Final Results - Part 4 of 8

RNS Number : 7409X

Standard Life plc

24 February 2017

Standard Life plc

Full Year Results 2016

Part 4 of 8

5. Directors' remuneration report

5.1 Remuneration Committee Chairman's statement

This report sets out what we paid the Directors of Standard Life plc in 2016 and how we will pay them in 2017, together with an explanation of what the Remuneration Committee considered in reaching its recommendations. Where tables and charts in this report have been audited by PricewaterhouseCoopers LLP we have marked them as 'audited' for clarity.

The report is structured in the following sections:

· This statement which sets actual remuneration for 2016 and proposed remuneration for 2017 for our Directors in the context of Group performance

· An 'at a glance' summary of the key remuneration decisions for 2016 on page 83

· A summary of our Directors' remuneration policy on pages 84 to 87. The policy was approved at the 2015 AGM. No changes are proposed and so there will be no resolution for a vote on the Directors' Remuneration Policy at the 2017 AGM.

· Our annual report on remuneration, beginning on page 88, details the decisions we took and how we applied our remuneration policy for our Directors for the 2016 performance year. This will be subject to an advisory shareholder vote at the 2017 AGM.

Approval

The Directors' remuneration report was approved by the Board and signed on its behalf by

Melanie Gee,

Chairman, Remuneration Committee

24 February 2017

Dear Shareholder

On behalf of the Board I am pleased to present the Remuneration Committee's report on Directors' remuneration for the year ended 31 December 2016. This sets out how our remuneration policy, adopted at our 2015 AGM, was applied during 2016.

This is my first report as Chairman of the Remuneration Committee having taken over the role after the 2016 AGM. I would like to thank Lynne Peacock who served as the previous Committee Chairman, the Board, and my fellow Committee members for their support.

Executive remuneration remains under intense scrutiny and we recognise that it is important that companies, especially a major investor such as Standard Life, must consider very carefully how senior executives are paid. We remain conscious of the societal impact of executive remuneration and views of the Government, investors and their representatives and also the general public. However, we must attract and retain talented individuals to manage our company and ensure that they are appropriately incentivised within the global market place.

Looking back at the 2016 AGM

When we appointed Keith Skeoch to replace David Nish as Chief Executive in August 2015 the Remuneration Committee restructured his pay to reflect his new responsibilities of running both an investment business and a life assurance business. We believe in the alignment of reward and performance and compared to his predecessor, David Nish, the variable component of Keith's pay was increased, the deferral period of the shares was lengthened and the shareholding requirements were increased. His basic salary was increased but was positioned considerably below that of his predecessor. We also set stretching performance targets, so that the highest levels of reward are only delivered for exceptional performance.

However, it became clear in the lead up to the 2016 AGM that views on executive remuneration had continued to evolve. Whilst a number of our shareholders were comfortable with our proposals, others had concerns with elements of our executive Director remuneration. The concerns raised by these shareholders were in respect of the terms for new appointments to the Board, Keith's promotion, and the termination arrangements for David Nish. As such, prior to the 2016 AGM, the Chairman and the Director of Group Reward and Employment Policy held discussions with a number of our largest investors and also with the Investment Association (IA) and Institutional Shareholder Services Inc. (ISS) to understand these concerns.

Having listened to the concerns raised, Keith volunteered a reduction in the 2016 Executive Long-Term Incentive Plan (Executive LTIP) award that had been granted to him on 24 March 2016. The Committee approved a reduction equivalent to 100% of Keith's basic salary, from 500% to 400%, in the face value of this 2016 Executive LTIP award. This was communicated by an announcement to the Stock Exchange on 11 May 2016. A number of shareholders had voted before the announcement was made, but others changed their position as a result of the decision, with the result that 77.69% of shareholders voted for the resolution to approve the Directors' remuneration report.

The Committee also agreed that until a new policy is approved by shareholders, 400% will be the maximum annual award grant level for executive Directors and it reviewed the approach to bonuses during garden leave for executive Directors and agreed to adopt best practice.

As a long-term investor, Standard Life champions the principles of good governance and stewardship. As part of these principles my fellow Board members and I strongly believe that constructive engagement with our investors is essential to building relationships based on trust and accountability. As such, recognising that 22.31% of shareholders voted against the resolution to approve the Directors' remuneration report, the Committee felt it was essential that I, as the new Chairman of the Remuneration Committee, follow up with our investors (including those who supported the resolution and those who voted against or abstained), to understand fully their views in relation to our executive remuneration. During the summer of 2016, I met with a number of our largest investors, the IA and ISS to understand fully the concerns raised in the lead up to the 2016 AGM. We also discussed our thinking regarding our future remuneration arrangements and solicited their views on the shape and direction of executive remuneration. The meetings were open, frank and constructive and were very helpful in gaining a detailed understanding of the concerns. The points raised by investors were discussed with the Remuneration Committee members and have informed our thinking regarding 2016/2017 remuneration and continue to inform our consideration of a new remuneration policy to be presented at the 2018 AGM. I would like to thank our investors and the IA and ISS for their time.

Our performance in 2016 and alignment with remuneration

2016 has been a year in which we have seen increased political uncertainty, regulatory and legislative complexity and market volatility. Against this complex backdrop our people have delivered a strong set of results while continuing to drive our strategic agenda. Our business model is based on increasing assets, growing revenue and lowering unit costs to drive profit. For 2016 operating profit has increased to £723m (2015: £665m) and operating return on equity has increased to 15.2% (2015: 14.2%). Net outflows were £2.6bn (2015: £6.3bn inflow), however, gross inflows remained strong at £42.1bn (2015: £43.0bn). The proposed final dividend, combined with the 2016 interim dividend brings the total dividend for the year to 19.82p - an increase of 8.0% on the 2015 full year dividend.

We have continued to develop strong relationships with our customers and clients. Standard Life Investments has continued to expand and diversify by geography, channel, client type and range of solutions. We have partnered with leading advisers and consultants in the UK - embedding workplace and platform solutions, and continued to grow strategic alliances that serve our markets worldwide. However, we have seen a fall of 11 points in our brand net promoter score which is an important measure of customer advocacy and a key consideration in the customer quadrant of the Group annual bonus scorecard. We've planned a number of actions for 2017 to improve customer experiences.

As detailed in the Chairman's statement and Chief Financial Officer's overview we have made a provision in our accounts for the costs we may incur in relation to the outcome of the Financial Conduct Authority's thematic review into the sale of non-advised annuities. This has been discussed by the Committee as part of its consideration of performance in respect of the Group annual bonus scorecard and the 2014 Executive LTIP.

Attracting, retaining and developing talented people is critical to successful delivery of our strategy and we believe that engaged people are central to building long-term customer and client relationships. To support our diverse workforce we have a number of employee networks and we remain committed to youth employment. We continue to develop our people managers with a tailored 12-month training programme, recognising the critical role of people managers in the engagement of our employees. In our 2016 employee survey we saw a 2% point increase in employee engagement to 65%. However employee enablement, the measure of how well employee skills are utilised and working environments facilitate productivity, dropped by 2% points to 62%. Action plans are being put in place to address key themes from the survey.

The Group continues to evolve and progress towards building a world-class investment company. We continued to expand and diversify Standard Life Investments' client base by geography, channel, client type and range of funds. The integration of Ignis is also substantially complete. Within Pensions and Savings we completed the acquisition of Elevate enhancing our position as a leading platform provider and three acquisitions were completed by 1825, our financial advice business. In Asia we completed the stake increase in HDFC Life and the aim is to complete the proposed combination of the life insurance businesses of HDFC Life and Max Life within the next 12 months subject to necessary approvals.

How our remuneration policy was applied in 2016

2016 Group annual bonus

The bonus award is based on Group performance and personal performance. The relative weightings are 90% based on Group performance and 10% on personal performance for Keith Skeoch. For all other executive Directors their awards are based 80% on Group performance and 20% on personal performance. The Group performance element is based on performance against four quadrants weighted as follows:

· Financial - 70%

- Operating profit before tax

- Operating return on equity (RoE)

· Customer and external leadership - 10%

- Drive customer focus within the organisation and build advocacy for the Standard Life brand

- Protect and enhance Standard Life's corporate reputation

· People - 10%

- Develop our organisational capability by building the environment, the resources, and the capabilities we will need through developing the right behaviours

· Strategic/delivery/process - 10%

- Management of the Group's strategy and its deployment in each business unit including the annual investment programme, any corporate actions and the efficiency of the Group's balance sheet

The key achievements for each scorecard quadrant are detailed on page 90. Having reviewed our performance, including the delivery of the key financial, strategic and non-financial objectives during the year, the Remuneration Committee approved a score of 4.325 out of 5 for performance against the Group annual bonus scorecard in 2016. In making the evaluation under each quadrant, we sought input from both the Risk and Capital Committee and Audit Committee as referenced below.

In reaching its decisions in terms of the annual bonus scorecard the Remuneration Committee considered a range of factors in order to ensure that the awards are fair and appropriately reflect overall Group performance. As well as considering the achievement against the targets, the Committee reviewed the individual components which contributed to the delivery of this financial performance. Looking externally, the Committee also considered the alignment of its decisions on remuneration with the interests of shareholders.

As part of the discussion of the scorecard rating the Committee considered the experience of our customers and clients including the deterioration in our net promoter score and the outcome of the Financial Conduct Authority's thematic review into the sale of non-advised annuities and the provision we have made in our accounts for the costs that we may incur in relation to this. Having considered the experience of our customers and clients the Committee reduced the score for the customer quadrant from 3 to zero. This change took the overall score from 4.625 to 4.325.

Considering this scorecard rating in conjunction with the personal performance of each of the executive Directors, the Remuneration Committee approved the following awards under the Group annual bonus, for 2016;

· 81% of the Chief Executive's maximum potential bonus (141% of salary)

· 79% of the Chief Financial Officer's maximum potential bonus (119% of salary)

· 79% of the Chief Executive Pensions and Savings' maximum potential bonus (119% of salary)

· 80% of the Global Client Director's maximum potential bonus (141% of salary)

Last year, as announced in the 2015 Directors' remuneration report, having considered our bonus deferral levels in the light of regulatory direction and best practice, the Committee decided to increase the deferral period for bonuses from two to three years. This three-year deferral will apply in respect of the bonuses for 2016 as detailed in this report. Normally, 50% of any bonus above 25% of salary is deferred into shares (subject to the deferred amount being at least 10% of salary).

As well as determining the bonus for executive Directors, the Group annual bonus scorecard is also included in the determination of bonus for all employees in central supporting functions, and in the Pensions and Savings business, to provide alignment in reward and performance at all levels of the company.

Until now we have disclosed our bonus threshold and maximum in the Directors' remuneration report published in the year following the bonus payment. In line with best practice, increased transparency and to demonstrate further the alignment of the Company's performance and remuneration, the Committee has decided to accelerate the disclosure of the bonus targets. As such, the threshold, target and maximum for the financial measures used to determine the 2016 Group annual bonus payments are detailed on page 88.

2014 LTIP

Having considered performance over the past three financial years against the three-year cumulative targets set in 2014, as set out in the 'at a glance' section, the Remuneration Committee also approved the vesting level of the 2014 Executive Long-Term Incentive Plan as 31.02% and awards granted under the Standard Life Investments Long-Term Incentive Plan will vest at 62.44%.

In relation to the vesting of the 2014 Executive LTIP, on a purely arithmetic basis the vesting level would be 41.02%. However, when determining the final vesting level for this award the Committee considered performance during the three-year performance period, including the outcome of the Financial Conduct Authority's thematic review into the sale of non-advised annuities and the provision we have made in our accounts for the costs that we may incur in relation to this. Considering these factors the Committee determined that a reduction in the vesting level by circa 25% to 31.02% more appropriately represented the overall performance of the company.

In its consideration of how performance for both the annual bonus and LTIP has been achieved the Committee receives formal input from the Risk and Capital Committee and Audit Committee. The Audit Committee provided comments on material financial and reporting issues that it considered during the year. The Risk and Capital Committee provided advice on how the performance outcome was achieved including specific advice in respect of the Financial Conduct Authority's thematic review into the sale of non-advised annuities.

Before finalising its decisions the Committee reviewed the overall remuneration for our executive Directors considering our shareholder experience over the performance periods, the underlying performance of the company and the remuneration decisions for the broader employee workforce. We believe that the remuneration for our executive Directors is appropriate considering these factors. The single remuneration figure for our executive Directors is presented in the 'at a glance' section below, with the full breakdown set out in Section 5.3 of this report.

Board changes

As announced, on 26 January 2017 Barry O'Dwyer will join the Board on 1 March 2017 in the role of Chief Executive Pensions and Savings. From his appointment to the Board his base salary will be £525,000 per annum and his maximum bonus will be 150% of base salary. For the 2017 Executive LTIP the Committee is proposing to grant an award of 120% of base salary.

As announced, Paul Matthews will retire from the Company on 31 August 2017. With effect from 1 March 2017 Paul will step down as an executive Director but will remain employed until 31 August 2017 in the capacity of Strategic Advisor to the Chief Executive. Paul will continue to be eligible to receive salary and benefits until 31 August 2017 and will accrue bonus until this date. Given his retirement, and in line with best practice, he will not be eligible to participate in the 2017 Executive LTIP award. Existing Executive LTIP grants will be pro-rated up to 31 August 2017 and will vest on the normal vesting dates, subject to the published performance conditions and in line with plan rules. The Remuneration Committee has agreed that any bonus for the 2016 and 2017 performance years will be subject to deferral in line with our remuneration policy. The deferred portion will be deferred for a period of three years. However, the portion of his bonus for the 2015 performance year, which was deferred into shares, will vest on cessation in line with the plan rules.

2016/2017 policy implementation

This year the Committee has decided not to increase the salaries for any of the executive Directors, with salary increases only being awarded by exception across our senior cadre of employees. This is to ensure that the available pay review budget is targeted towards more junior employees, for whom base pay forms a significant proportion of their total compensation.

As in previous years we will continue to set stretching targets for the Group annual bonus and the Executive LTIP to ensure that the maximum opportunity will only be earned for exceptional performance. The financial targets for the 2017 Group annual bonus will be disclosed at the end of this performance year in the Annual report and accounts 2017. The threshold and maximum for the proposed grants under the 2017 Executive LTIP plan are detailed on page 98.

Given the continuing, volatile external environment we will be making a change to the weighting of the Executive LTIP targets for the 2017 award. In order to improve incentivisation in these volatile conditions, align our employees with our strategy, and increase the focus on delivering shareholder value, the Remuneration Committee feels it appropriate to increase the weighting given to operating profit to 80% from 70%, with a corresponding reduction in measures of outright generation of net flows.

In addition the Remuneration Committee has increased the period for which cash awards, made under the Group annual bonus plan, are subject to clawback to three years to align with the deferral period.

Looking forward to 2018

As the strategy and structure of Standard Life continues to evolve, and we continue our progress to become a world-class investment company, we will continue to review the remuneration arrangements for our executive Directors and the performance measures to ensure that the awards are aligned to the company's strategy and structure and the experience of our shareholders. During 2016 we commenced a fundamental review of our remuneration structures and are actively considering a major simplification of these for 2018. In the development of our new remuneration policy the Committee wants to consider as wide a range of views as possible and to this end has discussed research on executive remuneration and consulted an academic in this field. We will present a new Directors' remuneration policy to shareholders at the 2018 AGM. We will consult the Company's major institutional investors in good time as part of this review.

I hope that you find this report a clear account of how the Committee has implemented the policy during 2016 and that you are able to support the remuneration decisions we have taken. I would again like to thank our investors for their time and for sharing their views during our meetings during 2016.

Performance and remuneration for 2016 at a glance

Key performance measures

The tables below illustrate outcomes against the Group's key performance measures relevant to 2016 remuneration. The annual bonus outcome is driven by assessment of performance against a scorecard, which includes financial and non-financial measures and personal performance. The Executive LTIP targets measure Group performance over a three-year period against a range of financial measures. The Standard Life Investments LTIP target measures Standard Life Investments' consolidated cumulative three-year third party EBITDA performance.

Annual bonus performance measures	2016	2015
Operating profit before tax	£723m	£663m
Operating return on equity	15.2%	14.5%
Overall Group annual bonus scorecard outcome (financial and non-financial measures)	4.325/5	4.6/5

Executive LTIP 2014 performance measure	Threshold	Actual performance	Weighted vesting level¹
Cumulative group operating profit before tax	£1,795m	£1,967m	41.02%
Cumulative group net flows	£15.5bn	£3.2bn	0%
Final vesting after performance adjustment			31.02%
Standard Life Investments LTIP 2014 Performance Measure	Threshold	Actual performance	Vesting level
Consolidated cumulative three-year third party EBITDA	60% of target	109.96% of target	62.44% of maximum

¹ Executive LTIP 2014 weighted 70% cumulative group operating profit before tax, and 30% cumulative group net flows.

Operating profit is not defined under IFRS and is therefore deemed an alternative performance measure.

A definition of operating profit can be found in the Glossary. Further information including reconciliations to relevant IFRS metrics are provided in Supplementary information in Section 11.

Total remuneration

In this table maximum remuneration includes the value of dividend equivalents added to LTIP awards and share price movement from the value when the awards were granted. The LTIPs are valued on the same basis as in the single figure table.

Executive Directors	Maximum remuneration £000s	2016 single figure remuneration £000s
Keith Skeoch	3,981	2,746
Luke Savage	2,424	1,733
Paul Matthews	2,012	1,631
Colin Clark	2,418	1,979

The chart illustrates the elements of remuneration that contribute to the single figure of remuneration. Chart removed for the purposes of this announcement. However it can be viewed in full in the pdf document.

Pay Ratios

The Committee is mindful of the relationship between Chief Executive pay and the pay of other employees across the Standard Life Group. In line with emerging best practice, the Committee has therefore voluntarily decided to include the pay ratio between the Chief Executive and the median pay of other employees within the Group.

Based on the Chief Executive's single figure set out on page 88 the ratio of pay to the median of all other UK based employees is 61:1. Employee pay includes base salary, employer pension contributions, benefits and incentive payments.

There is no external guidance on the methodology to be used for the calculation of the pay ratio. The Remuneration Committee used the median as the comparator as it is affected less by changes in the remuneration of a small number of employees when comparing between years. We look forward to any additional guidance that may be provided on the methodology going forward.

5.2 Overview of the remuneration policy

The following sets out key aspects of the current remuneration policy as it applies to the Company's executive Directors. The policy was approved by shareholders at the 2015 AGM. That policy came into effect on 12 May 2015 and can be found on our website at www.standardlife.com/annualreport and in the Annual report and accounts 2014. A shareholder vote on the remuneration policy is not required in 2017.

Base salary

Purpose and link to strategy

To provide a core reward for undertaking the role, positioned at a level needed to recruit and retain the talent required to develop and deliver the business strategy.

Operation

The Remuneration Committee sets base salaries taking into account a range of factors including:

· The individual's skills, performance and experience

· Internal relativities and wider workforce salary levels

· External benchmark data

· The size and responsibility of the role

· The complexity of the business and geographical scope

· Economic indicators

Maximum opportunity

No maximum level set.

Increases will normally be in line with the typical level of increases awarded to other employees at Standard Life and will be a reflection of the individual's performance.

The Remuneration Committee may award increases above this level in certain circumstances.

Benefits

Purpose and link to strategy

To provide market competitive monetary and non-monetary benefits, in a cost effective manner, to assist employees in carrying out their duties efficiently.

Operation

Executive Directors are provided with a package of core benefits and are invited to participate, in line with other employees, in the voluntary benefits programme which they fund themselves through salary sacrifice.

Core benefits include health screening, private healthcare, death in service protection, disability benefit and reimbursement of membership fees of professional bodies

Maximum opportunity

Car allowance up to a maximum of £16,585 per annum.

There is no maximum value of the core benefit package as this is dependent on the cost to the employing company and the individual's circumstances.

All-employee share plans

Purpose and link to strategy

To promote share ownership by all employees to drive performance aligned to the Company's shareholders' interests.

Operation

Executive Directors can participate in the all-employee share plans operated by Standard Life on the same basis as all other employees. The two current all-employee share plans are:

· The Standard Life (Employee) Share Plan

· The Standard Life Sharesave Plan

Maximum opportunity

The maximum opportunity is in line with all other employees and is as determined by the prevailing HMRC opportunity.

Pension

Purpose and link to strategy

To provide a competitive, flexible retirement benefit in a way that does not create an unacceptable level of financial risk or cost to the Group.

Operation

Executive Directors are auto enrolled into a defined contribution pension plan and are offered the alternative of a cash allowance.

Legacy arrangements will continue to be honoured.

Maximum opportunity

Employer contribution into the Group's defined contribution pension plan of up to 32% of salary. Alternatively a cash allowance of up to 30% of salary.

Group annual bonus

Purpose and link to strategy

To support the delivery of the Group's annual business plan.

The focus is on the delivery of the annual financial, strategic, customer and people objectives.

Operation

Performance targets are set annually by the Remuneration Committee.

The Remuneration Committee exercises its judgement to determine awards at the end of the year to ensure that the outcome is fair in the context of overall Group performance and against personal goals.

To date, 50% of any bonus above 25% of salary has been deferred into shares which vest two years from the date of award.

The deferral period for bonuses in respect of 2016 onwards will be three years.

Deferred bonus shares are subject to malus between grant and vest and cash awards are subject to clawback for three years from the date of award.

Maximum opportunity

The maximum award opportunity in respect of any financial year is based on role and is up to 175% of salary.

Performance measures

Performance is measured against a range of key financial metrics, strategic, customer and people indicators and personal performance.

The performance scorecard is weighted with at least 50% of bonus based on financial performance and no less than 30% based on non-financial performance. A portion of the award may be based on individual performance objectives. This will be no more than 20% of the overall award.

Performance is measured over 12 months.

The Standard Life plc Executive Long-Term Incentive Plan (Executive LTIP)

Purpose and link to strategy

To reward participants for the delivery of the Group's goals of driving shareholder value through customer experience including measures such as cumulative Group operating profit and cumulative Group net flows.

Operation

Award of shares subject to performance measured over a three-year period with a subsequent two-year holding period. Awards may only be exercised after the combined five-year period.

Performance targets are set annually for each three-year cycle by the Remuneration Committee.

Awards are subject to review by the Remuneration Committee and the Risk and Capital Committee at the end of the three-year performance period to confirm that vesting of the award is appropriate.

The Remuneration Committee has the discretion to amend the final vesting level of awards if it does not consider that it reflects the performance of the Group.

Unvested awards are subject to malus.

Dividend equivalents, or equivalents for other forms of awards, accrue over the five-year period on a re-invested basis.

Maximum opportunity

The maximum award opportunity is based on role.

The maximum award possible under the plan rules is 500% of salary. No award in excess of 400% of salary will be made to an executive Director under this policy.

Performance measures

Vesting of the award is based on the following Group performance measures:

· Cumulative Group operating profit performance before tax weighted at up to 100% of the award

· Cumulative Group net flows weighted at no more than 50% of the award

The split between these measures, for each grant, is set annually by the Remuneration Committee.

Legacy Arrangements

There is currently no intention to make further awards under the following plans to executive Directors:

· Standard Life Investments personal and company bonus plans - last operated (for an executive Director) for the Chief Executive Standard Life Investments, before his appointment to his role as Chief Executive in August 2015.

· Standard Life Investments' Long-Term Incentive plan - last award (to an executive Director) made in March 2015 to the Chief Executive, Standard Life Investments before his appointment to his new role

· Group Long-Term Incentive Plan - was replaced by the Executive LTIP at the 2014 Annual General Meeting and the last awards under this plan were made in March 2013

Further details on these plans are set out in the Annual report and accounts 2014

Remuneration policy for new executive appointments

Principles

In determining remuneration arrangements for new appointments to the Board (including internal promotions), the Remuneration Committee applies the following principles:

· The Remuneration Committee takes into consideration all relevant factors, including the calibre of the individual, local market practice and existing arrangements for other executive Directors, adhering to the underlying principle that any arrangements should reflect the best interests of the Group and the Company's shareholders

· Remuneration arrangements for new appointments will typically align with the remuneration policy approved by shareholders

· In the case of internal promotions, the Remuneration Committee will honour existing commitments entered into before promotion

· The Remuneration Committee will explain to shareholders the rationale for the relevant arrangements in the following year's Directors' remuneration report

· The maximum level of bonus and long-term incentive awards which may be awarded to a new executive Director (excluding the Chief Executive, Standard Life Investments) at or shortly following recruitment shall be limited to 475% of salary. The maximum level for the Chief Executive, Standard Life Investments will be 865% of salary. These limits exclude buyout awards and are in line with the policy table approved by shareholders.

Components and approach

The remuneration package offered to new appointments may include any element of remuneration included in the remuneration policy, or any other element which the Remuneration Committee considers is appropriate given the particular circumstances but not exceeding the maximum level of bonus and long-term incentive awards detailed above. In considering which elements to include, and in determining the approach for all relevant elements, the Remuneration Committee will take into account a number of different factors, including (but not limited to) typical market practice, existing arrangements for other executive Directors, internal relativities and market positioning.

Buyouts

To facilitate recruitment, the Remuneration Committee may make an award to buy out remuneration terms forfeited on leaving a previous employer. In doing so, the Remuneration Committee will adhere to the FCA guidance in relation to the practice of buyout awards to new recruits and, in particular, the requirements for Material Risk Takers (as defined by the Group's regulators). In considering buyout levels and conditions, the Remuneration Committee will take into account such factors as the type of award and performance measures and the likelihood of performance conditions being met. The buyout award will reflect the foregone award in amount and terms (including any deferral or retention period and performance conditions) as closely as possible but within the structures and timing of equivalent Group plans. Where appropriate, the Remuneration Committee retains the discretion to utilise Listing Rule 9.4.2 (a rule, set by the United Kingdom Listing Authority, which permits an arrangement to be made without shareholder approval, specifically to facilitate, in unusual circumstances, the recruitment or retention of the relevant individual) for the purpose of making an award to 'buy out' remuneration terms forfeited on leaving a previous employer or to utilise any other incentive plan operated by the Group.

Service contracts

The executive Directors' terms and conditions of employment are detailed in their respective executive service contracts. In these contracts, the Remuneration Committee aims to strike the right balance between the Company's interests and those of the executive Directors, while ensuring that the contracts comply with best practice, legislation and the agreed remuneration principles. Contracts are not for a fixed term, but set out notice periods in line with the executive Director's role.

The terms and provisions that relate to remuneration in each of the executive Directors' contracts (that are not set out elsewhere in this report) are set out below. It is intended that the terms for any new appointment would be in line with these.

Provision	Policy
Notice Periods	Six months by the executive Director to the Company. Up to 12 months by the Company to the executive Director. A payment in lieu of notice can be made.
Remuneration	Salary, pension contributions and core benefits are specified in the contracts and are treated as described in the policy table. There is no contractual entitlement to participate in the annual bonus plan or receive long-term incentive awards. Individuals are notified of these discretionary schemes at the beginning of each year.
Non-compete clauses	Apply during the contract and, at the Company's choice, for up to six months after leaving.
Contract Dates	Director Keith Skeoch Luke Savage Paul Matthews Colin Clark	Date of current contract 5 October 2015 24 April 2014 29 October 2015 1 November 2015

Keith Skeoch signed a new contract on 5 October 2015, reflecting his appointment to Chief Executive from 5 August 2015; his previous contract was signed on 3 April 2006. Luke Savage's contract was effective from 18 August 2014. Paul Matthews' and Colin Clark's contracts were effective from 1 November 2015.

The service agreements for executive Directors are available for shareholders to view on request from the Company Secretary at the Company's registered address (details of which can be found in Section 14) and at the 2017 AGM.

Loss of office remuneration

The Remuneration Committee will consider the following factors when considering remuneration for loss of office:

· The individual's service contract and the rules of the relevant incentive plans

· Circumstances of the loss of office

· Performance during office

· The commercial justification for any payments

The remuneration policy for loss of office for executive Directors is as follows:

Provision	Policy
Pay in lieu of notice	Any payment in lieu of notice will be up to 12 months' salary, pension contributions and the value of other contractual benefits. A duty to mitigate applies. The payment may be made in phased instalments and the policy is to do this for notice periods of over six months.
All-employee share plans	Rights to awards are governed by the rules of the respective plans. Awards under all-employee share plans vest in accordance with their terms, under which good leavers are entitled to shares on or shortly after cessation. Other leavers would usually forfeit awards.
Bonus awards and long-term incentive awards	Rights to awards are governed by the rules of the respective plans. Typically, for good leavers, rights to annual bonus and long-term incentive awards will be pro-rated for time in service to termination as a proportion of the performance period and will, subject to performance, be paid at the usual time (which in the case of the Executive LTIP will normally include the holding period). Outstanding deferred share awards typically vest in full at the date of termination. In certain circumstances, such as the individual's death, the Remuneration Committee retains the discretion to accelerate payments if it is considered appropriate. In all plans, the Remuneration Committee retains the discretion to dis-apply time pro-rating for good leavers and, in the case of the Group LTIP and Executive LTIP, performance pro-rating. Typically, for other leavers, rights to annual bonus and outstanding long-term incentive awards will be forfeited. In the rules of the annual bonus plans and long-term incentives plans distinction is made between good leavers and other leavers. A good leaver is someone whose employment comes to an end because of death, ill health, injury, disability, redundancy or retirement as determined by their employing company, sale of the employing company or business or any other circumstance at the discretion of the Remuneration Committee. For the purposes of the Standard Life Investments Long-Term Incentive Plan, a good leaver may also include an individual who is transferred out of Standard Life Investments to another company in the Group. In determining whether an individual is a good leaver, the Remuneration Committee will exercise its judgement in a manner which seeks to be in the Group's interests taking into account all relevant factors in relation to the departure. Where judgement has been exercised, the Remuneration Committee would provide an explanation in the following year's Directors' remuneration report.

Provision	Policy
Other payments	Other payments such as the outgoing Director's legal fees or outplacement costs may be paid if considered commercially appropriate.

Change of Control

In the event of a change of control, executive Directors may receive a cash bonus in respect of the year in which the change of control occurs which, unless the Remuneration Committee determines otherwise, will be time pro-rated by reference to the bonus year. Outstanding deferred share awards will typically vest in full. Long-term incentives will normally vest early, taking into account the extent to which any relevant performance conditions have been met and, unless the Remuneration Committee determines otherwise, the time that has elapsed from the beginning of the relevant performance period. If the Company undergoes a winding up or is subject to a demerger, delisting, special dividend or other event, which, in the opinion of the Remuneration Committee, may affect the current or future share price, the Remuneration Committee may allow awards to vest on the same basis as for a change of control.

The treatment of other awards in the event of a change of control will be in line with the relevant plan rules as approved by shareholders.

Remuneration Committee discretion in relation to future operation of the remuneration policy

In the event of a variation of share capital, demerger, special dividend or similar event, the Remuneration Committee may adjust or amend awards in accordance with the rules of the relevant plan.

The Remuneration Committee retains the discretion to amend the performance target in exceptional business or regulatory circumstances. If discretion is exercised in this way, the Remuneration Committee will consult with major shareholders as appropriate.

All awards are subject to Remuneration Committee discretion and may be adjusted (or reduced to zero) where it determines that the overall level of the Company or Group performance does not warrant payment of variable remuneration, or it considers that risks (such as financial, regulatory, compliance or brand risk) have not adequately been reflected in awards.

5.3 Annual remuneration report - what we did in 2016 for executive Directors

Single total figure of remuneration - executive Directors (audited)

The following table sets out the single total figure of remuneration for each of the executive Directors who served as a Director at any time during the financial year ending 31 December 2016. Where a Director has been appointed or stepped down during the year shown the remuneration included in the table is that paid for the period for which they were an executive Director.

Executive Directors		Basic salary for year £000s	Taxable benefits in year £000s¹	Annual bonus earned for year £000s	Long-term incentives with performance period ending during the year £000s^2,3	Other payments £000s⁴	Pension allowance paid in year £000s	Total remuneration for the year £000s
Keith Skeoch	2016	700	-	988	883	-	175	2,746
	2015	574	36	1,489	1,215	-	143	3,457
Luke Savage	2016	612	16	729	223	-	153	1,733
	2015	600	27	767	-	-	150	1,544
Paul Matthews⁵	2016	630	14	747	82	-	158	1,631
	2015	107	3	139	14	-	27	290
Colin Clark⁵	2016	600	-	843	386	-	150	1,979
	2015	98	-	159	64	-	25	346

¹This includes the taxable value of all benefits paid in respect of the year ended 31 December 2016. This includes car allowances of £15,825 for Luke Savage and £13,820 for Paul Matthews. Also included for all executive Directors is private health cover at a cost to the Group of £380 per employee.

²The value reported for 2016 is the market value of the Executive LTIP awards that will vest in 2019 and Standard Life Investments LTIP awards that will vest in March 2017. As the share price at the date of vesting is not known at the date of publication of this report the number of Standard Life plc shares that will vest (including additional Standard Life plc shares received in respect of accrued dividends from grant through to 31 December 2016) has been multiplied by the average share price over the quarter ending 31 December 2016 (350.94 pence).

³The value reported for 2015 has been restated to reflect the value of the shares that vested using the share price on the vesting date rather than the estimate provided in the Annual report and accounts 2015. The value at vesting was £185k, £2k and £6k lower than the estimate for Keith Skeoch, Paul Matthews and Colin Clark respectively due to a reduction in the share price.

⁴Keith Skeoch and Luke Savage participate in the Standard Life Sharesave Plan. Keith Skeoch, Luke Savage and Paul Matthews participate in the Standard Life (Employee) Share Plan - the maximum annual award of matching shares in 2016 was £475.

⁵Paul Matthews and Colin Clark were appointed as Directors on 1 November 2015 and the figures reported for their long-term incentive awards in both 2015 and 2016 represent the value of the proportion of the award which relates to the period of time in the performance period for which they were executive Directors.

Base salary (audited)

The table below shows the annual base salary paid to executive Directors in 2016.

	At 1 Jan 2016	From 16 March 2016	Total base salary paid in 2016
Keith Skeoch	£700,000	£700,000	£700,000
Luke Savage	£600,000	£615,000	£611,875
Paul Matthews	£630,000	£630,000	£630,000
Colin Clark	£600,000	£600,000	£600,000

Pension (audited)

Executive Directors received a cash allowance of 25% of salary in lieu of pension as follows:

	Paid in 2016
Keith Skeoch	£175,000
Luke Savage	£152,969
Paul Matthews	£157,500
Colin Clark	£150,000

In addition to the cash allowance shown above Paul Matthews is a member of the Standard Life Staff Pension Scheme. Under the pension scheme rules his normal retirement date is at age 60. At 31 December 2016 he was aged 56 and his accrued defined benefit pension was £144,044 per annum. There is no additional value paid on early retirement.

Annual bonus plans

Group annual bonus targets

Year ended 31 December 2015

The financial targets used in the determination of the 2015 Group annual bonuses and not previously disclosed are shown in the following table. Those bonuses were paid in March 2016 and were disclosed in the Annual report and accounts 2015.

Performance Measure 2015	Threshold	Target	Maximum	Outcome
Operating profit before tax	£500m	£544m	£589m	£663m
Operating return on equity	10.7%	11.6%	12.6%	14.5%

Year ended 31 December 2016

As explained in the Remuneration Committee Chairman's statement (Section 5.1), in the interests of transparency, the Committee has decided to accelerate the disclosure of the financial bonus targets, and as such the threshold, target and maximum for the financial targets used to determine 2016 Group bonus payments payable in March 2017 are detailed below.

Performance Measure 2016	Threshold	Target	Maximum	Outcome
Operating profit before tax	£645m	£680m	£715m	£723m
Operating return on equity	13.5%	14.3%	15.0%	15.2%

Non-financial measures

The non-financial measures used for the determination of the annual bonus plans for 2016 have not been disclosed in this Directors' remuneration report as the Board deems that, the disclosure of these could seriously prejudice the Group's business.

Detailed disclosure is provided on key achievements in the year to provide shareholders with context on the level of performance delivered in 2016.

The performance measures for the non-financial elements of the bonus scorecard are reviewed by the Remuneration Committee each year. Assessment of achievement against these outcomes takes into account corporate performance on environmental, social and governance issues either as a specific measure in the scorecard (e.g. brand advocacy and employee engagement) or in the exercise of judgement at the end of the year in determining awards when the Remuneration Committee seeks to ensure the outcome is fair in the context of overall Group performance. This includes performance against our sustainability priorities as set out in the Sustainability section within the Strategic report.

Group annual bonus opportunity

The target and maximum bonus award opportunities (expressed as a percentage of base salary at 31 December 2016) that could be earned in respect of 2016 Group performance were:

	Target	Maximum opportunity
Keith Skeoch	75%	175%
Luke Savage	65%	150%
Paul Matthews	65%	150%
Colin Clark	75%	175%

The award opportunity for bonus at threshold performance is zero.

The bonus award is based on Group performance and personal performance. The relative weightings are 90% based on Group performance and 10% on personal performance for Keith Skeoch and 80% based on Group performance and 20% on personal performance in respect of the other executive Directors.

The scorecard is based on a scale of 1 to 5 with 5 reflecting maximum, 3 on target and 1 unsatisfactory performance.

More information on the Group's financial key performance indicators can be found in the Chief Financial Officer's overview section of the Strategic report.

Before approving the level of performance in 2016, the Remuneration Committee sought the views of the Group Audit Committee on material accounting issues that it considered during the year and the Group Chief Risk Officer and the Risk and Capital Committee on the management of risk within the business.

In determining the bonus awards for personal performance the Remuneration Committee considered individual performance with regard to the Company's overall strategic priorities.

Keith Skeoch

Keith's performance has been reviewed in relation to both aspects of his role: as Chief Executive and Chief Executive, Standard Life Investments. The comments below cover both roles:

· Good increase in pace of delivery across all key aspects of our strategy to become a world-class investment company

· Relatively strong financial performance delivered in difficult markets and with a close focus on costs, particularly in Standard Life Investments

· Strong delivery on our people agenda, including laying the foundations for increased engagement and a shared culture across the Group

Luke Savage

· Effective management of our strong capital position to support our progressive dividend policy and strategic investments and acquisitions to grow our business

· Improvements in the operational efficiency of the company and continued progress on reducing the cost/income ratio whilst focussing on the growth of the business

· Development of reporting to provide additional clarity and insight into the performance of the business

· Active engagement with our investors and the analyst community

Paul Matthews

· Leadership of the Pensions and Savings business through a period of market and industry change and challenging conditions for sales

· The expansion of our already successful platform business with the acquisition of Elevate which complements our existing Wrap platform and enhances our position as a leading platform provider

· Continued growth of 1825 business, our financial planning and personal tax advice business, with three further acquisitions broadening our reach across the country and increasing total assets under advice

Colin Clark

· Focus on emerging needs of our Institutional, Wholesale, Retail and Workplace customer and clients with new investment propositions across a range of asset classes and geographies

· Expansion of our liability aware range with launch of our unique Integrated Liability Plus Solution and enhanced choice of investment fund with 16 funds launched during 2016 across a range of different asset classes

· Continued growth in our strategic partnerships serving our clients in markets worldwide, including John Hancock

· Maintenance of strong relationships with customers, clients and advisers and delivery of resilient flows in growth channels in a challenging market environment

The key achievements, scores for each scorecard element and overall score for the 2016 scorecard are shown in the following tables:

Element	Financial
Performance measures	Operating profit before tax Threshold £645m Target £680m Maximum £715m Outcome £723m	Operating return on equity (RoE) Threshold 13.5% Target 14.3% Maximum 15.0% Outcome 15.2%
Achievements against measures	Strong financial performance with operating profit before tax and operating return on equity both above maximum.
Score (out of 5)	5

Element	Strategic/delivery/process
Performance measures	Management of the Group's strategy and its deployment in each business unit including the annual investment programme, any corporate transactions and the efficiency of the Group's balance sheet. Maintain consistent and effective progress with the IT programme of work.
Achievements against measures	Continuation of progress toward becoming a world-class investment company including: · Substantial completion of migration of Ignis business onto the Standard Life Investments platform delivering annual synergies, earlier than targeted, in excess of £50m · Purchase of Elevate, building on our successful Wrap platform business and growth of financial advice business 1825, with three further acquisitions in this business · Increased stake in HDFC Life and proposed combination between the life companies of HDFC Life and Max Life announced August 2016 · Successful embedding of our new trade management system and significant progress with improving the technology and systems we use to manage investment data
Score (out of 5)	4.25

Element	Customer and external leadership
Performance measures	Drive customer focus within the organisation and build advocacy for the Standard Life brand. Deliver meaningful progress in brand advocacy as measured through Net Promoter Score measures or equivalent indices/measures. Protect and enhance Standard Life's corporate reputation. Enhance collaboration and co-operation across the Group to support customer and client needs.
Achievements against measures	· Our brand net promoter score is an important measure of customer advocacy. In 2016 our score fell by 11 points. We've planned a number of actions for 2017 to improve customer experiences - including automating key processes, better self service online and greater collaboration to better understand customer needs · Sponsorship with a direct link to our shared values which includes our continued partnership with Sir Andy Murray, extended Ryder Cup partnership and announced sponsorship of the British and Irish Lion's team and the tour to New Zealand · Announcement of Standard Life Foundation (May 2016), a charity that will focus on independent research to strengthen financial well-being and resilience in the UK and subsequent appointment of the Board of Trustees
Score (out of 5)	3 revised to 0 (see the explanation in the Remuneration Committee Chairman's statement)

Element	People
Performance measures	Develop our organisational capability by building the environment, the resources, and the capabilities we will need through developing the right behaviours. This will include: · Ensuring the environment we work in creates a culture of continuous improvement · Improving the employee effectiveness scores for enablement and engagement as measured by the Group engagement survey 'InterAction' and other supplementary indicators · Developing powerful and consistent leadership, identifying and growing tomorrow's leaders · Developing and actively managing robust and future facing plans to ensure sustainable succession for critical roles · Embedding our remuneration and performance management strategy to encourage high performance and the delivery of our business objectives
Achievements against measures	· Developed our people managers with a tailored 12-month training programme and encouraged our people to develop their skills through external board appointments · Signed HM Treasury Women in Finance charter, demonstrating our ongoing commitment to diversity. · Continued strong engagement, (+2% points) measured by our InterAction survey although enablement, the measure of how well employee skills are utilised and working environments facilitate productivity, dropped by 2% points. Action plans are being developed to address key themes. · Continued commitment to youth employment. Awarded Investors in Young People Gold accreditation and increased the percentage of employees aged 25 and under to 8% in the UK and Ireland. Continued our work with the Edinburgh Guarantee Scheme, providing young people with paid work experience for six months and the Investment2020 scheme offering 12-months paid work experience placements.
Score (out of 5)	4

Based on performance against each of the four Group performance elements and considering the performance of the Group as a whole, the Remuneration Committee approved a rating of 4.325 out of 5 (reduced from 4.625 to 4.325 as explained in the Remuneration Committee Chairman's statement) for performance against the Group annual bonus scorecard during 2016.

As a result of the approved ratings, the Group annual bonus outcome as approved by the Remuneration Committee for 2016 is:

	Bonus opportunity based on Group performance as a % of total bonus	Bonus opportunity based on personal performance as a % of total bonus	Total bonus payable as a % of bonus maximum	Total bonus payable as a % of salary at 31 December 2016
Keith Skeoch
Maximum	90%	10%	100%	175%
Actual	73%	8%	81%	141%
Luke Savage
Maximum	80%	20%	100%	150%
Actual	65%	14%	79%	119%
Paul Matthews
Maximum	80%	20%	100%	150%
Actual	65%	14%	79%	119%
Colin Clark
Maximum	80%	20%	100%	175%
Actual	64%	16%	80%	141%

If the bonus payable amounts to more than 25% of salary, then half of the amount above 25% of salary is deferred for three years into an award over Standard Life plc shares. The deferral is not made if the amount to be deferred is less than 10% of salary.

2016 Group annual bonus outcomes (audited)

The following table shows the total bonus awards made in respect of 2016 and the cash and deferred elements. Annual bonus payments are not pensionable.

	Group cash bonus	Group deferred bonus	Total
Keith Skeoch	581,437	406,438	987,875
Luke Savage	441,416	287,667	729,083
Paul Matthews	452,182	294,683	746,865
Colin Clark	496,500	346,500	843,000

Long-term incentives

Executive Long-Term Incentive Plan (Executive LTIP)

The Executive LTIP has been used to grant awards since May 2014.

The awards granted in 2014 under the Executive LTIP have two performance conditions. The outcome is based 70% on cumulative Group operating profit before tax and 30% on cumulative Group net flows. The awards are also subject to two underpins when assessing the Group performance. The first requires the Risk and Capital Committee to be satisfied that performance obtained has been achieved within acceptable defined risk parameters. The second requires the Remuneration Committee to be satisfied that Group operating profit performance and Group net flows performance reflect overall Group performance.

2014 Executive LTIP awards vesting in respect of performance ending in 2016 (audited)

Awards were made in March 2014 of 200% of salary to Keith Skeoch and in September 2014 of 125% of salary for Luke Savage. An award was also granted to Paul Matthews who was not a Director when the grant was made in March 2014. The original targets for the 2014 Executive LTIP award were adjusted to reflect the impact of corporate activities in 2014 and 2015. Further details of the adjustments made are provided in the Annual report and accounts 2014 from page 92 onwards.

	Threshold	Target	Maximum
Cumulative Group operating profit before tax for the three years ended 31 December 2016¹	£1,795m	£1,930m	£2,145m
Actual performance and vesting outcome (70% weighting)		£1,967m	58.60%
Cumulative Group net flows for the three years ended 31 December 2016¹	£15.5bn	£20.6bn	£24.3bn
Actual performance and vesting outcome (30% weighting)		£3.2bn	0%

¹Including our life associate HDFC Life and our life joint venture Heng An Standard Life from 2015.

In line with the above results, and following consideration of performance over the three-year period as set out in the Remuneration Committee Chairman's statement, the Remuneration Committee determined a vesting factor of 31.02% more appropriately reflects the overall performance of the Group and therefore reduced the vesting factor from the arithmetically calculated 41.02% in respect of awards granted in 2014 to executive Directors. These awards will be delivered to the executive Directors at the end of the holding period in 2019.

Standard Life Investments Long-Term Incentive Plan (Standard Life Investments LTIP)

In 2014, Keith Skeoch participated in the Standard Life Investments LTIP. An award was also granted to Colin Clark who was not a Director when the award was made. Under the Standard Life Investments LTIP, awards will only begin to vest if Standard Life Investments' investment performance (three-year money-weighted average) is above the lower quartile of the money-weighted average of all assets under management (both captive and third party assets) compared to other asset managers.

The level of vesting is then subject to consolidated cumulative three-year third party EBITDA performance shown in the following table. The actual EBITDA targets are not disclosed as Standard Life Investments is a subsidiary business of Standard Life plc and the Board deems that this is commercially sensitive information which, if disclosed, could seriously prejudice the Group's business.

Before an award can vest, the Risk and Capital Committee is required to verify to the Remuneration Committee that the level of vesting was not as a result of behaviour that has exposed the Group to undue risk. If the Risk and Capital Committee determines that the Group has been exposed to undue risk, the Remuneration Committee will take this into account when determining the level of vesting.

Performance	Consolidated cumulative three-year third party EBITDA	% of target award of shares that vest¹
Threshold	60% of target	0%
Maximum	140% of target	200%

¹Vesting takes place on a straight line basis between 60% of target cumulative three-year third party EBITDA and 140% of target cumulative three-year third party EBITDA.

2014 Standard Life Investments LTIP awards vesting in respect of performance ending in 2016 (audited)

In line with the above, Keith Skeoch received an award under this plan in March 2014 equivalent to 200% of salary (at maximum vesting).

The following table sets out performance against targets for the 2014 award:

Performance level	Below threshold	Threshold	Target	Maximum
Consolidated cumulative three-year third party EBITDA	<60% of target	60% of target	100% of target	140% of target
Actual performance				109.96% of target

As performance was above the lower quartile of the money-weighted average of all assets under management (both captive and third party assets) compared to other asset managers and the consolidated cumulative three-year third party EBITDA was 109.96% of target, the Remuneration Committee determined that 124.89% of the target award (62.44% of the maximum award) granted in 2014 would vest in 2017.

Awards granted in 2016

Awards to executive Directors were made in 2016 under the Executive LTIP only.

All of the awards are subject to an additional personal performance underpin whereby, if an executive Director performs at an unsatisfactory level in any year during the three-year performance period, their original award would be reduced by one-third, unless the Chief Executive, or the Remuneration Committee in the case of the Chief Executive, recommends otherwise.

The number of shares under option and the share price at the date of grant are set out in the table on page 95.

The table below summarises the key details of the awards made in 2016:

	Basis of award (% of salary)	Face value at grant
Keith Skeoch¹	400%	£2,800,000
Luke Savage	125%	£768,750
Paul Matthews	120%	£756,000
Colin Clark	300%	£1,800,000
Nature of award	Nil cost option
Performance criteria	Cumulative Group operating profit before tax (70%) and cumulative Group net flows (30%) for the three-year period ended 31 December 2018
Threshold and % of award vesting at threshold	Vesting: 0% Cumulative Group operating profit before tax Threshold: £2,130m Cumulative Group net flows Threshold: £30.8bn
Maximum and % of award vesting at maximum	Vesting: 100% Cumulative Group operating profit before tax Maximum: £2,595m Cumulative Group net flows Maximum: £51.0bn

¹A grant of 500% of salary was made to Keith Skeoch but the award was reduced to 400% of salary, as explained in the Remuneration Committee Chairman's statement.

Share ownership

A shareholding requirement was implemented in 2014 and we continue to require executive Directors and senior management to maintain a material long-term investment in Standard Life plc shares.

The requirement (increased in respect of the Chief Executive in 2015) is that the Chief Executive acquires and maintains a shareholding valued at 500% of salary. The other executive Directors are required to acquire and maintain a shareholding valued at 200% of salary.

The shares which the executive Directors are required to hold to reach their respective shareholding requirement are based on the net vested shares arising from the exercise of an award. Net vested shares are those shares which the executive Director would retain after selling sufficient shares to cover the costs of the income tax and employee national insurance payable when the award is exercised. Executive Directors will be required to hold shares arising from the following awards:

· 100% of the net vested shares that could be acquired from the exercise of awards granted from May 2014 onwards or the date of their appointment if later (this includes the awards arising from the deferral of annual bonus and awards granted under the Executive LTIP and the Standard Life Investments LTIP)

· 50% of the net vested shares that could be acquired from the exercise of awards granted prior to the introduction of the new requirement (this includes awards arising from the deferral of annual bonus and awards granted under the Group LTIP and the Standard Life Investments LTIP)

· Shares currently held which were obtained from the exercise of awards and which contributed to satisfying the previous shareholding guidelines

Keith Skeoch and Paul Matthews were subject to previous shareholding guidelines and from 2014, when the requirement was introduced, to a shareholding requirement. Luke Savage became subject to the requirement on appointment. As Colin Clark was not subject to the previous shareholding guidelines, under the requirement he is only required to hold shares from awards granted in 2016 onwards.

Executive Directors will be required to retain shares held in respect of the requirement for a period of one year following their departure from the Group. The Remuneration Committee reviews progress against the requirement annually and retains discretion to require executive Directors to purchase shares to meet the requirement. Personal investment strategies (such as hedging arrangements) are not permitted.

Directors' interests in shares (audited)

The following table shows the total number of Standard Life plc shares held by the executive Directors and their connected persons.

	Total number of shares owned at 1 January 2016	Shares acquired/ (sold) during the period 1 January 2016 to 31 December 2016	Total number of shares owned at 31 December 2016	Total value¹ of shares owned at 31 December 2016 as a % of salary at 31 December 2016	Shares acquired/(sold) during the period 31 December 2016 to 22 February 2017
Keith Skeoch	2,054,208	192,361	2,246,569	1194%	51
Luke Savage	129	698	827	1%	58
Paul Matthews	175,287	61,701	236,988	140%	51
Colin Clark	666,197	91,569	757,766	470%	-

¹The closing share price at 31 December 2016 used to determine total value was 372.0p.

At 31 December 2016 all executive Directors have complied with the requirement in respect of retaining shares from vested awards. Keith Skeoch holds significantly more shares than his shareholding requirement requires. Luke Savage was appointed in August 2014. No share awards granted since his appointment have yet vested. He has not yet met his shareholding requirement. Paul Matthews holds shares valued at 140% of salary, including shares acquired from awards not subject to either a guideline or the requirement. Colin Clark holds shares valued at 470% from previous awards not subject to either a previous guideline or the requirement.

David Nish, our former Chief Executive, is required to hold 703,651 shares until 31 March 2017. This number of shares was equivalent in value (at 31 March 2016) to 300% of his salary at 31 March 2016 (the date his employment ceased). At 31 December 2016, he held the number of shares required.

This table shows, in relation to each executive Director, the total number of share options with and without performance conditions held at
31 December 2016:

	Options with performance measures¹	Options without performance measures²	Vested but unexercised	Exercised during the year³
Keith Skeoch	1,652,348	186,015	-	361,862
Luke Savage	550,660	114,406	-	-
Paul Matthews	526,350	103,010	-	115,405
Colin Clark	1,586,480	17,237	-	173,158

¹This comprises Executive LTIP awards made in 2014, 2015 and 2016 and awards under the Standard Life Investments LTIP made in 2014 and 2015 excluding shares to be awarded in lieu of dividend equivalents. In the case of Colin Clark this also includes awards made under the Standard Life Restricted Stock Plan. All awards granted to Paul Matthews and Colin Clark other than 2016 Executive LTIP awards were granted before their appointments as executive Directors on 1 November 2015.

²This comprises deferred bonus awards made in 2015 and 2016 (excluding shares to be awarded in lieu of dividend equivalents) and options granted under the Standard Life Sharesave Plan. This includes the 2015 deferred bonus award granted to Paul Matthews before his appointment as executive Director on 1 November 2015.

³This comprises exercises of awards made under the 2013 Group and Standard Life Investments LTIPs and deferred share awards granted in 2014 in respect of the 2013 Group bonus plan, and includes shares awarded in lieu of dividend equivalents.

The closing market price of Standard Life plc shares at 31 December 2016 was 372.0p and the range for the year was 262.1p to 375.0p.

Directors' interests in the Company's shares through the medium of the Group's share plans, granted after appointment to executive Director are shown below.

Executive and Standard Life Investments LTIPs

Awards are subject to vesting conditions that are based on continuous employment and on satisfying corporate performance targets over the performance period. All awards lapse six months after the expected first date of exercise and carry the right to receive rolled-up dividends, but only to the extent awards vest. All awards were granted under the Executive LTIP unless otherwise noted.

Award dates		Number of shares						Value of shares
Date of original award	Expected first date of exercise	Original award	2016 awards	Shares in lieu of rolled-up dividends from date of grant to end of year	Exercised during year¹	Lapsed during year⁵	At end of year	Share price at award date²	Share price on exercise date	Actual date of exercise	Total value on exercise date
Keith Skeoch
25/03/13³	25/03/16	236,634	-	40,365	112,932	164,067	-	£3.6998	£3.559	30/03/16	£401,925
25/03/13⁴	25/03/16	236,634	-	40,365	233,233	43,766	-	£3.6998	£3.559	30/03/16	£830,076
28/03/14⁴	28/03/17	237,818	-	33,617	-	-	271,435	£3.7844	-	-	-
20/05/14	20/05/19	231,469	-	33,093	-	-	264,562	£3.8882	-	-	-
27/03/15	27/03/20	207,805	-	20,108	-	-	227,913	£4.8122	-	-	-
30/03/15⁴	30/03/18	208,637	-	19,930	-	-	228,567	£4.7930	-	-	-
24/03/16	24/03/21	-	958,274	43,492		191,655	810,111	£3.6524	-	-	-
		1,358,997	958,274	230,970	346,165	399,488	1,802,588
Luke Savage
10/09/14	10/09/19	184,329	-	20,832	-	-	205,161	£4.0688	-	-	-
27/03/15	27/03/20	155,853	-	15,081	-	-	170,934	£4.8122	-	-	-
24/03/16	24/03/21	-	210,478	11,940	-	-	222,418	£3.6524	-	-	-
		340,182	210,478	47,853	-	-	598,513
Paul Matthews
24/03/16	24/03/21	-	206,987	11,742	-	-	218,729	£3.6524	-	-	-
		-	206,987	11,742	-	-	218,729
Colin Clark
24/03/16	24/03/21	-	492,826	27,959	-	-	520,785	£3.6524	-	-	-
		-	492,826	27,959	-	-	520,785

¹The 2013 Group LTIP vested at 40.77% and the 2013 Standard Life Investments LTIP vested at 84.20%.

²Based on the average share price for the five dealing days immediately before the awards were granted.

³Awards granted under the Group LTIP.

⁴Awards granted under the Standard Life Investments LTIP.

⁵The shares shown against the awards granted in 2013 lapsed as a result of performance outcome. Following grant, the 2016 award was reduced from 500% of salary to 400% of salary and the corresponding number of shares lapsed.

The Standard Life Restricted Stock Plan

The award lapses six months after the expected first date of exercise and carries the right to receive rolled-up dividends, but only to the extent awards vest.

Award dates		Number of shares					Value of shares
Date of original award	Expected first date of exercise	Original award	Shares in lieu of rolled-up dividends from grant to end of year	Exercised during year	Lapsed during year	At end of year	Share price at award date¹	Share price on exercise date	Actual date of exercise	Total value on exercise date
Colin Clark²
8/10/15	31/03/17	173,181	9,417	-	-	182,598	£4.042	-	-	-

¹Based on the average share price for the five dealing days immediately before the awards were granted.

²The award will vest in 2017 subject to Colin maintaining a personal performance level above a pre-determined threshold and is forfeited in the event he resigns before 31 March 2017. The award was granted prior to his Board appointment in 2015.

Bonus awards - deferred shares

These awards are the deferred share elements of the 2013, 2014 and 2015 bonus awards. The value of the bonus deferred into share awards is reported within the annual bonus figures shown in the Directors' remuneration for the year for which the bonus is payable. All awards lapse six months after the expected first date of exercise and carry the right to receive rolled-up dividends, but only to the extent awards vest.

Award dates		Number of shares						Value of shares
Date of original award	Expected first date of exercise	Original award	2016 awards	Shares in lieu of rolled-up dividends from date of grant to end of year	Exercised during year	Lapsed during year	At end of year	Share price at award date¹	Share price on exercise date	Actual date of exercise	Total value on exercise date
Keith Skeoch
28/03/14	28/03/16	14,503	-	1,194	15,697	-	-	£3.448	£3.559	30/03/16	£55,866
27/03/15	27/03/17	17,825	-	1,702	-	-	19,527	£4.071	-	-	-
24/03/16	24/03/18	-	162,898	8,753	-		171,651	£3.897	-	-	-
		32,328	162,898	11,649	15,697	-	191,178
Luke Savage
27/03/15	27/03/17	30,076	-	2,872	-	-	32,948	£4.071	-	-	-
24/03/16	24/03/18	-	79,214	4,256	-	-	83,470	£3.897	-	-	-
		30,076	79,214	7,128	-	-	116,418
Paul Matthews
24/03/16	24/03/18	-	56,470	3,033	-	-	59,503	£3.897	-	-	-
			56,470	3,033	-		59,503
Colin Clark
24/03/16	24/03/18	-	17,237	925	-	-	18,162	£3.897	-	-	-
			17,237	925	-	-	18,162

¹Based on the average share price for the month of December preceding the date on which the options were granted.

The Standard Life Sharesave Plan

Luke Savage was granted an option under this plan on 12 September 2014 over 5,116 Standard Life plc shares exercisable from 1 November 2019. The exercise price for these options is £2.961.

Keith Skeoch was granted an option under this plan on 16 September 2016 over 5,292 Standard Life plc shares exercisable from 1 November 2021. The exercise price for these options is £2.834.

Executive Directors' external appointments

Subject to the Board's approval, executive Directors are able to accept a limited number of external appointments to the boards of other organisations and can retain any fees paid for these services. Significant executive Director appointments held during the year are shown below:

Executive Director	Role and Organisation	2016 Fees
Keith Skeoch	Non-executive Director of the Financial Reporting Council	£nil
Luke Savage	Member of Council, Queen Mary University of London	£nil
Paul Matthews	Member of the board of the Association of British Insurers Member of the Practitioner Panel of the Financial Conduct Authority	£nil

Loss of office payments (audited)

No loss of office payments were made in the year.

Payments to former directors (audited)

Payments made to former directors during the year (if not reported elsewhere) will be reported here if they are in excess of £20,000.

Details of the nature of the payments to be made to David Nish in 2016 following his stepping down as Chief Executive in August 2015 were set out in the Annual report and accounts 2015. The bonus to be paid in March 2017 in respect of his employment in the period 1 January 2016 to 31 March 2016 amounts to £294,860. This has been determined with reference to company performance as measured by the Group annual bonus scorecard. No further cash payments are to be made. In addition the value of his 2014 Executive LTIP award at 31 December 2016 following the application of the performance outcome is £388,336 (valued using the average Standard Life plc share price for the quarter 1 October 2016 to 31 December 2016 in line with the approach taken in the single figure disclosures for Directors). This award does not vest until 20 May 2019.

Pay compared to performance

The graph shows the difference in value at 31 December 2016 between having invested £100 on 1 January 2009, respectively, in Standard Life plc and in the FTSE 100. It is assumed dividends are reinvested in both. The FTSE 100 has been chosen as the comparator index because we consider it to be the widely recognised benchmark for large companies in the UK. Standard Life plc is a member of this FTSE grouping.

The following table shows the single figure of total remuneration for the Director (and in the case of 2015 the Directors) in the role of Chief Executive (CE) for the same eight financial years as shown in the graph above. Also shown are the annual bonus awards and LTIP awards which vested based on performance in those years.

Year ended 31 December	Chief Executive	CE single figure of total remuneration (£000s)	Annual bonus award rates against maximum opportunity (%)¹	Long-term incentive plan vesting rates against maximum opportunity (%)
2016	Keith Skeoch	2,746	81	31.02
2015	Keith Skeoch²	1,411	87	40.77
2015	David Nish³	2,143	90	40.77
2014	David Nish	6,083	95	100
2013	David Nish	4,206	75	64
2012	David Nish	5,564	88	100
2011	David Nish	2,601	77	63.5
2010	David Nish	1,971	83	-
2009	Sir Sandy Crombie	2,175	67	49.67

¹The annual bonus award rates against maximum opportunity are in respect of the Group annual bonus plan.

²The figure shown is the remuneration shown in the single figure table on page 88, time apportioned for the period 5 August 2015 to 31 December 2015. Annual bonus award rates against maximum opportunity and the long-term incentive plan vesting rate relates to the Group annual bonus and Group LTIP.

³David Nish ceased to be Chief Executive with effect from 5 August 2015 and the figure reported is that relating to the period 1 January 2015 to 5 August 2015.

Relative importance of spend on pay

The following table compares what the Group spent on employee remuneration to what is paid in the form of dividends to the Company's shareholders. Also shown is the Group's operating profit before tax from continuing operations which is provided for context as it is one of our key performance measures:

	2015	2016	% change
Remuneration payable to all Group employees (£m)	635	596	6%
Dividends paid in respect of financial year (£m)	362	389	7%
Operating profit before tax (£m)	665	723	9%

Percentage change in remuneration of the director in the position of Chief Executive

The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned between the year ended 31 December 2015 and the year ended 31 December 2016 for the Chief Executive compared to the average UK-based Group employee. The Committee considers these appropriate comparables as the Chief Executive is UK-based and the largest number of Group employees are based in the UK.

	% change in base salary¹	% change in bonus	% change in benefits
Chief Executive	-	(33.6%)²	-
UK-based employees of the Group	3%	(2.8%)	-

¹There was no change to the salary awarded to the Chief Executive from his appointment on 5 August 2015 to 31 December 2016.

²This is the difference between the bonus awarded to Keith Skeoch for 2016 and 2015, as shown on page 88. It reflects both the movement in performance between years and the reduction of the maximum bonus opportunity from his previous role as the importance of variable remuneration delivered over the long term increases.

Implementation of policy in 2017

Base salary

The Remuneration Committee has not awarded increases to base pay for executive Directors. Base pay for 2017 is therefore:

	Base pay
Keith Skeoch	£700,000
Luke Savage	£615,000
Paul Matthews	£630,000
Colin Clark	£600,000
Barry O'Dwyer¹	£525,000

¹From the date of his appointment to the Board.

Bonus

The executive Directors will participate in the Group annual bonus plan. Target and maximum award opportunities are:

	Target opportunity as a % of salary	Maximum opportunity as a % of salary
Keith Skeoch	75%	175%
Luke Savage	65%	150%
Paul Matthews¹	65%	150%
Colin Clark	75%	175%
Barry O'Dwyer²	65%	150%

¹The bonus will be apportioned to 31 August 2017.

²From the date of his appointment to the Board.

For Keith Skeoch, 90% of the award will be based on Group performance and 10% on personal performance. For the other executive Directors and for Barry O'Dwyer from appointment, 80% of the award will be based on Group performance and 20% on personal performance.

In evaluating the non-financial metrics, the Remuneration Committee will reference, where possible, objective data and will exercise judgement in determining achievement of objectives when assessing performance. Disclosure of the financial targets, performance and how performance has been evaluated by the Remuneration Committee will be provided in the Directors' remuneration report at the end of the performance period.

Pension

Cash allowances of 25% of salary are paid in lieu of pension contributions to all executive Directors.

Long-term incentive arrangements

The Remuneration Committee proposes to grant awards, in the form of nil-cost options, in 2017 under the Executive LTIP plan, which will vest in March 2022. These are set out in the table below.

	Basis of award (% of salary)	Face value at grant
Keith Skeoch	400%	£2,800,000
Luke Savage	125%	£768,750
Colin Clark	300%	£1,800,000
Barry O'Dwyer	120%	£630,000
Performance criteria	Cumulative Group operating profit before tax (80%) and cumulative Group net flows (20%) for the three-year period ended 31 December 2019
Threshold and % of award vesting at threshold	Vesting: 0% Cumulative Group operating profit before tax Threshold: £2,240m Cumulative Group net flows Threshold: £27.7bn
Maximum and % of award vesting at maximum	Vesting: 100% Cumulative Group operating profit before tax Maximum: £2,725m Cumulative Group net flows Maximum: £45.9bn

5.4 Annual remuneration report - what we did in 2016 for non-executive Directors

Single total figure of remuneration - non-executive Directors (audited)

The following table sets out the single total figure of remuneration for each of the non-executive Directors who served as a Director at any time during the financial year ending 31 December 2016. Non-executive Directors do not participate in bonus or long-term incentive plans and do not receive pension funding.

Non-executive Directors		Fees for year ended 31 December £000s	Taxable benefits in year ended 31 December £000s¹	Total remuneration for the year ended 31 December £000s
Sir Gerry Grimstone	2016	380	17	397
	2015	370	21	391
Pierre Danon	2016	78	36	114
	2015	72	17	89
John Devine²	2016	41	-	41
	2015	-	-	-
Melanie Gee³	2016	93	4	97
	2015	9	-	9
Crawford Gillies⁴	2016	35	2	37
	2015	84	3	87
Noel Harwerth	2016	73	5	78
	2015	83	4	87
Isabel Hudson⁵	2016	36	8	44
	2015	72	7	79
Kevin Parry⁶	2016	116	7	123
	2015	90	16	106
Lynne Peacock⁷	2016	143	5	148
	2015	101	9	110
Martin Pike	2016	104	6	110
	2015	90	8	98

¹Sir Gerry Grimstone received an allowance of £15,000 towards his business related accommodation costs in Edinburgh in addition to his Chairman's fees. Other amounts reported relate to expenses such as travel and accommodation expenditure incurred on Group business. While these payments are the reimbursement of expenses and not benefits, they are included as being a payment which is subject to tax.

²Appointed with effect from 4 July 2016.

³Appointed with effect from 1 November 2015.

⁴Stepped down from the Board following the conclusion of the AGM on 17 May 2016.

⁵Resigned with effect from 24 June 2016.

⁶Appointed Senior Independent Director following the conclusion of the AGM on 17 May 2016.

⁷Appointed chairman of Standard Life Assurance Limited on 1 April 2016.

Letters of appointment

The non-executive Directors, including the Chairman, have letters of appointment that set out their duties and responsibilities. The key terms are:

Provision	Policy
Period of appointment	Three-year term which can be extended by mutual consent and is subject to annual re-election by shareholders in line with Company's articles of association and the UK Corporate Governance Code.
Time commitment	Two to three days per week for the Chairman. For other non-executive Directors - 30 to 35 days a year
Notice periods (apply to both the Company and the Director)	Chairman - six months. For other non-executive Directors - no notice period. There is no provision for compensation payments for loss of office for non-executive Directors.
Remuneration	Fees (as set out on the following page). Reimbursement of travel and other reasonable expenses incurred in the performance of their duties. No pension, annual bonus or other incentive payment permitted.

Date of letters of appointment

Current letter of appointment

Sir Gerry Grimstone¹

Pierre Danon

John Devine

Melanie Gee

Crawford Gillies²

Noel Harwerth

Isabel Hudson³

Kevin Parry⁴

Lynne Peacock

Martin Pike

6 June 2003 as Director

28 February 2007 as Chairman (continuation 27 May 2010, 28 May 2013 and 17 May 2016)

28 November 2011 (continuation 6 October 2014)

4 July 2016

26 October 2015

7 December 2006 (continuation 11 January 2010, 3 December 2012 and 18 December 2015)

18 July 2012 (continuation 29 June 2015)

15 October 2014

27 October 2014

13 March 2012 (continuation 13 March 2015)

27 September 2013 (continuation 8 September 2016)

¹ Initially appointed as a director of The Standard Life Assurance Company and appointed as a Director of Standard Life plc effective from 30 March 2006.

² Retired from the Board, having concluded nine years' service at the conclusion of the AGM on 17 May 2016.

³ Resigned with effect from 24 June 2016.

⁴ Appointed Senior Independent Director with effect from the conclusion of the AGM on 17 May 2016.

The service agreements/letters of appointment for Directors are available to shareholders to view on request from the Company Secretary at the Company's registered address (details of which can be found in Section 14) and at the 2017 AGM.

Non-executive Directors' interests in shares (audited)

The following table shows the total number of Standard Life plc shares held by each of the non-executive Directors and their connected persons:

	Total number of shares owned at 1 January 2016 or date of appointment if later	Shares acquired/(sold) by the Directors during the period to 31 December 2016	Total number of shares owned at 31 December 2016 or date of cessation if earlier	Shares acquired/ (sold) by the Directors during the period 31 December 2016 to 22 February 2017
Sir Gerry Grimstone	206,626	-	206,626	-
Pierre Danon	47,034	2,622	49,656	-
John Devine¹	1,321	-	1,321	-
Melanie Gee	-	20,000	20,000	-
Crawford Gillies²	41,046	-	41,046	-
Noel Harwerth	10,074	-	10,074	-
Isabel Hudson³	5,067	-	5,067	-
Kevin Parry	36,324	13,676	50,000	-
Lynne Peacock	12,554	-	12,554	-
Martin Pike	32,727	-	32,727	-

¹Appointed with effect from 4 July 2016.

²Retired on 17 May 2016.

³Resigned on 24 June 2016.

The Chairman continues to be subject to a guideline holding of 100% of the value of his annual fee in Standard Life plc shares within four years of appointment. Sir Gerry Grimstone, as Chairman, fully met this requirement in 2016 with the value of his shares at the end of the year being 202% of his fees.

Implementation of policy for non-executive Directors in 2017

Following a review of non-executive Director fees, no changes were proposed for 2017.

Role	2017 fees¹	2016 fees
Chairman's fees²	£380,000	£380,000
Non-executive fees³	£73,500	£73,500
Additional fees:
Senior Independent Director	£18,000	£18,000
Chairman of the Audit Committee	£30,000	£30,000
Chairman of the Risk and Capital Committee	£30,000	£30,000
Chairman of the Remuneration Committee	£30,000	£30,000
Chairman of the Investment Committee⁴	£30,000	-
Chairman of Standard Life Assurance Limited⁵	£75,000	£50,000

¹The core fee of £73,500 paid to each non-executive Director (including the Chairman) is expected to total £588,000 for 2017 (2016: £603,303). This is within the maximum £1,000,000 permitted under Article 87 of Standard Life plc's articles of association. Total fees including additional duties are expected to amount to £1,107,500 for 2017 (2016:£1,099,000).

²The Chairman's fee is inclusive of the non-executive Directors' core fee and no additional fees are paid to the Chairman where he chairs, or is a member of, other committees/boards. In 2017 the Chairman will also receive £15,000 (2016: £15,000) as an allowance towards his business related accommodation costs in Edinburgh.

³For non-executive Directors, individual fees are constructed by taking a base fee and adding extra fees for chairing committees and subsidiaries' boards where a greater responsibility and time commitment is required.

⁴An appointment was made to this role in November 2016.

⁵An appointment was made to this role in April 2016 at which time the fee was revised from £50,000 to £75,000.

5.5 The Remuneration Committee

Membership

During 2016 the Remuneration Committee was made up of independent non-executive Directors: Lynne Peacock (Chairman and member until 17 May 2016), Melanie Gee (Chairman from 17 May 2016), John Devine (from 4 July 2016), Pierre Danon (until 24 October 2016), and Martin Pike.

Member	Attendance
Melanie Gee, Chairman	8/9
John Devine	4/4
Martin Pike	9/9

Former member
Pierre Danon	6/8
Lynne Peacock	4/4

The role of the committee

To consider and make recommendations to the Board in respect of the total remuneration policy across the Group, including:

· Rewards for the executive Directors, senior employees and the Chairman

· The design and targets for any employee share plan

· The design and targets for annual cash bonus plans throughout the Group

· Changes to employee benefit structures (including pensions) throughout the Group

The terms of reference are published within the Board Charter on our website at www.standardlife.com/annualreport

Committee effectiveness

The Committee reviews its remit and effectiveness annually. The 2016 review was carried out via an internal self-assessment questionnaire. The review concluded that the Committee remained effective and fulfilled its remit.

External advisers

The Remuneration Committee received information on comparative pay data from Towers Watson. Pinsent Masons LLP provided legal interpretation of remuneration related regulations to the Remuneration Committee.

Fees paid to Pinsent Mason LLP were £8,230.

During the year, the Remuneration Committee also took advice from Deloitte LLP (a member of the Remuneration Consultants Group), who were appointed as external advisers to the Remuneration Committee from October 2011.

A representative from Deloitte LLP attends, by invitation, all Remuneration Committee meetings to provide information and updates on external developments affecting remuneration as well as specific matters raised by the Remuneration Committee. Outside of the meetings, the Remuneration Committee's Chairman seeks advice on remuneration matters on an ongoing basis. As well as advising the Remuneration Committee, Deloitte LLP also provided tax, risk and data advice to the Group during the year. Deloitte Total Rewards and Benefits is an investment adviser to the trustees of the Standard Life Staff Pension Scheme. In addition, Standard Life is the current appointed provider for the Defined Contribution Master Plan that Deloitte LLP provides for its employees and Deloitte LLP is one of the employee benefit consultants through which Standard Life has been appointed to provide defined contribution arrangements for Deloitte's clients through competitive tender.

Fees paid to Deloitte LLP during 2016 for professional advice to the Committee were £179,800. This reflects all the fees paid to Deloitte LLP in relation to remuneration matters.

Where appropriate, the Remuneration Committee receives input from the Chairman, Chief Executive, Chief Financial Officer, Chief People Officer, Group Reward and Employment Policy Director, Group Chief Risk Officer and the Head of Corporate Governance at Standard Life Investments. This input never relates to their own remuneration.

As noted in Section 2 Sir Gerry Grimstone is an independent non-executive board member of Deloitte LLP. He was appointed to this role to represent the public interest following a recommendation by the Financial Reporting Council that all major audit firms should have such representation. His remuneration for that role is a fixed sum and has no relationship to Deloitte's business activities. Both the Chairman and the Remuneration Committee recognised the need to ensure there is no conflict of interest arising from the appointment process. The Remuneration Committee was satisfied at the date of the appointment that the nature of the Chairman's appointment to Deloitte LLP did not create a conflict of interest. The Remuneration Committee continues to monitor this position and are satisfied that the continuing appointment does not give rise to a conflict of interest. Deloitte LLP operates appropriate safeguards to maintain the independence of its advice, for example, the team responsible for providing advice to the Remuneration Committee are not rewarded for cross-selling non-related services to Standard Life and work is contracted for independently from work performed by the rest of the firm. Whilst Sir Gerry Grimstone has access to the Remuneration Committee adviser to the extent that he is invited to attend Remuneration Committee meetings, he does not meet with the Remuneration Committee adviser, other than in those meetings, to discuss matters relating to Standard Life. Communication between Deloitte LLP and the Remuneration Committee is on instruction from the Remuneration Committee Chairman.

The Committee's work in 2016

An indicative breakdown as to how the Remuneration Committee spent its time is shown below: Diagram removed for the purposes of this announcement. However it can be viewed in full in the pdf document.

Jan - Mar	· 2015 Directors' remuneration report · 2015 bonus payments and 2013 LTIP outcomes · 2016 annual bonus and LTIP targets · 2016 salaries and LTIP awards · Investor feedback on executive Directors' remuneration · Compliance review and updates for Solvency II requirements for reward · Group Remuneration Policy
Apr - Jun	· Investor response to the 2015 Directors' remuneration report and executive Directors' remuneration · Reward regulation and practice update · Material risk taker populations and disclosures for 2016 · All employee share plans
Jul - Sep	· Mid-year review of performance against target for annual bonus and LTIP awards · Review of bonus and LTIP terms · Regulatory update on in-force and pending regulations impacting different parts of the Group · Investor consultation on executive remuneration
Oct - Dec	· End of year review of performance against target for annual bonus and LTIP awards · Investor feedback on executive remuneration · 2016 Directors' remuneration report · Governance of incentive arrangements, including sales incentives, in line with regulatory compliance

Shareholder voting

We remain committed to ongoing shareholder dialogue and take an active interest in voting outcomes. Where there are substantial votes against resolutions in relation to Directors' remuneration, the Remuneration Committee seek to understand the reasons for any such vote, and will detail here any actions in response to it.

The remuneration policy was not subject to a vote at the 2016 AGM and the following table sets out the outcome of the vote on the remuneration policy presented at the 2015 AGM on 12 May 2015.

Policy	For	Against	Withheld
(% of total votes)	96.6%	3.4%
(No. of votes cast)	852,195,858	29,881,743	4,276,901

The Directors' remuneration report was subject to a vote at the 2016 AGM and the following table sets out the outcome.

2015 Directors' Remuneration Report	For	Against	Withheld
(% of total votes)	77.7%	22.3%
(No. of votes cast)	639,048,996	183,477,683	22,528,635

The Remuneration Committee acknowledges that a significant number of votes were cast against the 2015 Directors' remuneration report notwithstanding that all remuneration paid and awarded was within the approved policy. We understand that a key concern was the increase in the quantum of variable deferred remuneration awarded to the Chief Executive in 2016.

Having listened to the concerns raised, the Chief Executive volunteered a reduction in the 2016 LTIP award that had been granted to him on 24 March 2016. The Committee approved a reduction equivalent to 100% of salary from 500% to 400% in the value of the 2016 LTIP award that was granted to the Chief Executive. The Committee have also agreed that 400% will continue to be the maximum annual award grant level for the duration of the current remuneration policy.

In response to the 2016 vote on the remuneration report the Chairman of the Remuneration Committee met with a number of our largest investors, the Investment Association (IA) and Institutional Shareholder Services Inc. (ISS) with a view to understanding investors' concerns. The meetings were very helpful in gaining a detailed understanding of these concerns and their views of the evolving remuneration landscape more generally. The points raised by investors at these meetings were discussed with the Remuneration Committee and have informed our 2017 remuneration decisions and our consideration of a new remuneration policy to be presented at the 2018 AGM. Further detail can be found in the Remuneration Committee Chairman's statement.

Promoting all-employee share ownership

We believe that share ownership by our employees helps them to understand the interests of the Company's shareholders. On 31 December 2016, 73% of our employees were Standard Life plc shareholders through participation in the Standard Life (Employee) Share Plan. We promote employee share ownership with a range of initiatives:

· The Standard Life (Employee) Share Plan which allows employees to buy Standard Life plc shares directly from their earnings. A similar tax-approved plan is used in Ireland. At 31 December 2016, 3,915 employees in the UK were making a monthly average contribution of £58 and 171 employees in Ireland were making an average contribution of €44. Even though the plan cannot be structured on a tax-favourable basis in Germany and Austria, 119 employees in these countries participated in December 2016 with an average contribution of €40.

· The Standard Life Sharesave Plan which allows UK tax resident employees to save towards the exercise of options over Standard Life plc shares with the option price set at the beginning of the savings period at a discount of up to 20% of the market price. Sharesave invitations have been made annually since 2011 to UK employees and, as at 31 December 2016, over 3,300 employees in the UK were saving towards one or more of the Sharesave offers.

· The Standard Life Ireland Sharesave Plan which launched in August 2012. Invitations have been made annually from August 2012. As at 31 December 2016, over 100 employees were saving towards one or more of the Sharesave Ireland offers.

Share dilution limits

The Executive LTIP, the Group LTIP, the Standard Life Investments LTIP, the Standard Life (Employee) Share Plan, the Standard Life Sharesave Plan and the Standard Life Ireland Sharesave Plan contain dilution limits that comply with the guidelines produced by The Investment Association (IA). On 31 December 2016, the Company's standing against these dilution limits was:

· 4.6% where the guideline is no more than 5% in any 10 years under all discretionary share plans in which the executive Directors participate (Executive LTIP and Standard Life Investments LTIP)

· 5.5% where the guideline is no more than 10% in any 10 years under all share plans (Executive LTIP, Group LTIP, Standard Life LTIP, Standard Life (Employee) Share Plan, the Sharesave Plan and Sharesave Ireland Plan)

As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP and Standard Life Investments LTIP and the Standard Life (Employee) Share Plan. On 31 December 2016, the number of unallocated shares held within these trusts was 3,611 in respect of the Standard Life (Employee) Share Plan. In addition, the trusts held 1,287,431 shares acquired to satisfy deferred bonus awards, Executive LTIP, Group LTIP and Standard Life Investments LTIP awards and other share plan awards. Of these shares 66,131 are committed to satisfying vested but unexercised awards. The percentage of share capital held by the employee trusts is significantly less than the 5% best practice limit endorsed by the IA.

Related party transactions

All transactions between Directors and the Group are on commercial terms that are equivalent to those available to all employees. During the year to 31 December 2016, the Directors (including close family members) contributed £1,408,546 (2015: £3,283,620) to products sold by the Group.

6. Statement of Directors' responsibilities

The following statements should be read with the statement of auditors' responsibilities included in the independent auditors' reports. They are made to help shareholders distinguish between the responsibilities of the Directors and those of the auditors in relation to the financial statements for 2016.

The Directors are responsible for preparing the Annual report and accounts 2016. It is also their responsibility to state that they consider that the Annual report and accounts 2016, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. Under the Companies Act 2006, the Directors are required to prepare and approve financial statements for each financial year. The Directors must only approve the financial statements when they are satisfied that they give a true and fair view of how the Group and the Company have performed at the end of the financial year, and that they give a true and fair view of the profit of the Group and the Company for that year. The financial statements of the Group and, where relevant, the Company have been prepared in accordance with:

· International Financial Reporting Standards (IFRS) as adopted by the European Union (EU)

· The Companies Act 2006

· The Disclosure Guidance and Transparency Rules (DTR) issued by the Financial Conduct Authority (FCA)

· Article 4 of the International Accounting Standards (IAS) Regulation

In preparing these financial statements, the Directors are required to:

· Select suitable accounting policies and then apply them consistently

· Make judgements and accounting estimates that are reasonable and prudent

· State whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements

· Prepare the financial statements on the basis that the Group is a going concern, unless it is inappropriate to presume that the Group will continue in business

The Directors are responsible for ensuring that proper accounting records are maintained. These must disclose, with reasonable accuracy at any time, the financial position of the Group and the Company and enable the Directors to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and the DTR. The Directors should also make sure that the Group financial statements comply with Article 4 of the IAS Regulation.

The Directors are also responsible for:

· Safeguarding the assets of the Company and the Group

· Taking reasonable steps to prevent and detect fraud and other irregularities

· The maintenance and integrity of the Group's website

· Preparing a Strategic report, Directors' report, Annual remuneration report and Corporate governance statement which comply with applicable law and regulations

· The maintenance and integrity of the corporate and financial information included on the Company's website

UK legislation governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed in the Board of Directors section, confirms that to the best of their knowledge and belief:

· The Group and the Company financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and of the Company and taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy

· The Strategic report includes the information required by DTR 4.1.8 and DTR 4.1.9 - a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties it faces

By order of the Board

Sir Gerry Grimstone

Chairman

24 February 2017

Luke Savage

Chief Financial Officer

24 February 2017

This information is provided by RNS

The company news service from the London Stock Exchange

END

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