FSA Annual Report 2006/07 - Better Regulation Ltd

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Section five – Corporate governance statement and remuneration report FSA Annual Report 2006/07 63 Remuneration report This section of the remuneration report is not subject to audit. Information on the appointment of the Chairman and the Executive Directors can be found in the Report of the Directors on page 55 and in the emoluments table on page 65. The Executive Directors have continuous contracts of employment that provide for 12 months’ prior notice of termination by either party, with a maximum of 12 months’ total remuneration (as described below) payable in the event of early termination of the contract by the FSA. In determining the remuneration of the Executive Directors, the Committee undertook an evaluation of their performance, assisted by an assessment of performance against objectives. The objectives for each Director took account of the FSA’s overall objectives by reference to the Business Plan and the individual Director’s areas of responsibility. The Committee also considered feedback on each individual Director from HM Treasury and the Chairs of the Practitioner and Smaller Businesses Practitioner Panels. It has the benefit of advice from the Director, Human Resources, and market data from Watson Wyatt, its external consultants. The Company uses Watson Wyatt on an ad hoc basis for salary benchmarking exercises. The total remuneration package of the Executive Directors comprises the same four elements as apply to other FSA employees. • Basic Pensionable Salary Salaries are reviewed annually. In setting base salaries for the Chairman and Executive Directors, the Committee aimed, so far as possible, to position these at or around the median market level applying in the private sector. • Performance-related bonus The Executive Directors are eligible to be considered for a performance related bonus up to a maximum of 25% of basic pensionable salary. At his request, the Chairman was not considered for a bonus. • Other benefits A sum is available for each employee which may be spent against a range of benefits. The sum for the Chairman and Executive Directors is shown in table 5.5. The Chairman and Executive Directors also have access to a car and driver, and an appropriate portion of these costs is included in ‘other emoluments’ in the table on page 65. • Pensions There are two sections to the FSA Pension Plan (the Plan) operated by the FSA, both of which are noncontributory; a defined benefit section (closed to new entrants), and a defined contribution section. Callum McCarthy, David Kenmir and Clive Briault are members of the defined contribution section of the scheme. Before they were appointed as Managing Directors, David Kenmir and Clive Briault were members of the FSA’s defined benefit scheme, and they retain deferred benefits in that section. John Tiner and Hector Sants are not members of the Plan and are contractually entitled to receive a non-pensionable supplement to their base salary, in lieu. The sums paid to the Chairman and each of the Executive Directors in respect of each component are in the table on page 65. Table 5.5 Director Callum McCarthy John Tiner Clive Briault David Kenmir Hector Sants Flexible benefits account (£) 25,381 25,986 20,072 19,378 22,046
64 Section five – Corporate governance statement and remuneration report FSA Annual Report 2006/07 Non-executive Directors In order to facilitate the independent assessment of fees for Non-executive Directors, their remuneration is set by an independent panel, the membership of which comprises the Chairs of the Practitioner and Consumer Panels, or their nominees, and an external moderator. In April 2006 the Panel reviewed the fees payable; the Panel increased the fees for Non-executive Directors and the Chairman of FSA Pension Plan Trustee Ltd as shown in the table on page 65. At the end of the year, a deferred defined benefit pension was held in the Plan for two current Executive Directors, as a result of their active membership in the defined benefit section of the Plan up to 1 April 2004. From 1 April 2004 the two current Executive Directors joined the defined contribution section of the Plan. Details of accrued benefits in the defined benefit section are set out in table 5.6. Table 5.7 sets out the transfer values of those Directors’ benefits under the scheme, calculated in a manner consistent with ‘Retirement Benefit Schemes – Transfer Values (GN11)’, published by the Institute of Actuaries. Members of the Plan have the option to pay Additional Voluntary Contributions; neither contributions nor the resulting benefits are included. Emoluments tables This section of the report, which contains information on Directors’ emoluments, contains audited information. Table 5.6 Accrued pension Real increase/(decrease) Accrued pension at 31 March 2006 in accrued pension Inflation at 31 March 2007 £’000 £’000 £’000 £’000 1 Clive Briault 71 – 3 74 David Kenmir 52 – 2 54 1 The defined benefit entitlement is based on pensionable service to 1 April 2004 and final pensionable salary as at 1 April 2004. The Directors ceased to accrue any further benefits in the defined benefit section of the Plan from 1 April 2004. The Directors’ pension entitlement at their normal retirement date will be the leaving service pension at 1 April 2004 increased broadly by the change in the retail price inflation index (capped at 5% p.a.) between 1 April 2004 and date of retirement, calculated in accordance with legislation and the Rules of the Plan. Any pension from the defined contribution section of the Plan will be paid in addition to this pension. Table 5.7 Transfer value at Transfer value of real Other changes Transfer value at 31 March 2006 increase in accrued pension to transfer value 31 March 2007 £’000 £’000 £’000 £’000 Clive Briault 690 – 182 872 David Kenmir 386 – 102 488
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