Report of The Board in relation to remuneration policy and practice
7.5 Benefits
Each senior colleague is provided with benefits, which principally comprise a company car (or cash in lieu), pension arrangements or allowances, paid leave, healthcare cover and preferential terms for some Group products.
Individuals have generally been included in membership of HMRC approved final salary pension arrangements and, for certain individuals who joined the Group after 1989, for membership of separate final salary pension arrangements. These arrangements, taken together, provide a personal pension benefit based on salary only. The arrangements also provide a lump sum life assurance benefit of four times salary and pension benefits for spouses/dependants and qualifying children.
The final salary pension arrangements are closed to new entrants. All recruits since October 2002 have generally been, and future recruits will generally be, included in HMRC approved money purchase pension arrangements or separate arrangements of equivalent value. These arrangements also provide a lump sum life assurance benefit of four times salary.
All tax-approved benefits are subject to HMRC limits. Pension entitlement is based on salary only.
In April 2006 service related pension accrual under final salary pension arrangements ceased for those whose pension interest then exceeded the ‘Lifetime Allowance’ of £1.5m. In broad terms, this is equivalent to a maximum pension of £75,000 p.a., or such higher amount as had accrued by April 2006. Similar cessations applied under money purchase pension arrangements. Affected colleagues receive an annual non-pensionable cash allowance of 25% of salary, payable monthly, in lieu of such service related pension accrual or money purchase pension contributions. This cash allowance does not count as salary for the purposes of the incentive schemes.
Similar cessations took place in April 2007 and will take effect in April 2008 (and in each subsequent April) as more colleagues’ pension interests exceed the ‘Lifetime Allowance’ applicable at that time.