Tesco 2013 Annual Report Download - page 54

50 Tesco PLC Annual Report and Financial Statements 2013
Directors’ remuneration report continued
How remuneration policy will be applied in 2013/14
Salary
Policy • Base salary is designed to attract and retain talented individuals.
• It is set to reflect individual capability, responsibilities and market-competitive positioning.
Benchmarking
group
• The Committee reviews salary levels at the leading FTSE companies, other major retailers 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%. This was the same as the 2% average increase
for other colleagues.
• Pay levels for all Group colleagues 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 2013 and salaries following this review will be disclosed in next year’s report.
Pension
Policy • Pension provision is central to our ability to foster loyalty and retain experience, which is why Tesco wants to ensure
that pension is a highly valued benefit.
• Both current 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 (Final Salary Scheme).
• This Final Salary Scheme is now closed to new entrants and has been replaced in the UK by a defined benefit scheme
based on career average earnings. New Executive Directors will be automatically enrolled into this scheme.
• From 1 June 2012, two changes were made in respect of the build-up of future benefits under the Pension Scheme.
These changes applied to all participants in the Scheme including the Executive Directors. Firstly, whilst the Normal
Pension Age remains unchanged, the age at which a full pension is paid was increased by two years from 60 to 62.
This 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.
• Pension accrued before 1 June 2012 and drawn before age 60 will be actuarially reduced to reflect early retirement.
Pension accrued from 1 June 2012 will be actuarially reduced if it is drawn before the age at which a full pension is paid
(currently age 62 but subject to adjustment up or down to reflect unexpected changes in life expectancy).
• Our defined benefit pension remains a key part of our total reward package for all UK colleagues.
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 without incurring additional tax charges. The balance of any pension
entitlement for Executive Directors is delivered through an unfunded retirement benefit scheme (‘SURBS’). The SURBS
is secured by using a fixed charge over a cash deposit in a designated account.
• This SURBS is closed to new entrants.
Employee
contribution
• Executive Directors who are members of the Final Salary Scheme are required to contribute 10% of salary. New Executive
Directors will be required to contribute 7.75% of salary into the new career average pension scheme. Both these rates are
in line with contribution levels by senior management below Board level.
Further details of the pension benefits earned by the Directors can be found on page 60.
Short-term bonus
The table below sets out a summary of the maximum opportunity under the short-term bonus for 2013/14:
At a glance During the year the Committee reviewed the performance measures
used for the short-term bonus plan in light of our business priorities for
the foreseeable future and the financial performance that shareholders
can expect us to deliver in the current economic environment. The
Committee decided to expand the success factors against which annual
performance is assessed to create a better balance between incentive
payouts, financial results, and the strategic drivers of sustainable
shareholder value.
• Maximum opportunity of 250% of salary for the CEO.
• Maximum opportunity of 200% of salary for the CFO.
• Half payable in cash and half payable in shares which are deferred
for three years.
• Clawback provisions apply to the deferred shares element prior
to vesting.