is acknowledged that the management company has specific obligations to act in the best interests of the AIF or the UCITS it manages and, where relevant, its investors. Accordingly, in the application of the principles set forth and in the award (including deferral and/or clawback) of variable pay for AIF or UCITS management company ‘Code Staff’, the interests of the relevant AIF or UCITS and its investors and the performance of the relevant AIF or UCITS (taking into account, where relevant, the investment risk of the relevant AIF or UCITS) shall additionally (where relevant) be taken into account.

The board of the AIFM or UCITS management company have responsibility for the risk management arrangements as they relate to the AIF and UCITS fund range. The investment processes are subject to the governance structure of Aberdeen Standard Investments and the board of the AIFM or UCITS management company monitors effectiveness in meeting strict criteria.

Retention arrangements are operated on incentive arrangements in accordance with regulatory requirements, where required.

2.3 Share ownership

In line with good corporate governance guidelines, there is a requirement that executive Directors and members of the Executive Body to maintain a material long-term investment in Standard Life Aberdeen plc shares.  This includes a requirement for certain employees, as determined by the Board, to hold shares up to the value of the share ownership guidelines for a predefined period following departure from the Group.

2.4 Code of conduct

All staff are expected to adhere to the Global Code of Conduct, and underlying policies, which adheres to the behaviours and expectations set out in the PRA/FCA’s individual conduct standards. In addition to this, the reward for employees in senior management positions within the company’s corporate governance framework (which includes material risk takers for the Company and any of its subsidiaries) will be assessed annually through individual performance assessment to ensure the sound and prudent management of the organisation through adherence to the relevant frameworks, procedures, controls and policies.

The input of the Group’s risk and compliance functions is sought where appropriate in setting remuneration. The Group Chief Risk Officer will meet with the Committee Chair, Group Operating Officer and Group Reward and Policy Director to discuss any employees where there are concerns about the behaviour of the employee or the levels of risk of the business undertaken.

2.5 Performance adjustment

We maintain discretion to reduce unvested variable remuneration (malus) and discretion to clawback vested variable remuneration (clawback) in circumstances deemed appropriate by the Committee. Circumstances include but are not limited to a material misstatement of the Group’s audited financial statement; any failure of risk management, fraud or other material financial irregularity; material corporate failure; an error in the information or assumptions on which the Award was granted, Vests or is Released as a result of erroneous or misleading data or otherwise and serious misconduct by a participant or otherwise.

3. Quantitative Disclosures

Quantitative disclosures for Standard Life Aberdeen regulated entities are included in the relevant publication in accordance with regulatory guidance:

  • IFPRU/ BIPRU firms – in the relevant Pillar 3 disclosure.
  • AIFs – in the AIF’s annual report.
  • UCITS V – in the annual report of the relevant UCITS fund.

4. Regulated entities

The following entities under the control of Standard Life Aberdeen plc have been identified for the purposes of this disclosure (information as at 31 December):

Standard Life Aberdeen plc is regulated by the FCA and is subject to CRD IV regulations. It is the parent company for the following regulated subsidiaries:

CRD IV

  • Standard Life Aberdeen plc.

Solvency II1

  • Standard Life Assurance Company 2006.
  • Aberdeen Asset Management Life and Pensions Limited.

1Standard Life Assurance Limited (SLAL), Standard Life Lifetime Mortgages, Standard Life International dac, Standard Life Pension Funds Limited were transferred to Phoenix on 1 September 2018. Prior to the transaction date, they were subject to the Solvency II Directive.

AIFMD

  • Standard Life Investments (Mutual Funds) Limited.
  • Standard Life Investments (Corporate Funds) Limited.
  • SL Capital Partners LLP.
  • Standard Life Investments (Private Capital) Limited.
  • Ignis Fund Managers Limited.
  • Aberdeen Fund Managers Limited.
  • Aberdeen Global Services SA.
  • Aberdeen Fund Management Norway A/S.
  • Aberdeen Fund Management Ireland Limited.
  • Aberdeen Asset Management Deutschland AG.

The Company’s Undertakings for the Collective Investment in Transferable Securities (“UCITS”) management companies are:

  • Standard Life Investments (Mutual Funds) Limited, SLTM Limited and Ignis Fund Managers Limited. These entities are subject to the Undertakings for the UCITS V Directive. Note that the Company’s self-managed UCITS are Seabury Assets Funds plc, SLI Liquidity Funds plc and IGNIS Global Funds SICAV.
  • Aberdeen Fund Managers Limited, and Aberdeen Global Services SA.  These entities are subject to the Undertakings for the UCITS V Directive.

The companies impacted by the Markets in Financial Instruments Directive (MiFID) are:

  • Standard Life Savings Limited (SLSL).
  • Elevate Portfolio Services Limited.
  • Aberdeen Asset Managers Limited.
  • Aberdeen Investment Solutions Limited.
  • Parmenion Capital Partners LLP.
  • Aberdeen Asset Investments Limited.
  • Standard Life Investments Limited (SLI).
  • Standard Life Wealth Limited.
  • Ignis Investment Services Limited.

The following entities are Article 3 MiFID exempt firms

  • Baigrie Davies & Company Limited.
  • Jones Sheridan Financial Consulting Limited.
  • Pearson Jones Plc.
  • The Munro Partnership Ltd.
  • Standard Life Client Management Limited.
  • Self Directed Investments Ltd.

The following entities are identified as BIPRU firms

  • Standard Life Investments Limited (SLI).
  • Standard Life Investments (Corporate Funds) Limited (SLI (CF)).
  • SL Capital Partners LLP (SLCP).
  • Standard Life Wealth (SLW).
  • Standard Life Investments (Private Capital) Ltd (SLI (PC)).
  • Ignis Investment Services Limited.

The following entities are identified as significant IFPRU firms

  • Standard Life Savings Limited (SLSL).
  • Elevate Portfolio Services Limited.
  • Aberdeen Asset Managers Limited.
  • Aberdeen Asset Investments Limited.
  • Parmenion Capital Partners LLP.

3. Quantitative Disclosures
 

Quantitative disclosures for Standard Life Aberdeen regulated entities are included in the relevant publication in accordance with regulatory guidance:

  • IFPRU/ BIPRU firms – in the relevant Pillar 3 disclosure
  • AIFs – in the AIF’s annual report
  • UCITS V – in the annual report of the relevant UCITS fund.


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