Aviva 2009 Annual Report Download - page 106

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Aviva plc Directors’ remuneration report continued
Annual Report and Accounts 2009
Remuneration policy in practice for EDs
Table 4, below, summarises Aviva’s remuneration policy as it is applied in practice to EDs.
Table 4: Remuneration Policy in practice
Policy How delivered
Total remuneration
Total remuneration package levels are informed by relevant pay data, in particular the lower
quartile to median range of the FTSE 30 and the median to upper quartile range of the
FTSE 50.
These reference points are chosen to reflect Aviva’s market capitalisation and comparability
to other large, sophisticated multi-national companies and the positioning that is appropriate
to Aviva in those different comparator groups.
— Basic salary
— ABP
— OATTV Plan
— LTIP
— Long-term savings
— Aviva Staff Pension Scheme (ASPS)
— Benefits
— All employee schemes
Basic salary
Benchmarked as for total remuneration but with positioning and progression taking account — Monthly in cash
of individual and business performance and the levels of increase provided for the broader UK — Reviewed annually in February, with changes
employee population (basic salaries of the UK staff increased by 3% on average in 2009). taking effect from 1 April.
The Committee takes seriously institutional investors’ concerns on the upward ratchet of basic
salaries and is rigorous in its review of market position and salary.
ABP
The ABP is intended to motivate executives to achieve the annual business plan, based on a — Annually, one-third is paid in cash and two-
series of key financial, employee and customer performance indicators (KPIs), which make up thirds in deferred shares.
70% of the bonus opportunity, and personal objectives which make up 30%.
75% of basic salary is payable for “on target” performance and up to 150% for “stretch”
performance.
Two-thirds of bonus is deferred into shares and the deferred shares vest on the third
anniversary of the date of grant, subject to the recipient remaining in service. On resignation
during the three-year deferral period, all or part of the grant is forfeited (100% in year of
grant, 50% in following year and 25% in year after that). Additional shares are awarded at
vesting in lieu of the dividends paid on the deferred shares during the deferral period.
OATTV Plan
The OATTV Plan aligns senior executives with the Group Chief Executive clear strategic aim
of doubling EPS by the end of 2012.
The plan matches 100% of the deferred ABP shares for the Group Chief Executive (75% for
other EDs)
For the 2009 awards, the vesting of these matched shares is dependent on the achievement
of 49.2 pence per share and then compounded annual growth targets as follows:
— Less than 12.5% growth pa Nil
— 12.5% growth pa 0.1 for 1
— 41.5% growth pa 2 for 1
Matching is on a straight-line basis for performance from 12.5% to 41.5%. No additional
shares are awarded for the dividends paid during the three-year performance period on those
shares that vest.
— Annually, a proportion of the deferred element
of the ABP is matched in shares.
— Shares vest based only upon the achievement
of demanding EPS growth targets.
LTIP
The LTIP is intended to motivate the achievement of the Company’s longer-term objectives,
to aid the retention of key personnel and to align executive interests to those of shareholders.
The Group Chief Executive is eligible to receive an annual award of shares equal to 175% of
basic salary. Other EDs are eligible to receive an annual award of shares equal to 150% of
basic salary.
The Company operates a phantom scheme in the United States (US) for its US-based
employees. Levels of awards reflect US market practice.
No additional shares are awarded for the dividends paid during the three-year performance
period on those shares that vest.
— Annual awards in shares that vest, subject to
ROCE and relative TSR performance conditions
being met at the end of a three-year
performance period.
— Awards that do not vest lapse.
Long-term savings
The Aviva Capital Accumulation Plan (ACAP) is a long-term savings vehicle which aids — Discretionary payments into a trust where they
retention whilst recognising a need for flexibility in long-term wealth planning. are held for a minimum of five years.
Company contributions are discretionary and vary year on year, but would not normally
exceed 50% of basic salary. Contributions for the EDs are shown in the table on page 113.
No ED who participates in the ACAP is currently accruing benefits in the ASPS. A resignation
or departure for breach of contract generally results in forfeiture of contribution for the
relevant year.
ASPS
The UK ASPS provides a competitive post retirement package. No ED is currently accruing — Deferred cash payable on retirement in the
service-based benefits in the ASPS. form of a lump sum /monthly payment.
The scheme provides accrual at 1/30th, 1/45th or 1/60th of annual basic salary depending on
seniority and the date of joining the scheme.
Lump sum death in service benefit of four times basic salary is provided, as is a spouse’s or
partner’s pension equal to two-thirds of actual or, on death in service and in certain other
circumstances, prospective pension. Post retirement increases are equivalent to the Retail Price
Index up to a maximum of 10%. Retirement benefits can be accessed from age 60.