Annual Report 2008

Non performance-related rewards: benefits

Non performance-related benefits to which executive directors and other employees are generally entitled are private health insurance, cover for death in service and permanent disability and a choice of other benefits, such as subsidised gym membership, private dental costs, etc. Senior staff, including executive directors, also receive a car allowance.

Non performance-related rewards: employer pension contributions

The Company pays a percentage of base salary into either a Group occupational or stakeholder pension plan. Executive directors serving during the year participate in the relevant group pension plans on the same basis as other senior employees who are not directors. Pensionable salary is base salary only and dependants’ pensions are provided in addition to death in service cover. The Group has both defined contribution (DC) and defined benefit (DB) schemes. At the year end only 70 out of 745 staff (2007: 75 out of 683) were accruing any element of DB pension. This includes two of the four executive directors during the year (one of whom retired as an executive on 31 December and therefore ceased to accrue from that date).

In respect of DC pensions, the Group contributes a percentage of base salary depending on seniority, age and the percentage of salary (if any) that the employee chooses to contribute. The maximum total DC employer contribution made for any director in 2008 was 15% of base salary.

The Group’s DB schemes have been closed to new entrants since 1998 and, to create greater equality of treatment between staff and to limit further the uncertainty of future pension costs, the Company implemented benefit changes in 2006. These allow the remaining active DB members to continue accruing additional years’ service under the schemes, but such accrual is now generally based on 2006 pensionable salaries, as are DB pensions resulting from service to that date (in the latter case uprated for inflation, with a 5% cap). Salary increases from April 2006 onwards are pensioned only through the Company’s stakeholder DC arrangements. From that date the accrual rate was also rationalised (at 45th’s in the case of directors and others at senior level). Those affected by these changes have been receiving partial compensation through the Group passing on the first three years’ estimated saving in on-going DB scheme costs in higher employer contributions to their DC stakeholder pensions. The compensation payments finish in March 2009. Policies have been adopted to make minor variations to these arrangements for those few directors and staff affected by either the former pensions earnings cap or the present pensions lifetime allowance.

The DB employee contribution rate is 5% of DB pensionable salary. DB employer contribution rates vary according to actuarial advice in order to deliver the promised levels of pension. The rate applying under the main DB scheme during 2007 and until July 2008, based on the triannual actuarial review of 2004 which predated the changes made in 2006, was 30.2% of pensionable salary. Based on the 2007 triannual actuarial review, this has now reduced to an ongoing rate from 1 January 2009 of 19%. In 2006 the Group also raised the normal pension age from 60 to 65. By no later than 2009, there is likely to be an on-going saving in the Group’s overall pension costs compared with the position before 2006.

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