Remuneration disclosure

The merger between Standard Life plc and Aberdeen Asset Management PLC formally completed on 14th August 2017. As Standard Life was already part of the way through the 2017 performance year the underlying principle applied by the Remuneration Committee of Standard Life and set out in the appendix to the circular to the merger was that minimal changes should be made for 2017.  

Standard Life operated a company-wide remuneration policy, approved by the Remuneration Committee of Standard Life.  Due to the different structures in place at Standard Life and Aberdeen Asset Management some changes were required to accommodate existing remuneration arrangements of Aberdeen Asset Management for the period to 31 December 2017.  

The sections on this page set out the remuneration policy (the “Policy”) for Standard Life Aberdeen plc and describe our overarching principles and practice for remuneration.

Following the merger future remuneration structures are under review, however the arrangements described in this disclosure remain in place until the review is completed.

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 as an appendix to the circular sent to shareholders on 9 May 2017.

1. Governance of remuneration
 

The Policy is subject to independent oversight and control by the 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”).  The merger of Aberdeen Asset Management PLC and Standard Life plc completed on 14 August 2017 to form Standard Life Aberdeen plc.  Prior to the merger independent oversight and control was provided by the Remuneration Committee for Standard Life plc.

1.1 Regulated entities

The following entities under the control of Standard Life Aberdeen plc have been identified for the purposes of this disclosure:

Standard Life Assurance Limited (SLAL) is dual regulated by the PRA/FCA.  It is subject to the Solvency II directive and is the parent company for the following regulated subsidiaries:

  • Standard Life Lifetime Mortgages, Standard Life International dac, Standard Life Pension Funds Limited and Standard Life Assurance Company 2006 which are subject to the Solvency II Directive.
  • Standard Life Savings Limited (SLSL) and Elevate Portfolio Services Limited which are classed as significant IFPRU firms and Pearson Jones PLC (to 13 March 2017)
  • The companies impacted by the Markets in Financial Instruments Directive (MiFID) which are: Standard Life Savings Limited (SLSL) and Elevate Portfolio 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 and Standard Life Client Management Limited.

Standard Life Investments (Holdings) Limited (SLI(H)) is the parent company for the following regulated subsidiaries:

  • 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)), and Ignis Investment Services Limited which are identified as BIPRU firms.
  • The Company’s Alternative Investment Fund Managers (AIFM) are Standard Life Investments (Mutual Funds) Limited, Standard Life Investments (Corporate Funds) Limited, SL Capital Partners LLP, Standard Life Investments (Private Capital) Limited and Ignis Fund Managers Limited.  These entities are subject to the Alternative Investment Fund Manager Directive (“AIFMD”).
  • The Company’s Undertakings for the Collective Investment in Transferable Securities (“UCITS”) management companies are Standard Life Investments (Mutual Funds) Limited, SLTM Limited, Ignis Fund Managers Limited and Scottish Mutual Investment Managers Limited (to 10 March 2017). 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.
  • The companies impacted by the Markets in Financial Instruments Directive (MiFID) are Standard Life Investments Limited (SLI) Standard Life Wealth Limited and Ignis Investment Services Limited.

Aberdeen Asset Management PLC is the parent company for the following regulated subsidiaries:

  • Aberdeen Asset Management Life and Pensions Limited is subject to the Solvency II Directive.
  • Aberdeen Asset Managers Limited, Aberdeen Asset Investments Limited and Parmenion Capital Partners LLP are classed as significant IFPRU firms.
  • The Company’s Alternative Investment Fund Managers (AIFM) are Aberdeen Fund Managers Limited, Aberdeen Global Services SA, Aberdeen Fund Management Norway A/S and Aberdeen Asset Management Deutschland AG.  These entities are subject to the Alternative Investment Fund Manager Directive (“AIFMD”).
  • The Company’s Undertakings for the Collective Investment in Transferable Securities (“UCITS”) management companies are Aberdeen Fund Managers Limited, Aberdeen Fund Management Ireland 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 Aberdeen Asset Managers Limited, Aberdeen Investment Solutions Limited, Parmenion Capital Partners LLP and Aberdeen Asset Investments Limited.
  • The following entity is an Article 3 MiFID exempt firm: Self Directed Investments Ltd

1.2 The Committee

During 2017 the Remuneration Committee was made up of independent non-executive Directors: Melanie Gee (Chairman from 17 May 2016 until 11 August 2017), Martin Pike (until 11 August 2017), Richard Mully (Chairman from 14 August 2017), John Devine, Gerhard Fusenig, Kevin Parry  and Jutta af Rosenberg (from 14 August 2017).  

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.

During 2017, the Committee met 13 times. Details of the Committee meetings are provided in the Group’s 2017 Annual Report and Accounts.  More information on the Committee’s terms of reference can be found in the Board Charter.  

The remuneration for all material risk takers, as captured under the regulatory regimes impacting the Group, noted above, is approved by the Committee.

Remuneration Committees for Standard Life Savings Limited (SLSL) and Elevate Portfolio Services Limited (EPSL) were established in October 2017.  Membership is made up of independent non-executive Directors: David Marock (Chairman), Lynne Peacock, Amanda Bowe and Richard Houghton.  The role of the Committees is to consider and make recommendations to the Group Remuneration Committee in respect of remuneration policy and practice across SLSL and EPSL.

1.3 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 advisers to the Standard Life Remuneration Committee from October 2011 and external advisors to the Committee on 19 September 2017.  The contractual terms for independent third parties are governed by the Group Procurement Policy.

1.4 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.

1.5 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, senior employees in Risk and Internal Audit have a meaningful portion of any bonus based on independent scorecards linked to performance of the respective functions.  For other Control Function employees, where scorecards are not used, their variable remuneration is determined by the achievement of their own functional objectives.

1.6 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.

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 is linked to performance, is transparent and is easy to understand
  • The Policy encourages behaviours that deliver results which are aligned to the interests of the Group’s key stakeholders
  • Remuneration is competitive and reflects financial and personal performance and the individual’s value in the market, without paying more than is necessary
  • The Policy provides an appropriate balance of fixed and variable remuneration.

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 pension)

(b) Variable reward:

  • Short-term variable pay plans (bonus) for eligible employees
  • Senior heritage Standard Life employees may also be awarded a long-term incentive award
  • Heritage Aberdeen Asset Management employees may receive variable pay in non-deferred cash and variable pay in deferred share awards

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 Bonus 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

Performance targets are set annually by the Committee.

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 Group scorecard targets and business performance.

The Committee also exercises its judgement to determine awards at the end of the year against personal goals for relevant senior management and code staff.

Before approving the level of performance, the Committee seeks the views of the Group Chief Risk Officer and the Risk and Capital Committee on the management of risk within the business.

Senior employees may have an element deferred into shares.

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 three years from the date of the payment of cash bonus.

Performance Metrics

Performance is measured against a range of key financial metrics, strategic, customer and people indicators and personal performance.

The performance scorecard is weighted with at least 50% of bonus based on financial performance (adjusted profit before tax and operating return on equity) and no less than 30% based on non-financial performance. The split between financial and non-financial targets is set annually by the Committee.

A portion of the award may be based on individual performance objectives.

Performance is measured over 12 months.

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.

In such cases performance against a business function/unit/entity scorecard and/or business function/unit/entity results will be considered alongside the performance of the Group in determining reward.  Business function scorecards are reviewed by the Committee. It should be noted that no heritage Aberdeen Asset Management employees will be eligible to participate in this plan for 2017.

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

Where a Group company is an AIFM or UCITS 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 Standard Life Investments and the board of the AIFM or UCITS management company monitors effectiveness in meeting strict criteria.

The SLI bonus plans (which include a personal and company bonus plan) support the delivery of SLI’s annual business plan.  The Committee exercises its judgement to determine awards at the end of the year to ensure that the outcome is fair in the context of overall SLI performance, taking into account actual performance against the SLI targets and business performance.  The Committee exercises its judgement on awards at the end of the year for relevant senior management and code staff.

Any bonus is determined by reference to SLI’s financial performance. Personal bonus awards are based on personal performance against agreed objectives and awarded from the bonus pool.  Company bonus awards are made from the bonus pool after deduction of personal bonus payments and the size of the award reflects the value of total reward positioned, as appropriate, against market.

Before approving the level of performance, the Committee seeks the views of the Group Chief Risk Officer and the Risk and Capital Committee on the management of risk within the business.

Performance for the purpose of the Company bonus is measured against a range of key financial metrics, strategic, customer and people indicators and personal performance (which for portfolio managers includes a direct link between fund performance relative to peers as assessed against third-party scores).

A material proportion of total variable remuneration is deferred through the long-term incentive arrangements, as described in later sections of this disclosure and in accordance with regulatory requirements.

Retention arrangements are operated in accordance with regulatory requirements.

4. Standard Life plc Executive Long Term Incentive Plan for Eligible Senior Employees2

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 are normally granted in the form of shares but may be awarded in other forms, such as a unit, share or equivalent in a fund, or fund of funds managed by SLI, if it is considered appropriate.

Awards are subject to performance measured over a performance period (normally three years) with a subsequent holding period (up to two years) for some employees. Performance targets are set annually 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 Metrics

Vesting of the award is based on the following Group performance measures:

  • 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 plans may be in place.  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. It should be noted that no heritage Aberdeen Asset Management employees will be eligible to participate in this plan for 2017.

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

Where a Group company is an AIFM or UCITS management company it is acknowledged that the management company has specific obligations to act in the best interests of the AIF or 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 AIFM 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 SLI and the board of the AIFM or UCITS management company monitors effectiveness in meeting strict criteria.

Under the SLI Long-term Incentive Plan, awards are subject to performance measured over a performance period (normally three years). Performance targets are set annually 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 at the level calculated by reference to the performance target is appropriate.

Unvested awards are subject to malus.  Vested awards are subject to clawback for two years from the normal vesting date.

Performance is measured against performance metrics (which are financial in nature) based on Standard Life Investments consolidated cumulative three-year third Party EBITDA performance and vesting is subject to an investment performance gateway (awards only vest if SLI 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.

Retention arrangements are operated in accordance with regulatory requirements.

5. Legacy Aberdeen Variable Pay in Non-Deferred Cash (“Aberdeen Non-Deferred Cash Awards”) (only to be granted in 2017)3

Purpose and link to strategy To reward the achievement of performance targets in a range of key performance areas.
Operation

Awards are based on key performance indicators (KPIs) determined by reference to heritage Aberdeen business targets combining financial and strategic objectives.

The Committee selects KPIs and determines the weighting for each.

The Committee sets performance targets for these KPIs.

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

Payment will be made in cash following the end of the performance period.

Malus and clawback provisions apply to variable pay.

Performance Metrics Performance is based on achievement of key financial and strategic objectives, measured on both annual and long-term trailing performance.  At least 70% of the award will be based on financial KPIs (including investment performance).
On-target performance pay-out is 50% of the maximum award.

3. It should be noted that no heritage Standard Life employees will be eligible to participate in this plan for 2017.


6. Heritage Aberdeen Variable Pay in Deferred Shares (“Aberdeen Deferred Share Awards”) (only to be granted in 2017)4

Purpose and link to strategy To reward the performance in a range of key performance areas, to align executives’ interests to those of shareholders, and aid retention of talent.
Operation

Awards are based on the same KPIs and weightings as for Aberdeen Non-Deferred Cash Awards.

The Committee exercises its judgement to ensure that the outcome of the awards are fair in the context of underlying performance, taking into account actual performance against targets, business performance and performance against personal goals.

Awards are normally granted in the form of nil-cost options, however, may be awarded in other forms if it is considered appropriate.

Malus and clawback provisions apply to variable pay.

The award will be released to executive Directors in equal tranches over five years. For employees below this level, the 75% deferred portion may vest over a shorter time period, which will be no less than three years.  An amount equivalent to the dividends due on the shares may be paid to participants only after the earliest vesting date has passed.

In the exceptional event that, for practical reasons, the Group is unable to make awards in shares, awards may be made in deferred cash.

Performance Metrics

Performance is based on achievement of the same key financial and strategic objectives as those attached to the Aberdeen Non-Deferred Cash Awards set out above.

4. It should be noted that no heritage Standard Life employees will be eligible to participate in this plan for 2017.


7. 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.

8. 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.

2.3 Share ownership

A shareholding requirement was implemented in 2014 and we continue to require executive Directors and senior management to maintain a material long-term investment in Standard Life Aberdeen plc shares.

2.4 Code of conduct

All staff1 are expected to adhere to the Global Code of Conduct, and relevant addendums, 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.

1. Employees of Standard Life International based in Germany are subject to a separate agreement between the Company and their Works Council

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.

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.


Close