National Grid 2008 Annual Report Download - page 620

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 34166
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 95
Description: EXHIBIT 15.1
0/4291.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/291/4*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 34166
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 95 Description: EXHIBIT 15.1
0/4291.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/291/4*
Table of Contents
Annual Report and Accounts 2007/08
103
Pensions
Current UK-based Executive Directors are provided with final
salary pension benefits. The pension provisions for the UK-
based Executive Directors are desi
g
ned to provide a pension
of one thirtieth of final salary at age 60 for each year of
service subject to a maximum of two thirds of final salary,
includin
g
any pension ri
g
hts earned in previous employment.
Within the pension schemes, the pensionable salary is
normally the base salary in the twelve months prior to
leaving the Company. Life assurance provision of four times
pensionable salary and a spouse’s pension equal to two
thirds of the Executive Director’s pension are provided on
death.
UK-based Executive Directors have elected to participate in
the unfunded scheme in respect of any benefits in excess of
the Lifetime Allowance or their Personal Lifetime Allowance.
An appropriate provision in respect of the unfunded scheme
has been made in the Company’s balance sheet. These
Executive Directors are able to cease accrual in the pension
schemes and take a 30% cash allowance in lieu of pension if
they so wish. These choices are in line with those offered to
current senior employees in the Company, except the cash
allowance varies depending upon organisational grade.
US-based Executive Directors participate in a qualified
pension plan and an executive supplemental retirement plan
provided by National Grid’s US companies. These plans are
non-contributory defined benefit arran
g
ements. The qualified
plan is directly funded, while the supplemental plan is
indirectly funded through a ‘rabbi trust’. Benefits are
calculated using a formula based on years of service and
hi
g
hest avera
g
e compensation over five or three consecutive
years. In line with many US plans, the calculation of benefits
under the arrangements takes into account salary,
salary. At the end of the savings period, these
contributions can be used to purchase ordinary shares in
National Grid at a discount capped at 20% of the market
price set at the launch of the scheme.
Share Incentive Plan (SIP): Employees resident in the UK,
including UK-based Executive Directors, are eligible to
participate in the SIP. Contributions up to £125 are
deducted from participants’ gross salary and used to
purchase ordinary shares in National Grid each month.
The shares are placed in trust and if they are left in trust
for at least five years, they can be removed free of UK
income tax and National Insurance Contributions.
US Incentive Thrift Plans: Employees of National Grid’s
US companies (including US-based Executive Directors)
are eligible to participate in the Thrift Plans, tax-
advantaged savings plans (commonly referred to as 401
(k) plans). These are defined contribution pension plans
that give participants the opportunity to invest a maximum
of 50% of salary (pre-tax) and/or up to 15% of salary
(post-tax) up to applicable Federal salary limits
(US$225,000 for calendar year 2007 and US$230,000 for
2008). The Company matches 100% of the first 2% and
75% of the next 4% of salary contributed, resulting in a
maximum matching contribution of 5% of salary up to the
Federal salary cap. For employees in legacy KeySpan
plans, the Company matches 50% of employees’
contributions up to a maximum Company contribution of
3%. Employees may invest their own and Company
contributions in National Grid shares or various mutual
fund options.
bonuses and incentive share awards (the DSP) but not share
options or the PSP awards. The normal retirement a
g
e under
the qualified pension plan is 65. The executive supplemental
plan provides unreduced pension benefits from age 55. On
the death of the Executive Director, the plans also provide
for a spouse’s pension of at least 50% of that accrued by the
Executive Director. Benefits under these arrangements do
not increase once in payment.
Non-cash benefits
The Company provides competitive benefits to Executive
Directors, such as a fully expensed car or a cash alternative
in lieu of car and fuel, use of a driver when required, private
medical insurance and life assurance. Business expenses
incurred are reimbursed in such a way as to give rise to no
benefit to the Executive Director.
Flexible benefits plan
Additional benefits may be purchased under the flexible
benefits plan (the Plan), in which UK-based Executive
Directors, along with most other UK employees, have been
given the opportunity to participate. The Plan operates by
way of salary sacrifice, that is, the participants’ salaries are
reduced by the monetary value used to purchase benefits
under the Plan. Many of the benefits are linked to purchasin
g
additional healthcare and insurance products for employees
and their families. A number of the Executive Directors
participate in this Plan and details of the impact on their
salaries are shown in table 1A on page 105.
Similar plans are offered to US-based employees. However,
they are not salary sacrifice plans and therefore do not affect
salary values. Both Tom King and Bob Catell participate in
such plans.
Share ownership guidelines
Executive Directors are required to build up and retain a
shareholding representing at least 100% of annual salary.
This will be achieved by retaining at least 50% of the after-
tax
g
ain on any options exercised or shares received throu
g
h
the long-term incentive or all-employee share plans and will
include any shares held beneficially.
Share dilution through the operation of share-based
incentive plans
Where shares may be issued or treasury shares reissued to
satisfy incentives, the aggregate dilution resulting from
executive incentives will not exceed 5% in any ten year
period. Dilution resulting from all incentives, including all-
employee incentives, will not exceed 10% in any ten year
period. The Remuneration Committee reviews dilution
against these limits regularly and under these limits, the
Company currently has headroom of 3.8% and 5.65%
respectively.
Executive Directors’ service contracts
Service contracts for all Executive Directors provide for one
year’s notice by either party. Bob Catell has a fixed term, two
year contract with one year’s notice by either party until the
first anniversary and during the second year of employment
his notice period reduces so that employment ends on 24
August 2009.
Entitlement to payment of 12 months’ remuneration on early
termination for Executive Directors is not automatic and is
determined by the Remuneration Committee exercising its
sole discretion, taking into account the circumstances of the
termination. In determining any other such payments, the
Remuneration Committee
g
ives due re
g
ard to the comments