Final Results - Part 4 of 8

RNS Number : 6683S

Standard Life Aberdeen plc

13 March 2019

 

Standard Life Aberdeen plc

Full Year Results 2018

Part 4 of 8

5. Directors' remuneration report

5.1 Remuneration Committee Chairman's statement

This report sets out what the Directors of Standard Life Aberdeen plc were paid in 2018 and how we will pay them in 2019, 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 KPMG LLP we have marked them as 'audited' for clarity.

The report is structured in the following sections:

·  The annual statement from the Chairman of the Remuneration Committee

·  Summary, which sets out an overview of the remuneration policy, how it will be implemented in 2019 and key reward decisions in respect of 2018

·  The annual remuneration report, which sets out in detail how the remuneration policy was implemented in 2018

Approval

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

Richard Mully

Chairman, Remuneration Committee

13 March 2019

Dear Shareholder

2018 Events

On behalf of the Board I am pleased to present the Remuneration Committee's report on Directors' remuneration for the year ended 31 December 2018.

We welcomed Cathleen Raffaeli to the Committee this year. Cathleen brings substantial experience to the Committee from her international roles and we look forward to working with her. I also extend my thanks to Gerhard Fusenig and Kevin Parry, both of whom stepped down from the Board at end of the year and have offered invaluable advice during their time on the Committee.

2018 was a year of change for Standard Life Aberdeen. There has been a significant amount of work behind the scenes and I would like to thank the People team who, under Kerry Christie's leadership, have helped deliver on critical projects. From an executive remuneration perspective, the new Directors' Remuneration Policy was submitted at the 2018 AGM and approved by shareholders with 98% of the vote. I would like to thank shareholders for the strong level of support given to the policy and their continued dialogue on remuneration matters. The policy was designed to clearly align the remuneration for executive Directors with company performance, taking into account an assessment of financial, non-financial and personal performance and supports our objective of having a simple and transparent structure for executive remuneration with a focus on sustainable long-term performance.

Business context and remuneration outcomes

As set out in the Chairman's statement, it is clear that 2018 has been a challenging year for our business with investment performance having fallen below historic levels, particularly within our absolute return strategies and weaknesses within a number of other equity classes. Significant outflows have materialised as a result of both investment performance in those areas and general investor sentiment in challenging market conditions. Conversely, performance for Fixed Income, Cash/Liquidity and Alternatives remains strong over 3 and 5 years, and we have maintained capital strength which has enabled us to sustain strong dividend payments.

We have continued to set and execute our long term strategic agenda with the sale of our UK and European insurance business to Phoenix in August 2018 marking a significant milestone in our transformation to a fee based, capital-light investment company. There has been substantial progress made on transformational and operational integration projects as a result of the merger. We remain on track to deliver the targeted annual efficiency savings of over £350m by 2020. While the strategy remains well supported by shareholders and the execution of the strategy has been good, it is clear that the challenges associated with the prevailing economic and geopolitical environment have impacted our financial performance, as a result of which our share price has not been what we would want over the past year.

Executive Incentive Plan ('EIP') outcomes

The financial performance indicated above has rightly impacted executive reward with the outcome of the Executive Incentive Plan ('EIP') scorecard being heavily weighted (80%) towards financial outcomes. However, the Committee did acknowledge that achievements from the perspective of strategic and personal performance also need to be taken into account when determining overall remuneration outcomes for our executive Directors.

To consider whether the awards generated by the scorecard were fair in the broader performance context the Committee considered the following factors:

·  The outcome from the perspective of overall company performance

·  The shareholder experience during 2018

·  The context of the incentive funding position across our workforce

As a result, taking a holistic view of these factors, the Committee decided to apply a discretionary reduction to the EIP outcome for the co-CEOs in recognition of the disappointing outturn in 2018, reducing the awards to 50% of the calculated outcome. In addition, the Committee decided that the awards should be deferred in full, with vesting determined by performance against underpins which link the awards to future performance (details of which can be found on page 91).

In the Committee's view, the outcomes for the co-CEOs set out above best balance disappointing financial results and shareholder outcomes with appropriate recognition for the contribution made by the co-CEOs to manage the Company's performance in a challenging marketplace and to continue to move forward on the Company's strategic agenda as articulated to, and strongly supported by, our shareholders.

The overall outcome of the scorecard and the discretionary adjustment for the co-CEOs is set out in the table below.

co-CEOs	Formulaic assessment (% of maximum)	Final outcome (% of maximum)1	Final outcome (% of salary)	Final outcome (£000s)
Martin Gilbert	20.4%	10.2%	61%	367
Keith Skeoch	20.4%	10.2%	61%	367

¹    After discretionary adjustment applied.

Further details on EIP outcomes for all executive Directors can be found on pages 88-91.

Vesting of the 2016 Executive LTIP and Standard Life Investments Long Term Incentive Plan ('SLI LTIP')

Keith Skeoch participated in the 2016 Executive LTIP, the outcome of which was dependent on the achievement of stretching performance conditions by reference to adjusted profit and net flows targets. On assessment of performance against these conditions, it was determined that the award did not meet the required thresholds against either of these measures and the award lapsed in full.

Rod Paris participated in the 2016 SLI LTIP which was dependant on the achievement of adjusted profit targets and subject to underpins relating to investment performance. After the performance conditions were assessed, it was determined that 6.35% of the target award vested (3.175% of maximum).

Further details of the LTIP performance assessment, including how these performance conditions were restated to reflect various transactions during the year, can be found on page 91.

Alignment of remuneration across our workforce

As a result of the merger, a diverse range of terms and conditions are currently in operation across the Group. In 2018, work started on a project to harmonise terms and conditions for all UK based colleagues, with other activities underway or planned to achieve similar harmonisation objectives in our other locations. The harmonisation programme includes alignment of pension contributions, variable pay structures and other benefits. This provides an opportunity to improve alignment of remuneration with the Group's culture and to further enhance our 'one company' vision. Proposals have been communicated to staff and are now subject to employee consultation. Implementation is expected to be in the second half of 2019.

The Committee has approved the proposed changes and is monitoring progress in line with its duty to periodically review trends in the wider remuneration landscape and to oversee relevant changes for our employees. Where appropriate, and where this is in line with the approved Directors' Remuneration Policy, the new set of terms and conditions will be extended to executive Directors.

Corporate Governance Code

Alongside the above work, the Committee noted the publication of the 2018 Corporate Governance Code in July 2018. I am pleased to confirm that Standard Life Aberdeen had already introduced a number of the measures proposed, such as a shareholding requirement post-cessation, which was adopted as part of the Directors' Remuneration Policy at the 2018 AGM, and the publication of the CEO pay ratio.

Another recommendation of the review was that executive Director pension arrangements should be aligned with those operating across the wider workforce. At the current time there is not a single set of terms and conditions in operation across the Group, although pension arrangements will be aligned as part of the terms and conditions harmonisation programme set out above. However, pension arrangements for existing executive Directors were aligned to colleagues within the legacy Aberdeen Asset Management heritage (which is a significant proportion of employees) as part of Directors' Remuneration Policy. It is not intended at this stage to make any further changes for current executive Directors in this regard. However, once the harmonisation programme has been implemented, pension arrangements for any executive Directors appointed after that date will be aligned with those operating across the wider workforce.

The Committee also took steps to strengthen the terms under which malus and clawback operate, clarifying additional scenarios under which the Committee could apply either as appropriate. The enhanced circumstances include material corporate failure, and where the grant or vesting of award is based on an error in information, assumptions or erroneous or misleading data.

Restatement of in-flight performance targets

As a result of the sale of our UK and European insurance business to Phoenix in August 2018, and other corporate events, the Remuneration Committee carefully assessed the impact on in-flight performance targets. In relation to executive Directors, this impacted EIP targets and in-flight LTIP arrangements. Where targets have been restated this has been done on a formulaic basis, taking into account the direct impact of the transaction on the relevant targets. The Committee approved these adjustments on the fundamental principle that targets should be no more or less difficult to achieve than the original targets. Restated targets are set out on page 88 for the EIP and page 93 for the LTIP.

 

How we will implement the policy in 2019

Base Salary

The Committee has determined that no increases to salaries would be made for any of the executive Directors. Salaries will therefore remain in line with 2018 (see page 85).

EIP

The Committee remains comfortable that the overall EIP mechanism remains fit for purpose and, as shown in the 2018 outcomes, appropriately aligns executive remuneration with the interests of the Group and its shareholders. It also allows the Committee an appropriate level of flexibility to apply discretion to ensure that remuneration outcomes are reflective of a holistic view of overall performance.

The Committee did, however, review the individual metrics which make up the financial element of the scorecard. In particular the Committee decided to make the following minor adjustments to metrics for 2019:

·  Replace Adjusted Profit (20%) with Adjusted Diluted EPS (20%). In line with the conversations with major shareholders in 2018, the adjusted profit metric will be replaced with an EPS metric to further align the management team with the shareholder experience. EPS was not introduced in 2018 given the intended corporate activity in 2018. In line with the current adjusted profit metric, EPS will continue to be based on a look back period increasing to three years over the life of the policy. The 2018 base year EPS has therefore been taken from the same operating plan as the original adjusted profit target to maintain the integrity of the plan.

·  Update the approach to measurement of net new flows. Given the volatility in setting net flows targets, and the relative size of fund flow, the Committee has revised the approach to determining the net flows target range to be based on the differential between gross inflows and gross redemptions. The revised approach is considered to provide a more robust assessment of performance.

Details of the proposed targets for 2019 can be found on page 86.

Board succession

A number of changes to the Board were announced on 13 March 2019. A summary of these changes, and the implications for associated remuneration arrangements, are set out below.

With effect from 13 March 2019, Keith Skeoch will become the sole CEO of Standard Life Aberdeen and Martin Gilbert becomes Vice Chairman of Standard Life Aberdeen and Chairman of Aberdeen Standard Investments from that date. Martin will continue to be an executive Director of the Board and both he and Keith will continue to report into the Chairman. In this role, Martin will be able to focus solely on our strategic relationships with key clients, winning new business and realising the potential from our global network and product capabilities.

Martin's base salary will remain as £600,000 and he will continue to participate in the EIP, although his maximum bonus opportunity will reduce from the current level of 600% to 350% of base salary with effect from the date of his appointment to his new role. There will be no changes to Keith's remuneration as a result of this change.

Stephanie Bruce will succeed Bill Rattray as CFO (subject to shareholder approval) on 1 June 2019.

Stephanie will be appointed on a base salary of £525,000 and she will receive a cash allowance in lieu of pension of 20% of salary in line with the executive remuneration policy. She will be eligible to participate in the EIP on the same basis as other executive Directors with a maximum opportunity of 350% of salary. As set out in the shareholder announcement, to reflect the change in the profile of her remuneration arrangements on leaving PwC, where partners have relatively stable earnings expectations with the full payment made in cash through the year, to joining Standard Life Aberdeen where there is significantly greater variability in out-turns and a significant proportion of awards are deferred for the longer-term, the Remuneration Committee has agreed to grant Stephanie a one-off award over Standard Life Aberdeen plc shares in connection with her appointment as CFO. The award, with a face value of £750,000 at the date of grant, will be over Standard Life Aberdeen shares and will vest in equal tranches in June 2020, June 2021 and June 2022.

Bill Rattray will retire from the Board on 31 May 2019 and will be given notice of cessation of his employment (12 months) at that date. It is intended that Bill will remain employed, to support transition to Stephanie, until 31 December 2019 during which time he will receive salary, benefits and will continue to accrue an award under the EIP. Following that date, in line with his contractual entitlements, Bill will receive salary and benefits for the remainder of his notice period.

For a full overview of our remuneration policy please see the Annual report and accounts 2017 on our website www.standardlifeaberdeen.com/annualreport

As you wilI be aware from the announcement of 13 March, I have decided to retire from the Board at the 2019 AGM. It has been a pleasure to serve on the Board and I have much appreciated the open and constructive dialogue on remuneration matters that I have been able to enjoy with shareholders during my time as Chair of the Remuneration Committee. Although my successor has yet to be confirmed, I wish them every success and that they are able to enjoy the strong levels of support and engagement that you have afforded me.

I hope you find this report a clear account of how the Committee has implemented our policy during 2018 and are able to support the decisions we have made. I welcome comments from shareholders and look forward to hearing your feedback at the AGM.

5.2 Summary

What are the principles that underpin our remuneration framework?

The Remuneration Committee developed three key principles designed to support our strategy, culture and values which guided the design of the remuneration framework going forward, as follows:

Underlying principles How this is achieved with the proposed framework       1           The approach to remuneration within the Group should be simple and transparent ·  Our remuneration framework and the basis for awards is simple, transparent and fair for both participants and shareholders alike 2 The approach should encourage a long-term focus on strategy and culture ·  The remuneration framework rewards the achievement of long-term sustained business results which support our strategy, culture and values ·  Conduct and how performance has been achieved will form a key part of how remuneration levels are determined ·  The remuneration design encourages significant long-term share ownership to ensure wealth and not just income is at risk ·  An appropriate level of fixed remuneration is provided to balance risk and reward 3 Alignment with stakeholders ·  Our remuneration design aligns the interests of executives, shareholders and importantly our clients

How does the remuneration structure support delivery of strategy?

The remuneration structure for executive Directors has consciously been designed to support the delivery of the Group's key strategic priorities as illustrated below:

Our strategy		What this means for us	How our remuneration structure delivers our strategy
	Client centricity	Our primary focus is delivering for our customers and clients - this means working to understand and meet their needs while building lasting partnerships	·  A balance of non-financial measures forms part of our scorecard for reward which includes a customer and client metric as well as measures on risk, compliance and conduct ·  These will be assessed in determining reward outcomes to ensure that our culture and values have been adhered to in achieving results delivered
	Enhancing our operations	Helping people be more productive, simplifying our ways of working and managing our costs effectively, enabling us to invest for growth	·  Cost/income ratio is included in performance measures for reward outcomes and also forms part of underpin measures post-award for a further three years ·  Remuneration structure which improves transparency between performance and reward
	Innovating for the future	Investing in leading edge capabilities, helping us attract clients and customers, enhance relationships and develop smarter ways of working over the long term	·  A variable pay award based on a pre-determined balanced scorecard of measures that will reward achievement of key financial milestones across our global business over the long term (up to six years). This includes flows. ·  Non-financial scorecard includes customer and client as well as strategic measures
	Valuing our savings ecosystem	Optimising the breadth and depth of our investment management, platform and advice ecosystem, along with our geographical reach enables us to meet the savings needs of clients and customers around the world	·  Investment performance and flows are included in performance measures for reward outcomes, with performance measured over an extended time period ·  Investment performance is measured over three and five years and flows over three years. Both metrics also form part of the underpin measures post-award for a further three years.

Overview of the policy and how it will be implemented in 2019

Element	Overview of remuneration policy	Implementation in 2019
Base salary	Provides a core reward for undertaking the role. Salaries are normally reviewed annually.	With effect from 1 January 2019 base salaries are as follows Salary Salary increase Co-Chief Executive officers1 (Co-CEOs) £600k 0% Chief Investment Officer (CIO) £450k 0% Chief Financial Officer (CFO) £450k 0% Chief Financial Officer (designate) £525k n/a 1      Martin Gilbert's salary will remain at £600k when he takes up his new role from 13 March 2019.
Benefits and Pension	Provides market competitive and cost effective benefits. Competitive, flexible retirement benefit delivered in a way that does not create an unacceptable level of financial risk or cost to the Group.	Benefits in line with approved policy. Pension allowance for each executive Director set at 20% of base salary.
Executive Incentive Plan (EIP)	Single incentive plan designed to reward the delivery of the Group's business plan in a range of financial and non-financial areas. Maximum award opportunity set at 700% of salary. Performance assessed against a range of key financial, non-financial and personal performance measures. Performance is measured both on annual, and where appropriate, trailing performance of up to three years. Awards are delivered as follows: ·  25% in the form of cash ·  75% in the form of a deferred award Deferred awards are subject to underpin conditions which are measured over the three financial years from award. Subject to performance against the underpins, deferred awards vest in equal tranches on the third, fourth and fifth anniversaries of the grant date. Vested awards are subject to a holding period until the fifth anniversary of the grant date. Cash and deferred awards are subject to malus and clawback.	Maximum opportunities for 2019: ·  Co-CEOs: 600% of salary ·  CIO: 600% of salary ·  CFO: 350% of salary 80% of the award will be based on financial metrics, with the remainder based on non-financial (10%) and personal (10%) performance. Underpin metrics for deferred variable pay awards are solely financial in nature. The performance metrics used to determine awards are set out in the following section. Martin Gilbert's maximum bonus opportunity will reduce to 350% of base salary with effect from 13 March 2019 when he takes up his new role.
Share Ownership	Executive Directors are required to build up substantial interests in the Group. Shares to the value of the share ownership guidelines must be held for 12 months following departure from the Group.	Executive Directors are required to build up interests in the Group as follows: ·  Co-CEOs: 500% of salary ·  CIO and CFO: 300% of salary Martin Gilbert's shareholding requirement will remain at 500% of salary until 13 March 2020 and will then revert to 300% of salary, in line with other executive Directors.
Non-executive Directors	Fees for the Chairman and non-executive Directors are set at an appropriate level to reflect the time commitment, responsibility and duties of the position and the contribution that is expected. The Board annually sets the fees for the non-executive Directors, other than the fee for the Chairman of the Company which is set by the Remuneration Committee. Fees for non-executive Directors are made up of a base fee and additional fees to reflect additional responsibilities (e.g. the Senior Independent Director / members / Chair of a Board Committee). The Chairman receives an all-inclusive fee. Additional fees or benefits may be provided at the discretion of the Remuneration Committee.	Details on non-executive Director fees in respect of 2019 can be found on page 98.

Time horizon of our remuneration structure for executive Directors

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

Scorecard for the 2019 EIP

The following table sets out the performance scorecard to be used to determine 2019 EIP awards:

Performance metrics	Measurement period	Weighting	Threshold (0% of maximum)		Target (50% of maximum)		Stretch (100% of maximum)
Long-term financial
Adjusted diluted earnings per share1	2018 and 2019	20%	Due to commercial sensitivity this measure will only be disclosed at the end of the performance period
Gross new business flows (all channels)1, 2	2018 and 2019	10%	£137.7bn		£153.0bn		£168.2bn
Net new business flows (excl. Strategic Insurance Partners)1, 2, 3	2018 and 2019	10%	(£11.2bn)		£2.9bn		£17.2bn
Investment performance	Three and five years	20%	50.0%		60.0%		70.0%
Short-term financial
Cost/income ratio	Annual	20%	70.2%		68.2%		66.2%
Non-financial
Strategic	Annual	2.5%	Remuneration Committee assessment at year end
Customer and client	Annual	2.5%	Remuneration Committee assessment at year end
People	Annual	2.5%	Remuneration Committee assessment at year end
Risk, compliance, conduct	Annual	2.5%	Remuneration Committee assessment at year end
Personal	Annual	10%	Remuneration Committee assessment at year end

¹    Includes eight months of discontinued business.

²    Flows exclude investments in cash and liquidity funds.

³    Definition aligns to the previous terminology of 'growth' flows.

How our executives were remunerated in 2018

What was earned during 2018

The remuneration outcomes for executive Directors have been determined by the Remuneration Committee as illustrated below:

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

Our performance

EIP scorecard outcomes for 2018

The table below shows the outcome of the executive Directors' participation in the EIP plan for the period 1 January 2018 to 31 December 2018. Adjustments made to the performance targets as a result of the sale of Standard Life Aberdeen's UK and European insurance business together with further details on how outcomes have been determined can be found on pages 88-91.

As set out in further detail in the Chairman's statement, the Committee exercised its discretion to reduce the pay-out to the co-CEOs by 50% to reflect the overall performance of the Group over the 2018 performance period. In addition, for the co-CEOs, the full award (rather than 75%) will be delivered in the form of deferred shares. Deferred share awards vest over a five-year deferral period (tranche vesting between years three and five, with a holding period such that no shares are capable of being sold until the fifth anniversary of grant) and are subject to underpin performance conditions measured over three years. Details of the underpin conditions for 2018 deferred awards are set out on page 91.

	% based on financial performance (maximum 80%)	% based on non- financial performance (maximum 10%)	% based on personal performance (maximum 10%)	Scorecard outcome (% of maximum)	Final outcome after discretion applied (% of maximum)1	Pay-out (£000s)
Martin Gilbert	9.4%	5%	6%	20.4%	10.2%	367
Keith Skeoch	9.4%	5%	6%	20.4%	10.2%	367
Rod Paris	9.4%	5%	8%	22.4%	22.4%	605
Bill Rattray	9.4%	5%	5%	19.4%	19.4%	306

¹   After application of the discretionary reduction of 50% to the EIP scorecard outcome, which was applied to the co-CEOs. No discretionary adjustment was applied to the CIO or the CFO.

Long-term incentive plan awards

The table below shows the outcome of the executive Directors' participation in legacy LTIP awards, during the three-year performance period ending on 31 December 2018. Further details on the adjustments made to the performance targets as a result of the sale of Standard Life Aberdeen's UK and European insurance business and additional commentary on performance from the Remuneration Committee can be found on pages 90-91.

	Threshold (0% of maximum)	Target (50% of maximum)	Stretch (100% of maximum)	Actual	Vesting (% of maximum)
2016 Executive LTIP1
Cumulative Group adjusted profit before tax	£2,395m	£2,600m	£2,910m	£2,305m	0%
Cumulative Group net flows	£30.8bn	£38.9bn	£51.0bn	(£53.7bn)	0%
	Threshold (0% of maximum)	Target (50% of maximum)	Maximum (100% of maximum)	Actual	Vesting (% of maximum)
2016 Standard Life Investments2
Cumulative adjusted profit performance	70% of target	100% of target	130% of target	72% of target	3.175%

¹    Of the executive Directors, only Keith Skeoch participated in this plan in 2016.

⁴    Of the executive Directors, only Rod Paris participated in this plan in 2016.

5.3 Annual remuneration report - what we did in 2018 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 2018:

Executive Directors		Basic salary for year £000s	Taxable benefits in year £000s1	EIP paid in cash2  £000s	EIP deferred £000s3,4	Long-term incentives with performance period ending  during the year £000s5,6	Other payments £000s7	Pension allowance paid  in year £000s	Total remuneration  for the year £000s
Martin Gilbert8	2018	600	2	-	367	-	-	120	1,089
	2017	199	1	279	838	-	-	-	1,317
Keith Skeoch	2018	600	1	-	367	-	1	120	1,089
	2017	700	-	588	413	978	1	175	2,855
Rod Paris8	2018	450	1	151	454	41	1	90	1,188
	2017	170	-	311	224	70	-	43	818
Bill Rattray8	2018	450	1	77	229	-	-	90	847
	2017	139	1	58	173	-	-	25	396

¹   This includes the taxable value of all benefits paid in respect of the year ended 31 December 2018. Included for Keith Skeoch and Rod Paris is private health cover at a cost to the Group of £518 per annum per employee and medical insurance for Martin Gilbert (£1,717) and Bill Rattray (£1,408).

²   For prior years this figure shows the annual cash bonus paid in respect of the year

³   As set out in the Chairman's statement, the Remuneration Committee decided that, for the co-CEOs, the full amount of the EIP award should be deferred in shares vesting over years 3, 4 and 5 and will be subject to the underpin mechanism detailed on page 91. For the CIO and the CFO, 75% of the EIP award is deferred under the same mechanism in line with the Directors' Remuneration Policy. In the event that all, or part, of the award fails to satisfy the underpin and subsequently lapses, the single figure outcome will be restated in the following Annual report and accounts.

⁴   For prior years this figure shows the annual deferred bonus awarded in respect of the year

⁵   The values reported for 2018 are the market values of the Executive LTIP awards and the Standard Life Investments LTIP awards granted in 2016 that will vest based on the three-year performance measurement period ending on 31 December 2018 - Executive LTIP (0%); and Standard Life Investments LTIP (3.175% of maximum). 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 Aberdeen plc shares that will vest (including additional Standard Life Aberdeen plc shares received in respect of accrued dividends from grant through to 31 December 2018) has been multiplied by the average share price over the quarter ending 31 December 2018 (264.15pence). This amount will be restated in the following Annual report and accounts once the share price at vesting is known.

⁶   The values reported for 2017 have been restated to reflect the value of the shares vesting in respect of the three-year performance measurement period ending on 31 December 2017. Where the awards vested in 2018 the price has been restated using the share price on the vesting date (355.80p). For the Executive LTIP awards which are subject to a further two year holding period until 2020, the restatement is based on the share price on the first trading day following the third anniversary of grant (355.80p).

⁷   Keith Skeoch, Martin Gilbert and Rod Paris, participate in the Standard Life Sharesave Plan. Keith Skeoch and Rod Paris participate in the Standard Life (Employee) Share Plan - the maximum annual award of matching shares in 2018 was £600.

⁸   Martin Gilbert, Rod Paris and Bill Rattray were appointed to the Board on 14 August 2017. All reported figures for 2017 are in respect of the period 14 August 2017 to 31 December 2017.

Base salary (audited)

No salary changes were made in 2018.

Pension (audited)

All executive Directors received a cash allowance in lieu of pension contributions of 20%.

Executive Incentive Plan

The following section sets out performance against each of the elements of the EIP for 2018.

Performance target adjustments

As set out in the Chairman's statement, following the sale of Standard Life Aberdeen's UK and European insurance business to Phoenix and other corporate transactions, the following adjustments were made to the EIP performance targets:

·  Following its sale to Phoenix, removal of targets related to Standard Life Aberdeen's UK and European insurance business from 31 August 2018

·  Addition of Phoenix profit share from 1 September 2018

·  Removal of targets as a result of the change in share of HDFC AMC following the IPO and inclusion of interest on the sales proceeds

·  Removal of flows relating to India & China life and HDFC AMC (as set out in the Strategic report, this information is no longer available)

The underlying principle to the adjustments made was that the adjusted targets should not be easier / more challenging than the original targets set when the award was made.

The table on the following page contains the original and adjusted targets and shows the outcome of the executive Directors' participation in the EIP plan for the period 1 January 2018 to 31 December 2018 against each of the elements of the EIP scorecard.

Financial performance metrics		Weighting	Threshold (0% of maximum)	Target (50% of maximum)	Stretch (100% of maximum)	Actual	Result (% of max)
Long-term financial
Adjusted profit before tax (excluding spread/risk margin)1	original target		£874m	£941m	£1,010m
	adjusted target	20%	£815m	£877m	£942m	£801m	0%
Gross new business flows (all channels)2	original target		£76.8bn	£85.3bn	£93.8bn
	adjusted target	10%	£72.2bn	£80.2bn	£88.2bn	£70.5bn	0%
Net new business flows (excl. Strategic Insurance Partners)2,3	original target		£1bn	£3.3bn	£6.0bn
	adjusted target	10%	£0.0bn	£0.8bn	£1.8bn	(£33.9bn)	0%
Investment performance	original target		50.0%	60.0%	70.0%
	(no adjustment)	20%	50.0%	60.0%	70.0%	55.9%	5.90%
Short-term financial
Cost/income ratio (excluding spread/risk margin)	original target		68.0%	66.0%	64.0%
	(no adjustment)	20%	68.0%	66.0%	64.0%	67.3%	3.50%

¹    Impacted by all adjustments except flow adjustments.

²    Impacted by adjustments for the removal of targets related to Standard Life Aberdeen's UK and European insurance business following its sale on 31 August 2018 and the removal of flows relating to India & China and HDFC AMC. Flows exclude cash and liquidity flows.

³    Definition is aligned to the previous terminology of 'growth' flows. Vesting outcomes of (£33.9bn) = net flows (see page 31) of (£40.9bn) excluding strategic insurance partners outflows of (£5.5bn) and excluding cash and liquidity outflows of (£1.3bn), plus discontinued inflows to end August 2018 of £0.2bn.

Non-financial performance metrics	Weighting	Highlights	Result (% of max)
Strategic	2.5%	·  Strong progress being made to becoming a world-class investment company with the execution of the sale of the UK and European insurance business to Phoenix ·  SLA Transformation Portfolio progressing well - on track to deliver the targeted annual efficiency savings of over £350m by 2020 ·  Accelerated pace of innovation with circa 30 fund launches in 2018 and initiatives completed to diversify geographic footprint across Asia, EMEA and the Americas	50%
Customer and client	2.5%	·  Sustained customer benchmark rating over 2018 however, slight fall in respondents rating SLA good or excellent over the year ·  Underlying customer confidence remains strong in ASI franchise but is below expected levels ·  Stable client perceptions across key markets: UK, Germany and USA	38%
People	2.5%	·  Achieved Women in Finance executive target, up 6% from 2017 ·  A full talent and succession review of Executive pipelines and other critical roles ·  Baseline employee engagement survey completed with 69% response rate, but with a score below industry average. However, responses have highlighted key areas for focus and action plans have been developed. ·  Voluntary turnover within the group remains ahead of the benchmark	38%
Risk, compliance, conduct	2.5%	·  Global Code of Conduct refreshed in the year with a 99.5% attestation rate across all employees ·  Enterprise Risk Management Framework established in 2018 ·  Enterprise Risk Management Framework rated as strong in four out of five components following annual credit rating reviews from external bodies ·  Group impact risk events were in line with expectations ·  Regular engagement sessions with Executives on risk matters ·  Roll out of single compliance system for ASI colleagues	75%

Personal Performance metrics	Weighting	Highlights	Result (% of max)
Martin Gilbert	10%	·  Strategic review for Asia and Americas with significant restructuring and centralisation as part of transformation programme. Ensured strong focus on responsibilities and cost control. ·  Implemented system for consistent tracking of customer metrics showing customer service and satisfaction across 16 key investment drivers. 13 of 16 metrics trending positively. ·  Client retention strategies implemented and plans rolled out for all clients and improvements in the global sales process ·  Distribution and marketing agenda on target, with 26 product campaigns and over 10m social media engagements. Refocused sponsorship activity post-merger in line with plan.	6%
Keith Skeoch	10%	·  Leadership role in the evolving regulatory environment via role with Financial Reporting Council, HM Treasury taskforce and Asset Management CEO meetings. Strong focus on promoting good conduct internally and incorporating effective control structures. ·  Complaint rate below target of less than 1 per 1,000 policies, with no material impact felt as a result of the sale of the UK and European insurance business. Transactional Net Promoter Score above target. ·  Introduced innovation panel and idea sharing platforms to embed an innovative culture across the Group. Review of working practices is underway to support transformation objectives.	6%
Rod Paris	10%	·  Integration of the investment teams and the creation of a unified leadership group, bringing together investment capabilities and their associated processes ·  Led the creation of a single global research platform across asset classes ·  Introduced Process Enhancement Plans for underperforming asset classes ·  Promoted our ESG programme and ensured integration into investment processes ·  Helped deliver a record number of new funds for clients	8%
Bill Rattray	10%	·  Oversight of the move from Solvency II to the CRD IV regulatory regime that created a capital light company ·  The associated restructuring of the balance sheet to maintain capital strength ·  Oversight and management of the capital return through both a share buy-back and the B share scheme ·  Continued engagement with the institutional investor and analyst communities	5%

Before approving the level of performance in 2018, 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. The Remuneration Committee determined there should be no adjustments made to the EIP scores as a result of the feedback from the Group Audit Committee, and the Group Risk and Capital Committee.

As set out in the Chairman's letter, to consider whether the awards generated by the scorecard were fair in the broader performance context the Committee considered the following factors:

·  The outcome from the perspective of overall company performance

·  The shareholder experience during 2018

·  The context of the incentive funding position across our workforce

Taking everything into account, the Committee decided to apply discretion to the EIP outcome for the co-CEO's to reduce the awards to 50% of the calculated outcome. In addition, the Committee decided that this amount would be deferred in full, with vesting determined by performance against underpins which links the award to future performance.

In the Committee's view, this outcome best balances disappointing financial results and shareholder outcomes with appropriate recognition for the contribution made by the executive Directors to manage the Company's performance in a challenging marketplace and to continue to move forward on the Company's strategic agenda as articulated to, and strongly supported by, our shareholders. The overall outcome of the scorecard and the discretionary adjustment is set out on page 91.

As a result of the approved ratings, the EIP outcome for 2018 is as set out in the table below:

	Formulaic outcome (% of maximum)	Final outcome after discretion applied (% of maximum)	Total payable (% of salary)	Total payable (£000s)	EIP cash (£000s)	EIP deferred1 (£000s)
Martin Gilbert
Maximum	100%	n/a	600%	3,600	900	2,700
Actual	20.4%	10.2%	61.2%	367	-	367
Keith Skeoch
Maximum	100%	n/a	600%	3,600	900	2,700
Actual	20.4%	10.2%	61.2%	367	-	367
Rod Paris
Maximum	100%	n/a	600%	2,700	675	2,025
Actual	22.4%	22.4%	134.4%	605	151	454
Bill Rattray
Maximum	100%	n/a	350%	1,575	394	1,181
Actual	19.4%	19.4%	67.9%	306	77	229

¹    EIP deferred awards are subject to performance underpins measured over three years as set out in the following section.

EIP deferred awards to be granted in 2019

EIP deferred awards will be made in 2019, in the form of nil-cost options, under the Deferred Bonus Plan rules. Awards will be subject to performance underpins, measured over a three-year period. Subject to performance against the underpins, awards will vest pro-rata over years three, four and five following grant. Awards will not be released to participants until the fifth anniversary of grant.

The following table sets out each of the performance underpins:

Performance measure	Weighting	Underpin level
Investment performance	25%	·  The outcome is calculated at the end of each financial year in the three-year underpin period (2019-2021), with the average of the three years' results to be at or above 55% of AUM by value to be outperforming benchmark
Flows1	25%	·  Gross new business flows underpin2 (12.5%) approved target of £251.5bn is based on 2019 budget for the three year period 2019 - 2021 reduced by the % midpoint of the range between Threshold and Target applied in the 2019 EIP. ·  Net new business flows underpin3 (12.5%) approved target of £40.6bn is based on the 2019 budget sum of the differential between gross inflows and gross redemptions for the three year period 2019-2021 reduced by the mid-point between Threshold and Target applied to 2019 in the EIP.
Return on adjusted equity	25%	·  The underpin requires return on adjusted equity, calculated as the average rate over the three-year underpin period (2019-2021), to be 17% or higher
Cost/income ratio	25%	·  The underpin approved target of 66.0% is based on averaging the three annual cost-income ratios for the three year period 2019-2021 from the 2019 budget increased by the % midpoint of the range between Threshold and Target applied in the 2019 EIP.

¹    Flows exclude investments in cash and liquidity funds.

²    All channels excluding Lloyds.

³    Excluding strategic insurance partners.

Long-term incentives

In line with the arrangements in place prior to the merger of Standard Life plc and Aberdeen Asset Management PLC, Keith Skeoch and Rod Paris have outstanding awards under the Standard Life Executive LTIP and Rod Paris also has outstanding awards under the Standard Life Investments LTIP. The following section sets out the level of vesting of outstanding awards due to vest based on performance to the end of 2018.

2016 Executive LTIP award vesting in respect of performance ending in 2018 (audited)

The awards granted in 2016 under the Executive LTIP have two performance conditions. The outcome is based 70% on cumulative Group adjusted 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 performance against the plan metrics appropriately reflects overall Group performance.

Keith Skeoch received an award in March 2016 of 400% of salary with the performance period ending in 2018. Rod Paris does not have an award under the Standard Life Executive LTIP with performance ending in 2018 as he was not an executive Director at the time of grant in March 2016.

The following adjustments were made to the performance targets for the 2016 awards:

·  Following its sale to Phoenix, removal of targets linked to the Standard Life Aberdeen's UK and European insurance business from 31 August 2018

·  Addition of Phoenix profit share post 31 August 2018

·  Removal of targets related to the change in share of HDFC AMC following the IPO and inclusion of interest on the sales proceeds

The underlying principle to the adjustments made was that the adjusted targets should not be easier / more challenging than the original targets.

The table below shows the original and adjusted performance targets together with actual outcomes for the 2016 LTIP award:

	Threshold	Target	Maximum	Actual performance	Level of vesting
Cumulative Group adjusted profit before tax1 for Standard Life Aberdeen Group for the three years ended 31 December 2018 Original performance conditions1	£2,490m	£2,705m	£3,030m
Adjusted performance conditions	£2,395m	£2,600m	£2,910m	£2,305m
Vesting outcome (70% weighting)					0%
Cumulative Group net flows for the Standard Life Aberdeen Group for three years ended 31 December 2018 Original performance condition1	£30.8bn	£38.9bn	£51.0bn
Adjusted performance condition	£30.8bn	£38.9bn	£51.0bn	(£53.7bn)
Vesting outcome (30% weighting)					0%

¹   These performance conditions were adjusted in 2017 in light of the merger, full details can be found in the Annual report and accounts 2017. No change was made to the net flows condition from those originally set in 2016.

In line with the above results, it was determined the performance conditions were not met and the award lapsed in full.

2016 Standard Life Investments LTIP award vesting in respect of performance ending in 2018 (audited)

Under the Standard Life Investments LTIP, awards are only capable of vesting if Aberdeen Standard 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.

When awarded, the vesting outcome was subject to a consolidated cumulative three-year third party EBITDA performance and this measure was used to capture vesting outcomes up to the end of 2017. As a consequence of the merger the awards became based on an adjusted profit before tax performance target for Aberdeen Standard Investments for the 2018 performance year. The actual profit targets are not disclosed as Aberdeen Standard Investments is a subsidiary business of Standard Life Aberdeen 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. The Remuneration Committee took the view of the Risk and Capital Committee into account when determining the level of vesting.

Rod Paris, who was not a Director at the time of grant in March 2016, received an award with a maximum value of 500% of salary with the performance period ending in 2018.

The following table sets out performance against targets for the 2016 award:

Performance level	Below threshold	Threshold	Target	Maximum
Adjusted profit before tax performance target	<70% of target	70% of target	100% of target	130% of target
Actual performance				72.4% of target
Vesting outcome				6.35% 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 having considered the risk underpin, the Remuneration Committee determined that 6.35% of the target award (3.175% of the maximum award) granted in 2016 would vest in 2019.

Awards granted in 2018

Summary table of scheme interests awarded during the year

The table below shows the key details of scheme interests granted in 2018:

Plan	Participant	Type of award	Basis of award	Face value at grant	Number of shares awarded	% payable for threshold performance	Details on performance conditions
Executive LTIP1	Keith Skeoch	Nil-cost option	400% of salary	£2,800,000	761,531	0%	See below
	Rod Paris	Nil-cost option	400% of salary	£1,800,000	489,556	0%	See below
Deferred Bonus Awards2	Keith Skeoch	Nil-cost option	Deferred Bonus	£413,000	97,541	Not applicable	Not applicable
	Rod Paris	Nil-cost option	Deferred Bonus	£224,483	53,017	Not applicable	Not applicable
Variable Pay Awards3	Martin Gilbert	Nil-cost option	Deferred Bonus	£3,076,827	742,908	Not applicable	Not applicable
	Bill Rattray	Nil-cost option	Deferred Bonus	£636,943	153,786	Not applicable	Not applicable

¹    Executive LTIP share price used was 367.68 p.

²    Under the 2017 Group annual bonus plan and Standard Life Investments bonus plan, 50% of bonuses in excess of 25% of salary were deferred for three years into Standard Life Aberdeen plc shares. This resulted in the above awards being granted on 28 March 2018 based on the average share price for December 2017 as per plan rules of 423.41p.

³   Under the Aberdeen variable pay plans, deferred bonus awards in the form of nil-cost options were granted to Martin Gilbert and Bill Rattray. As disclosed in the Annual report and accounts 2017, of the above awards £837,827 (Martin Gilbert); £172,943 (Bill Rattray) relate to the period post completion of the merger (i.e. 14 August 2017 to 31 December 2017). These awards will vest in equal tranches between 5 March 2019 to 5 March 2023 (share price on award 368.88 pence which was the average Standard Life Aberdeen plc share price for the 5 days prior to the 5 March grant). The balancing figures £2,239,000 (Martin Gilbert); £464,000 (Bill Rattray) relate to the period prior to the completion of the merger (i.e. 1 October 2016 to 13 August 2017). These awards will vest in equal tranches between 14 August 2018 to 14 August 2022 (share price on award 328.08 pence, being the average Aberdeen Asset Management share price for the five days prior to grant, i.e. 14 August 2017).

Performance conditions for Executive LTIP awards granted 2018 and 2017

The awards granted in 2018 under the Executive LTIP have two performance conditions. The outcome is based 80% on cumulative Group adjusted profit before tax and 20% on cumulative Group net flows. In addition to business performance criteria, 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 Co-Chief Executive Officers, or the Remuneration Committee in the case of Keith Skeoch, recommends otherwise. Keith Skeoch and Rod Paris were granted awards under the Executive LTIP in 2018 and 2017.

As set out in the Remuneration Committee Chairman's statement, the performance targets for the 2018 and 2017 awards under the Executive LTIP Plan have been adjusted as follows:

·  Following its sale to Phoenix, removal of targets linked to the Standard Life Aberdeen's UK and European insurance business from 31 August 2018

·  Addition of Phoenix profit share post 31 August 2018

·  Removal of targets as a result of the change in share of HDFC AMC following the IPO and inclusion of interest on the sales proceeds

The underlying principle to the adjustments made was that the adjusted targets should not be easier/ more challenging than the original targets.

The table below sets out the adjusted performance targets for Executive LTIP awards granted in 2018:

Performance condition	Performance measurement period	Original/adjusted target	Threshold	Maximum
Cumulative Group adjusted profit before tax (excluding spread/risk margin)	1 January 2018 -31 December 2020	original	£2,675m	£3,615m
		adjusted	£2,295m	£3,105m
Cumulative Group growth net flows (excluding strategic insurance partners)		original	£45.1bn	£83.7bn
		adjusted	£36.5bn	£67.9bn

The table below sets out the adjusted performance targets for Executive LTIP awards granted in 2017:

Performance condition	Performance measurement period	Original1/adjusted target	Threshold	Maximum
Cumulative Group adjusted profit before tax	1 January 2017 -31 December 2019	original	£3,000m	£3,650m
		adjusted	£2,665m	£3,245m
Cumulative Group net flows		original	£27.7bn	£45.9bn
		No adjustment	£27.7bn	£45.9bn

¹    These are the performance targets after the adjustments in 2017 in light of the merger, full details can be found in the Annual report and accounts 2017. No change was made to the net flows condition in 2017 from those originally set at grant.

Directors' interests in shares (audited)

A shareholding requirement was implemented in 2014 and amended in 2018. We continue to require executive Directors and senior management to maintain a material long-term investment in Standard Life Aberdeen plc shares. 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. For the purpose of the shareholding requirement, awards qualifying include 50% of the value of deferred awards held by the executive Directors that have vested but not been exercised and 50% of the value of long-term incentive awards that are no longer subject to a performance condition but have not been exercised. As illustrated in the tables below, all executive Directors have complied with the current requirement as at 31 December 2018.

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

	Total number of shares owned at  1 January 2018	Shares acquired during the period 1 January 2018 to 19 October 2018	Total number of shares owned at 19 October 2018	Total number of shares owned at  22 October 2018	Shares acquired during the period 22 October 2018 to 31 December 2018	Total number of shares owned at 31 December 2018	Shares acquired between 31 December 2018 and 8 March 2019
	Pre share consolidation on 22 October 2018			Post share consolidation (shares were consolidated on a seven for eight basis)
Martin Gilbert	139,185	125,000	264,185	231,161	200,000	431,161	-
Keith Skeoch	2,347,467	150,623	2,498,090	2,185,828	200,203	2,386,031	139
Rod Paris	602,257	165,160	767,417	671,489	233	671,722	159
Bill Rattray	1,743,549	-	1,743,549	1,525,603	-	1,525,603	-

The following table shows the number of qualifying awards included in assessing achievement towards the shareholding requirement, as at 31 December 2018:

	Qualifying awards
	Number of shares available as unrestricted vested deferred awards	Number of shares under option under long-term incentive plans which are no longer subject to performance conditions	Total qualifying holding (shares held from table above) and 50% of qualifying awards	Value1 of holding	Shareholding requirement	Total of the value of shares (from table above) and 50% of the value of qualifying awards at 31 December 2018 as a % of salary
Martin Gilbert	1,846,924	-	1,354,623	£3,477,994	500%	580%
Keith Skeoch	-	172,871	2,472,466	£6,348,056	500%	1058%
Rod Paris	-	-	671,722	£1,724,646	300%	383%
Bill Rattray	652,206	-	1,851,706	£4,754,255	300%	1057%

¹    The closing price at 31 December 2018 used to determine value was 256.75 pence.

Executive Directors will be required to retain shares held in respect of the post cessation requirement (500% of salary for the co-CEOs and 300% of salary for other executive Directors) for a period of one year following their departure from the Group.

All former Directors held or continue to hold the shares required under their post-employment holding requirement. Luke Savage is required to hold 15,940 shares until 28 February 2019 and met this requirement. Paul Matthews met his requirement to hold 157,934 shares until 1 March 2018. Colin Clark retained in excess of his requirement at the point of the share consolidation on 22 October 2018. As no subsequent disposal of shares has been made he therefore has retained the necessary holding at 31 December 2018.

This table shows, in relation to each executive Director, the total number of share options with and without performance conditions held at 31 December 2018:    

	Unvested options with performance measures1	Unvested options without performance measures2	Vested but unexercised options at 31 December3	Exercised during the year4	Aggregate gains made on awards exercised during the year
Martin Gilbert	-	1,286,106	1,846,924	-	-
Keith Skeoch	2,307,052	387,762	-	282,866	£994,274
Rod Paris	1,400,967	55,763	-	273,244	£1,003,898
Bill Rattray	-	258,585	652,206	-	-

¹    This comprises Executive LTIP awards made in 2016, 2017 and 2018, awards under the Standard Life Investments LTIP made in 2016 and 2017 excluding, in each case, shares to be awarded in lieu of dividend equivalents.

²    This comprises awards under the Executive LTIP granted in 2014 and 2015 and deferred bonus awards (including unvested awards under the Aberdeen Variable Pay plans). It does not include shares to be awarded in lieu of dividend equivalents. Also included are options granted under the Standard Life Sharesave Plan.

³    This comprises awards made under the Aberdeen Variable Pay plans which are now exercisable.

⁴    This comprises, for both Keith Skeoch and Rod Paris, awards made under the 2015 Standard Life Investments LTIPs. Additionally it includes for Keith Skeoch the deferred share award granted in 2016 in respect of the 2015 Group bonus plan, and for Rod Paris a Restricted Stock Plan award granted in 2015, before he became a Director. It includes shares awarded in lieu of dividend equivalents.

The closing market price of Standard Life Aberdeen plc shares at 31 December 2018 was 256.75 pence and the range for the year was 224.85 pence to 442.60 pence.

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	2018 Fees
Martin Gilbert	Non-executive Director Glencore plc	$157,000
	Non-executive Director Sky plc1	£117,508
	Chairman of the Practitioner Panel - Prudential Regulation Authority	£nil
Keith Skeoch	Non-executive Director of the Financial Reporting Council	£nil
Bill Rattray	Non-executive Director - Curtis Banks Group PLC	£50,000

¹    Stepped down from this position with effect 10 October 2018.

Payments to past Directors/Loss of office payments (audited)

No payments were made to former Directors that have not been previously reported elsewhere. Payments made to former Directors that have not been previously reported elsewhere will be reported if they are in excess of £20,000.

Sir Gerry Grimstone is entitled to a six month notice period under the terms of his letter of appointment and will receive fees of £190,000 and an allowance of £10,000 in the period to 30 June 2019 (being the pro-rated value of his annual fee and allowances respectively). Sir Gerry will remain in an advisory position with the Company for this period. During this time, he will be available to advise the new Chairman and the Co-Chief Executives and serve as the Company's representative on the boards of Heng An Standard Life Insurance Company Limited and HDFC Life Insurance Company Limited.

Percentage change in remuneration of the Director in the position of Chief Executive Officer

The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned between the year ended 31 December 2017 and the year ended 31 December 2018 for Martin Gilbert and Keith Skeoch as Co-Chief Executive Officers compared to the average UK-based Group employee. The Remuneration Committee considers these appropriate comparators as the Co-Chief Executive Officers are UK-based and the largest number of Group employees are based in the UK.

	% change in base salary	% change in EIP outcome/bonus	% change in benefits1
Martin Gilbert	15%	(67%)	6%
Keith Skeoch	(14%)	(63%)	23%
UK-based employees	3%	(45%)	23%

¹   The change in benefits figure is based on the change in medical premium paid by the Group on behalf of employees. It does not reflect a change to the benefit received by individuals.

Pay Ratio

The table below sets out the ratio of both CEO's pay to the median, 25th and 75th percentile total remuneration of full-time equivalent UK employees in accordance with the legislation published by the Government in 2018. We have identified the relevant employees for comparison using our gender pay gap data set and updated the figures for remuneration received in respect of the 2018 performance year (methodology B). While the requirement to disclose the ratio under this methodology does not come into effect until next year, the Remuneration Committee welcomes the opportunity to illustrate its approach to remuneration across the Group.

	25th percentile	50th percentile	75th percentile
Martin Gilbert/ Keith Skeoch	30	19	12

Pay compared to performance The graph shows the difference in the total shareholder return at 31 December 2018 if, on 1 January 2009 £100 had been invested in Standard Life Aberdeen plc and in the FTSE 100 respectively. It is assumed dividends are reinvested in both. The FTSE 100 has been chosen as Standard Life Aberdeen plc is a member of this FTSE grouping.

Total shareholder return of Standard Life Aberdeen plc compared to the FTSE 100 index Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

The following table shows the single figure of total remuneration for the Directors in the role of Chief Executive Officer for the same ten financial years as shown in the graph above. Also shown are the annual incentive awards and LTIP awards which vested based on performance in those years:

Year ended 31 December	Chief Executive Officer	Chief Executive Officer single figure of total remuneration (£000s)	EIP outcome / Annual incentive rates against maximum opportunity (%)	Long-term incentive plan vesting rates against maximum opportunity (%)
2018	Martin Gilbert	1,089	10.2	-
2018	Keith Skeoch	1,089	10.2	-
2017	Martin Gilbert	1,317	56	-
2017	Keith Skeoch	3,028	82	70
2016	Keith Skeoch	2,746	81	31.02
2015	Keith Skeoch	1,411	87	40.77
2015	David Nish	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

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 adjusted profit before tax which is provided for context as it is one of our key performance measures:

	2018	% change	2017
Remuneration payable to all Group employees (£m)1	772	(1%)	781
Dividends paid in respect of financial year (£m)	559	(11%)	626
Share buybacks and return on capital (£m)	1,235	n/a	-
Adjusted profit before tax (£m)1	860	1%	854

¹   Shown on a Reported basis and includes discontinued operations. The 2017 figure includes remuneration paid to Aberdeen employees from 14 August 2017 and adjusted profit includes Aberdeen from 14 August 2017.

5.4 Annual remuneration report - 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 2018. 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	2018	380	20	400
	2017	380	15	395
Sir Douglas Flint2	2018	14	-	14
	2017	-	-	-
Simon Troughton	2018	200	13	213
	2017	77	-	77
Julie Chakraverty3	2018	43	-	43
	2017	40	-	40
John Devine	2018	124	3	127
	2017	92	4	96
Gerhard Fusenig	2018	124	-	124
	2017	36	-	36
Melanie Gee	2018	114	4	118
	2017	104	4	108
Richard Mully	2018	124	8	132
	2017	43	-	43
Kevin Parry	2018	171	14	185
	2017	118	7	125
Lynne Peacock3	2018	66	-	66
	2017	153	3	156
Martin Pike	2018	114	5	119
	2017	107	4	111
Cathleen Raffaeli4	2018	35	-	35
	2017	-	-	-
Jutta af Rosenborg	2018	94	1	95
	2017	36	-	36
Akira Suzuki3,5	2018	-	-	-
	2017	-	-	-

¹    Sir Gerry Grimstone received an allowance of £20,000 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.

²    Appointed to the Board with effect from 1 November 2018. Appointed Chairman with effect from 1 January 2019.

³    Stepped down from the Board with effect from 29 May 2018.

⁴    Appointed to the Board with effect from 1 August 2018.

⁵    No fee is paid to a non-executive Director who represents a corporate shareholder.

The non-executive Directors, including the Chairman, have letters of appointment that set out their duties and responsibilities. The key terms are set out in the Remuneration Policy, which can be found in the Annual report and accounts 2017.

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 12) and at the 2019 AGM.

Details of the date of appointment to the Board and date of election by shareholders are set out below:

Chairman/Non executive Director	Initial appointment to the Board1	Initial election by shareholders
Chairman
Sir Gerry Grimstone1	29 May 2007	AGM 2007
Deputy Chairman
Simon Troughton2	14 August 2017	AGM 2018
Senior Independent Director
Kevin Parry	27 October 2014	AGM 2015
Non-executive Directors
John Devine	4 July 2016	AGM 2017
Sir Douglas Flint3	1 November 2018
Gerhard Fusenig	14 August 2017	AGM 2018
Melanie Gee	1 November 2015	AGM 2016
Richard Mully	14 August 2017	AGM 2018
Martin Pike	27 September 2013	AGM 2014
Cathleen Raffaeli	1 August 2018
Jutta af Rosenborg	14 August 2017	AGM 2018

¹    Appointment as Chairman.

²    Appointment as Deputy Chairman.

³    Appointed Chairman with effect from 1 January 2019.

Implementation of policy for non-executive Directors in 2019

The following table sets out non-executive Director fees to be paid in 2019. No changes were made to the level of fees from 2018.

With regards to the Chairman's fee, as set out on page 59, Sir Douglas was appointed following an extensive international search led by the Co-Chairs of the Appointment Committee (Simon Troughton and Melanie Gee). Sir Douglas has joined the Company in a period of significant organisational change, following the merger of Standard Life and Aberdeen Asset Management and the sale of Standard Life Aberdeen's UK and European Insurance business. In addition, the wider asset management sector is going through a period of consolidation and market conditions remain challenging as macroeconomic and political uncertainties continue to affect investor sentiment.

Given the calibre of the candidate and taking into account market data on Chairman fees for other large international financial services companies, the Remuneration Committee approved an all-inclusive fee of £475k per annum for Sir Douglas. Whilst the Remuneration Committee acknowledges the fee represents an increase on the base fee for the current incumbent, it was considered appropriate to ensure that the right candidate was appointed to lead the Company through a period of significant change.

Role	2019 fees1	2018 fees
Chairman's fees2, 3	£475,000	£380,000
Deputy Chairman's Fees2	£200,000	£200,000
Non-executive Director fee4	£73,500	£73,500
Additional fees:
Senior Independent Director	£25,000	£25,000
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
Committee membership (Audit, Risk and Capital, Remuneration and Nomination Committees)	£10,000	£10,000

¹    The core fee of £73,500 paid to each non-executive Director (including the Chairman and Deputy Chairman) is expected to total £588k for 2019 (2018: £775k). This is within the maximum £1,000,000 permitted under Article 87 of Standard Life Aberdeen plc's articles of association. Total fees including additional duties are expected to amount to £1,131k for 2019 (2018: £1,599k).

²    The Chairman's and Deputy Chairman's fees are inclusive of the non-executive Directors' core fee and no additional fees are paid to the Chairman or Deputy Chairman where they chair, or are members of, other committees/boards.

³    The Committee has agreed to provide life insurance benefits to the Chairman with effect from April 2019 to reflect his personal circumstances and business travel requirements.

⁴    For non-executive Directors, individual fees are constructed by taking a base fee and adding extra fees for being the senior independent Director or, the chairman of, or member of, committees and subsidiaries' boards where a greater responsibility and time commitment is required.

Non-executive Directors' interests in shares (audited)

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

	Total number of shares owned at  1 January 2018 or date of appointment if later	Shares acquired during the period 1 January 2018 to 19 October 2018	Total number of shares owned at 19 October 2018 or date of cessation if earlier	Total number of shares owned at  22 October 2018 or date of appointment if later	Shares acquired during the period 22 October 2018 to 31 December 2018	Total number of shares owned at 31 December 2018	Shares acquired between 31 December 2018 and 8 March 2019
	Pre share consolidation on 22 October 2018			Post share consolidation (shares were consolidated on a seven for eight basis)
Sir Gerry Grimstone	206,626	-	206,626	180,797	-	180,797	-
Sir Douglas Flint1				10,375	40,000	50,375	-
Simon Troughton	52,990	20,215	73,205	64,054	-	64,054	-
Julie Chakraverty2	2,302	-	2,302
John Devine	1,321	31,135	32,456	28,399	-	28,399	-
Gerhard Fusenig3	26,495	40,000	66,495	58,183	-	58,183	-
Melanie Gee	20,000	-	20,000	17,500	50,000	67,500	-
Richard Mully	52,990	50,000	102,990	90,116	-	90,116	-
Kevin Parry	60,754	39,246	100,000	87,499	-	87,499	-
Lynne Peacock2	12,554	-	12,554
Martin Pike	32,727	-	32,727	28,636	40,840	69,476	-
Cathleen Raffaeli4	-	-	-	-	-	-	-
Jutta af Rosenborg	-	10,000	10,000	8,750	-	8,750	-
Akira Suzuki2	-	-	-

¹    Appointed to the Board with effect from 1 November 2018.

⁵    Stepped down from the Board with effect from 29 May 2018.

⁶    Stepped down from the Board with effect from 31 December 2018.

⁷    Appointed to the Board with effect from 1 August 2018.

Sir Gerry Grimstone, as Chairman, was subject to a shareholder guideline holding of 100% of the value of his annual fee in Standard Life Aberdeen plc shares to be reached within four years of appointment. Sir Gerry Grimstone fully met this requirement in 2018 with the value of his shares at the end of the year being 122% of his fees.

Sir Douglas Flint will be subject to an equivalent requirement.

5.5 The Remuneration Committee

Membership

During 2018 the Remuneration Committee was made up of independent non-executive Directors: Richard Mully, John Devine, Gerhard Fusenig, Kevin Parry, Cathleen Raffaeli (from 1 August 2018), and Jutta af Rosenberg. A number of meetings during the year were called at short notice which resulted in some members being unable to attend due to prior commitments. All members had the opportunity to review papers and pass comments to the Chairman in advance of the meeting.

Member	Attendance
Richard Mully (Chairman)	12/12
John Devine	12/12
Gerhard Fusenig	9/12
Kevin Parry	12/12
Cathleen Raffaeli	4/4
Jutta af Rosenborg	11/12

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.standardlifeaberdeen.com/annualreport

Committee effectiveness

The Committee reviews its remit and effectiveness annually. In 2018 an independent externally facilitated review was conducted by IBE. This included observation of a meeting, review of papers and interviews with Committee members. The key points arising from the review were:

·  The Committee had worked hard to bring together the remuneration structures of the two heritage companies

·  Principally through its Chair, the Committee had engaged well with investors throughout the consultation period and responded to their views to gain consensus

·  Committee papers continued to be clear and well articulated

·  Going forward, the Chair should continue to update the Board on the key matters debated during the Committee's discussions

External advisers

During the year, the Committee took advice from Deloitte LLP (a member of the Remuneration Consultants Group) who were appointed by the Committee in 2017. The Committee is satisfied that the advice given is objective and independent.

A representative from Deloitte LLP attends, by invitation, all Committee meetings to provide information and updates on external developments affecting remuneration as well as specific matters raised by the Committee. Outside of the meetings, the Committee's Chairman seeks advice on remuneration matters on an ongoing basis. As well as advising the Committee, Deloitte LLP also provided tax, risk, data, consultancy and transaction related services 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 Aberdeen 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 Aberdeen has been appointed to provide defined contribution arrangements for Deloitte's clients through competitive tender.

Fees paid to Deloitte LLP during 2018 for professional advice to the Committee were £181,550. Additional fees of £220,450 were paid to Deloitte LLP in respect of professional advice in relation to regulatory disclosures under relevant regulations, the administration of the Discretionary Share Plan and remuneration matters related to the sale of Standard Life Aberdeen's UK and European insurance business to Phoenix.

Where appropriate, the Committee receives input from the Chairman, Co-Chief Executive Officers, Chief Financial Officer, Chief People Officer, Group Director of Reward, Group Chief Risk Officer, and the Head of Stewardship and ESG Investments. This input never relates to their own remuneration. The Committee also receives input from the Risk and Capital Committee and Audit Committee.

The Committee's work in 2018

An indicative breakdown as to how the Committee spent its time is shown below:

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

Jan-Mar	·  2017 Directors' Remuneration Report ·  2017 bonus payments and 2015 LTIP outcomes ·  Set 2018 EIP scorecard targets ·  Finalise Directors' Remuneration Policy
Apr-Jun	·  Material Risk Takers and related 2018 disclosures ·  Group Remuneration Policy review ·  Executive Committee remuneration ·  Harmonisation of Terms and Conditions across the Group ·  Impact of the sale of Standard Life Aberdeen's UK and European insurance business on remuneration matters
Jul-Sep	·  Mid-year review of performance against target for annual bonus and LTIP awards ·  Remuneration outcomes as a result of the sale of Standard Life Aberdeen's UK and European insurance business ·  Review of senior individual appointments and termination agreements
Oct-Dec	·  Update on the regulatory position of Standard Life Aberdeen ·  Review CEO pay ratio data ·  Update on the external environment

Promoting all-employee share ownership

The Group believes that share ownership by employees helps them to understand the interests of the Company's shareholders. The Group promotes employee share ownership with a range of initiatives:

·  The Standard Life (Employee) Share Plan which allows eligible employees to buy Standard Life Aberdeen plc shares directly from their earnings. A similar tax-approved plan is used in Ireland. At 31 December 2018, 1,954 employees in the UK and Ireland were making a monthly average contribution of £65. On 31 December 2018, 2,555 of our employees were Standard Life Aberdeen plc shareholders through participation in the Standard Life (Employee) Share Plan.

·  The Sharesave Plan, offered in 2018 to eligible employees in the UK. This plan allows UK tax resident employees to save towards the exercise of options over Standard Life Aberdeen 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. At 31 December 2018, 2,534 employees in the UK were saving to buy Standard Life Aberdeen plc shares.

·  The Sharesave Plan in Ireland launched in August 2012, with invitations made annually thereafter. As at 31 December 2018, 5 employees were saving towards one or more of the Sharesave Ireland offers.

Share dilution limits

All share plans operated by the Company which permit awards to be satisfied by issuing new shares contain dilution limits that comply with the guidelines produced by The Investment Association (IA). On 31 December 2018, therefore, the Company's standing against these dilution limits was:

·  1.56% where the guideline is no more than 5% in any ten years under all discretionary share plans in which the executive Directors participate

·  1.97% where the guideline is no more than 10% in any ten years under all share plans

As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP, Standard Life Investments LTIP, the Restricted Stock Plan, the deferred elements of the Standard Life annual bonus plan and the Aberdeen Asset Management deferred plans. On 31 December 2018 the trusts held 51,917,150 shares acquired to satisfy these awards. Of these shares 9,836,865 are committed to satisfying vested but unexercised awards. The percentage of share capital held by the employee trusts is 2.05% - well within the 5% best practice limit endorsed by the IA.

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 Committee seek to understand the reasons for any such vote, and will detail here any actions in response to it.

The remuneration policy was subject to a vote at the 2018 AGM on 29 May 2018 and the following table sets out the outcome of the vote.

Policy	For	Against	Withheld
(% of total votes)	97.91%	2.09%
(No. of votes cast)	1,412,472,135	30,105,977	15,014,089

The Directors' remuneration report was subject to a vote at the 2018 AGM on 29 May 2018 and the following table sets out the outcome.

2017 Directors' Remuneration Report	For	Against	Withheld
(% of total votes)	97.36%	2.64%
(No. of votes cast)	1,416,364,330	38,430,826	2,795,153

6. Statement of Directors' responsibilities in respect of the Annual report and the financial statements

The Directors are responsible for preparing the Annual report and accounts and the Group and Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) and applicable law and have elected to prepare the parent company financial statements in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to:

·  Select suitable accounting policies and then apply them consistently

·  Make judgements and estimates that are reasonable, relevant, reliable and prudent

·  For the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU

·  Assess the Group's and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern

·  Use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' remuneration report and Corporate governance statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

·  The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole

·  The Directors' report and Strategic report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face

We consider the Annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

By order of the Board

Sir Douglas Flint Chairman 13 March 2019
Bill Rattray Chief Financial Officer 13 March 2019

 

END

 

 

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