Report of The Board in relation to remuneration policy and practice
10.2 Pension benefits
Details of each Executive Director’s pension and lump sum life assurance entitlement are as follows:
Table 2
| Normal retirement age | Pension as a % of final salary | Lump sum life assurance as a multiple of salary | |
| Peter Cummings | 60 | 55 | 4 |
| Jo Dawson | 60 | 16 | 4 |
| Mike Ellis | n/a | 0 | 4 |
| Philip Gore-Randall | n/a | 0 | 4 |
| Phil Hodkinson | 60 | 15 | 4 |
| Andy Hornby | 60 | 23 | 4 |
| Colin Matthew | 60 | 66 | 4 |
| Dan Watkins | 60 | 39 | 4 |
Notes to Table 2
Note 1:
Pension is generally based on retirement from service at normal retirement age (age 60) and is based on final salary. Pension and lump sum life assurance is provided from the HBOS Final Salary Pension Scheme (the ‘Scheme’) and otherwise from separate arrangements with the Group.
Note 2:
On death after retirement or after leaving service, a spouse’s or dependant’s pension may be payable. Children’s benefits may also be payable.
Executive Directors who have five years’ service as an Executive Director have a contractual right to retire at age 55 or above with a non-reduced pension and at age 50 or above (but below age 55) with a reduced pension.
Pension increases after retirement are a mixture of guaranteed and discretionary. Scheme provisions vary by individual; at best, the Scheme guarantees to increase pensions in line with the RPI, subject to a maximum of 5% p.a. and a minimum of 3% p.a. (no minimum for pensionable service after 31 March 2004). There is an established policy of reviewing pensions on a discretionary basis taking account of increases in the RPI. Allowance is made in transfer values on leaving in respect of the guaranteed and discretionary increases outlined above.
Note 3:
The pension entitlements of the Executive Directors included in the Scheme are set out in the table below:
Table 3
| Name (Age) | Accrued pension at 31.12.07 £000 p.a. | Increase in accrued pension during 2007 £000 p.a. | Transfer value at 31.12.06 or, if later, date of appointment £000 | Transfer value at 31.12.07 £000 | Increase in transfer value less Director’s contributions £000 |
| Peter Cummings (52) | 344 | 45 (34) | 5,208 | 5,970 | 762 (588) |
| Jo Dawson (45) | 89 | 22 (19) | 897 | 1,184 | 282 (249) |
| Phil Hodkinson (49) | 96 | 5 (1) | 1,497 | 1,578 | 81 (24) |
| Andy Hornby (40) | 220 | 36 (29) | 2,019 | 2,407 | 388 (312) |
| Colin Matthew (57) | 398 | 23 (9) | 7,843 | 7,799 | (44) ((168)) |
| Dan Watkins (45) | 162 | 21 (20) | 1,801 | 1,972 | 171 (245) |
Notes to Table 3
Note 1:
The accrued pension at 31 December 2007 is the pension which the Director would have been entitled to receive based on his/her completed pensionable service, had he/she left on 31 December 2007, payable from normal retirement age (age 60) and subject to revaluation increases between leaving and retirement.
Note 2:
The increase in accrued pension is the accrued pension at 31 December 2007 less the accrued pension at 31 December 2006. The amount shown in brackets is calculated on the basis of the disclosure methodology under the Listing Requirements of the UK Listing Authority.
Note 3:
The transfer values are based on the accrued pensions at 31 December 2006 and at 31 December 2007 and are calculated as at 31 December 2006 and 31 December 2007 respectively based on factors supplied by the actuaries, Watson Wyatt Limited. The transfer values are the notional lump sums which would have been paid to another pension scheme for the benefit of the Director had he/she left service at the respective dates. It is not possible for a transfer value to be paid directly to the Director personally. The amount shown in brackets is calculated on the basis of the disclosure methodology under the Listing Requirements of the UK Listing Authority.
Note 4:
The Director’s contribution is the personal contribution required, if any, under the terms of the Scheme. Members of the Scheme have the option to pay additional voluntary contributions; neither the contributions nor the resulting benefits are included in the table.
Note 5:
For Dan Watkins (appointed 5 September 2007) the opening accrued pension and transfer value have been calculated at the relevant date of appointment.
Note 6:
For those members whose benefits were above the ‘Lifetime Allowance’ at ‘A-day’, there will be no further service accrual of benefits and no further Directors’ contributions.
Where there is no further service accrual of pension, Executive Directors receive an annual non-pensionable cash allowance of 25% of salary, payable monthly, in lieu.
Note 7:
Philip Gore-Randall is not included in the Scheme and simply receives the cash allowance referred to in Note 6 above. Mike Ellis is in receipt of a pension from his earlier employment with the Group which is unaffected by, and independent of, his current employment. In respect of his current employment, he receives the cash allowance referred to in Note 6 above.