Article date: 23 June 2015
The Remuneration Code applies to Aviva Wrap UK Limited. This is a subsidiary firm of Aviva Life Holdings UK Ltd and the principal activity of which is the sale of units in authorised unit trusts, shares in open ended investment company (OEICs) sub-funds, and the management of Personal Equity Plans and Individual Savings Accounts. It is designated as a level three organisation as defined in the Remuneration Code. This disclosure meets the requirements of Article 450 of the Capital Requirements Regulation.
a) Decision-making process for remuneration policy
Aviva Wrap UK Limited is governed by Aviva’s Group Remuneration Committee ‘The Committee’ which meets regularly to consider issues relating to the remuneration policy and structures for the Aviva Group including the terms of annual bonus and long-term incentive plans and individual remuneration packages for all employees to which the Remuneration Code applies.
The Committee’s attendees comprise the Non-Executive Directors, Chairman, Chief Executive Officer and HR Director of Aviva Plc. Where appropriate the Chief Risk & Capital Officer, Chief Finance Officer, Chief Audit Officer and Chief Strategy & Development Director will advise The Committee and the Group Reward Director & Executive Reward Director will advise on matters specifically in respect to the firm’s remuneration policy. No individual is involved in decisions relating to their own remuneration. In 2014, the Committee met on nine occasions.
The Committee approves the Remuneration Policy Statements for Aviva Wrap UK Limited. They consider alignment between Group strategy and the remuneration of its Directors and therefore Code staff. Our remuneration policy provides market competitive remuneration, and incentivises Code staff to achieve both the annual business plan and the longer term strategic objectives of the Group. Significant levels of deferral and the introduction of an aggregate shareholding requirement align interests with those of shareholders and aid retention of key personnel. As well as rewarding the achievement of objectives, variable remuneration can be zero if performance thresholds are not met.
The creation of long-term wealth for our shareholders is the guiding principle that underpins the work and decisions of the Committee. A clear Group strategy has been defined to achieve long-term sustainable growth, based on the three anchors of:
- True Customer Composite
- Digital First; and
- Not Everywhere
The full objectives are documented in the Directors’ remuneration report in the Aviva Annual Report which is included on the Investor Relations web site, found here:
b) External consultants
During the year the Group Remuneration Committee received advice on executive remuneration matters from Deloitte LLP which is a member of the Remuneration Consultants Group and adheres to its Code of Conduct. Deloitte LLP was appointed as advisor to the Committee on 4 December 2012.
c) Role of the relevant stakeholders
The Remuneration Committee takes full account of the company’s strategic objectives in setting remuneration policy and is mindful of its duties to shareholders and other stakeholders. The Committee seeks to preserve shareholder value by ensuring the successful retention, recruitment and motivation of employees.
d) Code Staff criteria
The following groups of employees have been identified as meeting criteria for Code Staff:
- Members of the firm’s board e.g. statutory directors including non-executive directors.
- Any director\employee holding any of the following currently defined FCA Control Functions in respect of the firm (changes to be made as appropriate should FCA change the control function definitions);
- CF1: Director Function;
- CF2: Non-Executive Director;
- CF3: Chief Executive Function;
- CF8: Apportionment and oversight function;
- CF10: Compliance Oversight Function;
- CF10A: CASS Operational Oversight Function;
- CF11: Money Laundering Function;
- CF28: Systems and Controls Function;
- CF29: Significant Management Function.
- Any employees with delegated financial or other authority for the firm equivalent to directors\members of the firm’s board.
- From 2015 (the first full performance year following the introduction of the new EBA guidance on Material Risk Takers), a quantitative assessment for identifying Code staff has also been introduced.
The Code Staff population is reviewed at least annually by the Remuneration Committee and Code Staff are notified of their status.
e) The link between pay and performance for Code Staff
The remuneration framework is based on a total reward approach and is designed to achieve alignment with Aviva’s business strategy. Remuneration packages are leveraged, with a suitable percentage of pay ‘at risk’ against the achievement of stretching goals, which is aligned with the Company’s risk profile and employee behaviour. There are four components of pay:
- Basic Salary – set within an appropriate market range, which is sufficient to allow the possibility, where performance so warrants, that an employee may receive no variable pay.
- Annual bonus – a discretionary short term incentive plan where individuals have the opportunity to receive a bonus (which may be subject to 3 year deferral in to Group shares) based on business and individual performance against targets. The extent to which each aspect of performance affects the overall payment level depends on the role and responsibilities of the individual. Company and Individual performance is measured against objectives built under Financial, Customer and People headings.
- Long Term Incentive Plan – the LTIP encourages a longer-term management focus on Return on Equity (ROE) and relative Total Shareholder Return (TSR). These metrics measure how the Company is performing in both absolute and relative terms.
- Benefits in Kind – standard benefits are provided that are appropriate to the market.
Aviva believes in rewarding strong performance and achievement of our business and individual goals, however, the manner in which these goals are achieved is also important. We do not consider it appropriate to reward people who have engaged in inappropriate behaviour or conduct which is not in line with Aviva’s values. As such the Company may decide that a Deferred Share Award which has not vested will lapse wholly or in part if they consider that:
- the participant or his team has, in the opinion of the Directors, engaged in misconduct which ought to result in the complete or partial forfeit or repayment of their award;
- there has been, in the opinion of the Directors, a material failure of risk management by reference to Group risk management standards, policies and procedures, taking into account the proximity of the participant to the failure of risk management in question and the level of the participant’s responsibility;
- there is, in the opinion of the Directors, a materially adverse misstatement of Aviva’s or the participant’s relevant business unit’s financial statements for which the participant has some responsibility;
- the participant participated in or was responsible for conduct which resulted in significant loss(es) to their relevant business unit, Aviva or any member of the Aviva Group;
- the participant failed to meet appropriate standards of fitness and propriety;
- there is evidence of misconduct or material error that would justify, or would have justified, had the participant still been employed, summary termination of their contract of employment; or
- any other circumstances required by local regulatory obligations to which any member of the Group or business unit is subject.
f) Aggregate remuneration cost for Code Staff
Having reviewed the business it was considered that the operations of Aviva Wrap UK Limited should be considered as one business unit.
There were 12 Code Staff for all or part of the 2014 performance year. Aggregate remuneration expenditure in respect of Code Staff for the 2014 performance year was £4.653m.
This cumulative remuneration represents 34%, 13% and 53% of fixed, pension/benefits and variable remuneration respectively.
Of the total variable pay (bonus and LTIP) made to Code staff, 53% was deferred in to Aviva Group shares for 3 years and is subject to malus provisions as outlined above during this period. From 2016 such deferred payments will additionally be subject to clawback provisions for a further 2 years upon vesting.