The Remuneration Policy (“Policy”) is subject to independent oversight and control by the Group Remuneration Committee (the “Committee”) for Virgin Money UK PLC (VMUK), which is the ultimate parent company of the consolidated group of companies/subsidiaries (the “Group”), including but not exclusively Clydesdale Bank PLC (“CB”) and Virgin Money plc (“VM”).
The Board of VMUK has delegated responsibility to the Committee to oversee the remuneration arrangements; in particular those of the senior management (Executive and non-executive where appropriate) and employees covered by the Prudential Regulation Authority ("PRA") and the Financial Conduct Authority ("FCA") Senior Management Arrangements, Systems and Controls Remuneration Code ("Remuneration Code") across the Group. Therefore; the Policy has been developed to follow the relevant regulations and guidance from the PRA Rulebook, the EBA sound remuneration guidelines, the FCA Remuneration Code for dual regulated firms (SYSC 19D) and, to the extent they are applicable, the UCITS Remuneration Code (SYSC 19E) and the MiFID Remuneration Code (SYSC 19F) as amended from time to time.
VMUK will not adopt remuneration policies, procedures or practices which are inconsistent with the letter and spirit of the Remuneration Code(s) relevant regulations and guidance. Any breach of a rule referred to in the PRA Rulebook 16.1 will be notified to the PRA.
The Group does not believe that the implementation of this Policy and its practices impairs its ability or the ability of its management company subsidiary to comply with its duty to act in the best interests of the UCITS business it manages.
The committee comprises four independent Non-executive Directors; Darren Pope (“Chair”), Geeta Gopalan, Paul Coby and Tim Wade and the Board Chairman (“Chairman”), David Bennett.
More information on the Remuneration Committee’s role and responsibilities can be found in the Remuneration Committee Charter.
Details of the Committee meetings are provided in the Group’s Annual Report and Accounts. More information on the Committee’s terms of reference can be found in the Remuneration Charter.
The remuneration for all Material Risk Takers (“MRT”), as captured under the regulatory regimes impacting the Group, noted below, is approved by the Committee.
The VMUK Group operates common Remuneration Committees across VMUK, Clydesdale Bank PLC (“CB”) and Virgin Money plc (“VM”), covering their regulated subsidiaries. This is supported by a Prudential Regulation Authority (PRA) Governance Direction which modifies certain Ring-fenced Bodies Rulebook rules, allowing the Chair of the Remuneration Committee be the same for VMUK, CB and VM.
The Group appoints an independent remuneration consultant as advisor to the Committee on remuneration design and compliance with regulatory guidance. During 2020, the Committee took advice from PricewaterhouseCoopers LLP (PwC). The contractual terms for independent third parties are governed by the Group Procurement Policy.
VMUK’s overall remuneration philosophy (as reflected in our Policy) is designed to support both our culture and our business strategy (including those of any ring-fenced body). It is based on the approach that remuneration should be linked to the performance and behaviour of an individual, business results over the short and long-term, shareholder outcomes and fair customer outcomes. This means that the Group seeks to reward colleagues fairly for their contribution, whilst ensuring they are motivated to always deliver the best outcomes for our customers. To achieve this, colleagues are rewarded in line with best practice in the UK listed Financial Services sector with absolutely no reward for inappropriate risk taking (including any that is inconsistent with the risk profiles of the UCITS funds we manage), to protect customers, corporate partners, shareholders and wider society.
The Group identifies and manages risk using the Risk Management Framework, which is the totality of systems, structures, policies, processes and people that identify, measure, evaluate, control or mitigate, monitor and report all internal and external sources of material risk. It supports the Board of Directors’ (the “Board”) aim of achieving the long-term and sustainable growth of the Bank. Included within the overall governance framework are several Committees with a specific Risk Management focus, although all Committees will consider appropriate management of risk as part of their wider remit.
The remuneration policy is consistent with the Group’s Risk Framework and its risk appetite, which includes key risk types (e.g. credit, market, operational, liquidity and reputational risk). The remuneration policy does not encourage any risk taking that would undermine its ability to comply with relevant regulations (including any ring-fencing obligation).
The Group operates established processes and procedures that are designed to identify, document and manage conflicts of interest. These apply to the Policy and other remuneration matters as they would to all other areas of the business and include requirements for line manager oversight and individual voluntary disclosures to be made and recorded.
The Policy prohibits any employee from being involved in decisions on their own remuneration. Furthermore, all employees are required to adhere to our code of conduct, which encompasses conflicts of interest.
Specific measures are in place to avoid conflicts of interest as regards control functions as set out below.
The Group ensures that, as appropriate, all colleagues engaged in control functions are independent from the business units they oversee and have appropriate authority to undertake their roles and duties.
Variable remuneration for control function colleagues is determined by the achievement of their own functional objectives. The successful completion of these objectives influences the size of allocation which the function receives from the main bonus pool.
VMUK identifies individuals who have a material impact on the risk profile of the Group and individuals who have a material impact on the risk profiles of any regulated entities or the funds managed under the control of the Group as Material Risk Takers (“MRT”). The relevant regulated technical standards are taken into account in identifying MRT.
The Committee is responsible for undertaking a review of the application of the principles under the relevant technical standard no less frequently than annually.
The following overarching remuneration principles are applied to our Policy, which is intended to:
Employee remuneration is composed principally of fixed and variable elements of reward as follows:
a. Fixed remuneration: base salary
b. Benefits (including retirement benefit as appropriate)
a. Employees may receive variable pay in non-deferred cash or in deferred awards delivered in appropriate instruments (e.g. VMUK PLC shares).
b. Selected employees may participate in discretionary share award plans, subject to Remuneration Committee review and approval.
Any awards made under such plans include a personal performance underpin to ensure there is no payment for poor conduct or below expected performance.
Ratios of fixed to variable remuneration will be set so as to ensure that fixed and variable components of total remuneration are balanced as well as compliant with regulatory guidance. The overall annual variable pay opportunity for colleagues as a ratio of total fixed will not exceed a ratio of 2:1. As such, the fixed component is a sufficiently high proportion of total remuneration to allow the Group to operate a fully flexible policy on variable remuneration components including paying no variable remuneration component.
Recruit, reward, retain and recognise role responsibilities
Base salaries are paid monthly and reviewed at least annually in line with economic indicators. Salaries reflect the size, scope and complexity of the role considering responsibilities with reference to market rates and internal relativities. They are also reflective of the skills and experience of the incumbent.
Recruit, reward, retain and contribute towards employee wellbeing and funding for retirement.
Benefits provided may be made up of core benefits (e.g. Holiday, Private Medical) and extra voluntary benefits (as appropriate).The Group operates a defined contribution pension scheme open to all colleagues. Cash allowances in lieu of an employer pension contribution are provided where annual or lifetime allowances are exceeded.
Designed to reward for team contribution towards Group performance against annual targets.
Performance is measured against a range of key financial metrics together with non-financial metrics which are linked to the Group’s strategic priorities and typically include: strategic, customer, risk, conduct and people indicators.
The Committee review and approve the metrics used and appropriate targets against the Group’s strategic priorities and the risk-adjustment model at the beginning of each year for the financial year ahead.
Individual awards are based on the Group’s performance outcome only (other than for individual conduct or performance adjustments) with the level of award determined by the grade of the role and the size of the variable pay pool.
The variable pay pool (and therefore individual awards), are determined at the end of the performance period (financial year) by the Committee, to ensure that the outcome is fair in the context of overall Group performance and is subject to an overall risk assessment (and where appropriate adjustment for ex-ante or ex post risk events) and to apply qualitative judgements in the final bonus decision.
Awards can be made in cash or appropriate instruments (e.g. VMUK PLC shares) following the financial year. All awards may be subject to deferral at the Group’s discretion.
MRT may be subject to additional deferral and/or retention where remuneration exceeds the de-minimis threshold. Awards are subject to the malus and clawback policy.
Designed to reward for individual contribution towards Group performance against annual targets.
A small number of roles with a high level of strategic and execution responsibilities or key roles from a regulatory or commercial perspective will have bonus determined individually using a discretionary model.
The variable pay pool is determined at the end of the performance period (financial year) by the Committee in line with the ‘Team’ bonus pool approach; however, line manager discretion is then applied with a qualitative judgement on how the pool is distributed amongst this population within a defined range of potential awards.
Awards can be made in cash or appropriate instruments (e.g. VMUK PLC shares) following the financial year end. All awards may be subject to deferral at the Company’s discretion and regulatory holding periods may be applied as necessary.
Where applicable, taken together with the LTIP (see below) and any other relevant awards under all-employee share schemes the total variable opportunity in respect of the financial year is limited by the 2:1 ratio of variable to fixed pay.
Material Risk Takers may be subject to additional deferral and/or retention where remuneration exceeds the de-minimis threshold. Awards are subject to the malus and clawback policy.
Designed to reward Leadership Team members for Group and personal performance in line with strategic objectives.
Discretionary and based on both Group and individual performance measures (objectives) within the year. Group measures and targets align with those of the annual bonus plan for other colleague populations, with personal performance determined by an assessment of individual objectives set and approved by the Board for the year ahead.
Taken together with the LTIP (see below) and any other relevant awards under all-employee share schemes the total variable opportunity in respect of the financial year is limited by the 2:1 ratio of variable to fixed pay.
Awards can be made in cash or appropriate instruments (e.g. VMUK PLC shares) following the financial year. All awards may be subject to regulatory deferral and/or retention and/or Company deferral at the Group’s discretion and regulatory holding periods may be applied as necessary to comply with the relevant regulatory regime.
 Where it is appropriate for some Control Functions (i.e. Risk, Audit & Compliance), business function specific bonus plans may be in place. All bonus plans operate on the same underlying principles as the Group bonus plan(s) but specific plans may include an element of reward for performance in line with the specific strategy and objectives of that particular business function.
The Remuneration Committee has responsibility for determining who will be granted Awards under LTIP. The value awarded will be determined by the Remuneration Committee with reference to prior performance.
Delivery of the Group’s strategy and growth in shareholder value.
Awards are subject to performance conditions aligned with the Group’s long-term strategic goals and granted as conditional share awards. Performance conditions are normally tested over a period of three financial years. Upon the vesting of shares at the end of the required deferral period, a regulatory holding period may be applied as necessary.
The weighting of metrics used is determined before grant with no more than 25% of the maximum vesting for threshold performance. The Committee has discretion, in exceptional circumstances, to amend targets, measures or weightings if a corporate event takes place (e.g. major transaction, including change of control or capital raising) that in the opinion of the Committee causes the targets, measures or weightings to be no longer appropriate or such adjustments to be reasonable.
The Committee can, at its discretion, apply malus and/or clawback to all or part of any award.
Taken together with the Annual Bonus where applicable and any other relevant awards under all-employee share schemes the total variable opportunity in respect of the financial year is limited by the 2:1 ratio of variable to fixed pay, subject to the LTIP opportunity being at least half of the total variable pay opportunity.
From time to time the Group may award all eligible colleagues a nominal award of Free Shares under the Group Share Incentive Plan (SIP). The Free Shares are held in the SIP Trust on behalf of participants and are subject to retention periods in line with HMRC rules. Free Shares may also be subject to service conditions.
Where a Group company (e.g. Virgin Money Unit Trust Managers Ltd) is a UK UCITS management company, it is acknowledged that the management company has specific obligations to establish and apply remuneration policies and practices for UCITS Remuneration Code staff (broadly, senior management, MRT, staff engaged in control functions and any employees in the same remuneration bracket who have a material impact on the risk profile of the management company or its UCITS) that:
Accordingly, in the application of the principles set forth and in the award (including deferral and/or clawback) of variable pay for its Code Staff, remuneration shall also be governed in line with relevant obligations of SYSC 19E: UCITS Remuneration Code including (where applicable):
In line with good corporate governance guidelines, there is a requirement that Executive Directors and members of the Leadership Team maintain a material long-term investment in VMUK shares.
All staff are expected to adhere to the Code of Conduct, and underlying policies, which adheres to the behaviours and expectations set out in the PRA/FCA’s individual conduct standards. In addition to this, the reward for employees in senior management positions within the Group’s corporate governance framework (which includes MRT for the Group and any of its subsidiaries) will be assessed annually through individual performance assessment to ensure the sound and prudent management of the organisation through adherence to the relevant frameworks, procedures, controls and policies.
The input of the Group’s risk and compliance functions is sought where appropriate in setting remuneration. The Risk function has primary responsibility for oversight and challenge of the Remuneration Policy on behalf of the Chief Risk Officer (CRO). This includes ensuring that VMUK establishes, implements and maintains adequate policies and procedures sufficient to ensure compliance with applicable Regulatory Standards. All awards are subject to a comprehensive risk assessment (including conduct risk) before release, with clawback provisions applying thereafter. No individual determines their own remuneration.
In the interests of ensuring sound risk management for the benefit of the Group as a whole, and to ensure compliance with regulatory obligations, all variable remuneration is subject to malus and clawback provisions. These conditions are set out in the service agreements / contracts for senior colleagues as well as the Annual Bonus Plan and LTIP rules.
The Committee retains discretion to reduce unvested variable remuneration (malus) and to clawback vested variable remuneration (clawback) in circumstances deemed appropriate by the Committee. The circumstances in which the Remuneration Committee may make a malus/clawback determination include but are not limited to:
Quantitative disclosures for VMUK regulated entities are included in the relevant publication in accordance with regulatory guidance: