Tesco 2012 Annual Report Download - page 72

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Fixed remuneration for 2012/13
Salary and pension
Base salary
Policy  Base pay is designed to attract and retain talented individuals.
 It is set to reflect individual capability, responsibilities and market-competitive positioning.
Benchmarking group  The Committee examines salary levels at the major retailers, the leading FTSE companies and ensures
consideration is also given to appropriate international competitors.
Relationship to all
employee pay
 The Committee also takes into account pay conditions throughout the Group in deciding executive
annual salary increases.
 The average increase for established Executive Directors last year was 2.4%. The average increase for
senior management below Board level last year was 2.4%, and for other employees the average increase
was typically around 2.5%.
 Pay levels Group-wide are determined with consideration to a number of factors, including the prevailing
economic environment, discussions with employee representative groups, and current market practice.
Review date  Base salaries are typically reviewed with effect from 1 July each year.
 The next salary review will be 1 July 2012 and salaries following this review will be disclosed in next
year’s report.
Pension
Philosophy  Pension provision is central to our ability to foster loyalty and retain experience, which is why Tesco wants
to ensure that the Tesco PLC Pension Scheme is a highly valued benefit.
Pension policy  All Executive Directors are members of the Tesco PLC Pension Scheme, which provides a pension of up to
two-thirds of base salary on retirement, normally at age 60, dependent on service.
 Pension drawn before age 60 will be actuarially reduced to reflect early retirement.
 The Final Salary Scheme is now closed to new entrants and has been replaced in the UK for new entrants
throughout the organisation by a defined benefit pension scheme based on career average earnings.
 Our defined benefit pension is a key incentive and retention tool throughout the organisation and
remains an important part of our reward package for all UK employees.
SURBS  Since April 2006, following implementation of the regulations contained within the Finance Act 2004,
and the subsequent changes to the annual allowance in 2010, Executive Directors have been eligible
toreceive the maximum pension that can be provided from the registered pension scheme.
 The balance of any pension entitlement for all Executive Directors is delivered through an unapproved
retirement benefits scheme (‘SURBS’). Except for Tim Mason (US CEO), the SURBS is ‘secured’ by using
a fixed charge over a cash deposit in a designated account.
Employee contribution  Over the last few years employee pension contributions by our Executive Directors have been increasing
progressively.
 In 2011/12 the level of employee contribution was 10% of salary which is in line with contribution levels
by senior management below Board level. Contributions for 2012/13 will remain at this level.
The Company is currently consulting with employees regarding some proposed changes to the pension scheme. These changes, which would be
expected to come into effect from 1 June 2012 and only apply to benefits that build up in the future, will apply to all participants in the scheme
including the Executive Directors. There are two proposed changes. The first is that, whilst the Normal Pension Age remains unchanged, the age
at which a full pension is paid will increase by two years – and which will be adjusted up or down to reflect any further unexpected changes in life
expectancy. Secondly, we will increase pensions, up to 5%, by CPI instead of RPI.
Further details of the pension benefits earned by the Directors can be found on page 80.
Directors’ remuneration report
68 Tesco PLC Annual Report and Financial Statements 2012