Accountability

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 75 out of 683 staff (2006: 83 out of 622), including two of the four executive directors, were accruing any element of DB pension.

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 2007 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 April 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). Pensionable salaries of members restricted up to March 2006 by the HM Revenue & Customs earnings cap are continuing to grow, calculated as if that cap had continued on the same increasing basis, until the pensionable salary reaches the actual March 2006 salary. 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 are 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 until March 2009.

The DB employee contribution rate remained 5% of DB pensionable salary following these changes. 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, based on the triannual actuarial review of 2004 which predated the changes made in 2006, was 30.2% of pensionable salary. This is expected to reduce once the results of the 2007 actuarial review have been finalised. In 2006 the Group also raised the normal pension age from 60 to 65, and introduced greater retirement flexibility. By no later than 2009, there is likely to be an on-going saving in the Group’s overall pension costs as a percentage of salaries compared with the position before 2006.

© Copyright Amlin 2007