Certain measures such as adjusted profit before tax, are not defined under IFRS and are therefore termed alternative performance measures (APMs). Further details on APMs are included in Supplementary information in Section 10. We include measures below which have not been determined to be KPIs but we believe are integral to the Group’s performance.
Standard Life plc renamed as Standard Life Aberdeen plc Standard Life plc was renamed as Standard Life Aberdeen plc on 14 August 2017.
1.Strategic report Message from the Chairman 2 Co-Chief Executives’ overview 4 Our business and strategy 8 People and culture 30 Chief Financial Officer’s overview 32 Our businesses 40 Risk management 52 Business practices 60 Basis of preparation 61
Governance 2. Board of Directors 64 3. Directors report 66 4. Corporate governance statement 72 5. Directors’ remuneration report 94 6. Statement of Directors’ responsibilities 135
Financial information 7. Independent audit report 138 8. Group financial statements 147 9. Company financial statements 265 10. Supplementary information 280
Other information 11. Glossary 300 12. Shareholder information 304 13. Contact us IBC
Realising our ambitions 2017 was a momentous year for our organisation. I am very pleased to be writing this foreword for the first time as Chairman of Standard Life Aberdeen plc, the UK’s largest active investment management company. The merger of Standard Life plc and Aberdeen Asset Management PLC, two highly complementary businesses, was the beginning of the exciting next chapter of our story. The proposed sale of the capital heavy insurance business and enhanced strategic partnership with Phoenix completes our transformation into a world-class investment company.
The proposed transaction with Phoenix completes our strategic transformation and will bring a number of benefits including an enhanced long-term strategic partnership with Phoenix, providing investment content to their customers and the opportunity for wider collaboration as their asset manager of choice. We have retained our valuable and fast growing UK retail platforms and financial advice businesses. This ensures that we maintain Standard Life’s important and strong relationships with financial advisers. The sale is subject to approvals and is expected to complete in H2 2018.
In our asset management business, we’ve seen momentum across a wide range of products, including particularly strong demand for emerging market debt and multi-asset solutions, including MyFolio and our diversified growth funds. We’re winning new mandates across a wide range of investment strategies as we continue to innovate and launch new funds – all designed to meet the growing demand for ‘new active’ investment solutions. We have had performance concerns with some of our funds, but overall performance has begun to return and I’m optimistic about an improving outlook for flows in 2018.
In the UK, we saw impressive growth from our workplace pensions, advice and wealth channels, driven by the changes to pension freedoms and, at the other end of the retirement journey, through auto enrolment. We’ve maintained our strong position in the adviser platform market as our market-leading platforms attract record assets – and our advice business 1825 grew further with the announcement of two new acquisitions.
The UK and Brexit It is a feature of successful businesses like ours that they are able to chart a course through uncertain times whilst successfully pursuing their ambitions. Brexit negotiations are, of course, reaching a critical stage. As a business headquartered in the UK with significant operations throughout Europe, we have confirmed that we will have arrangements in place to allow us to continue to offer services to our European customers. Working closely with European regulators, our intention is to use our hubs in Dublin and Luxembourg to do this. There is a lot to do in a short space of time and we are amongst those firms pressing governments in the UK and Europe to clarify how any transitional or implementation period will work and, frankly, to start taking the detailed decisions which we all need to move ahead.
Managing our risks and governance We remain very aware of the risks that face our business as we grow and globalise. We continue to strengthen our risk management capabilities and oversight and you can read about this on pages 52 to 53 of this report. Likewise, strong and effective governance at all levels is more essential than ever. I pay a lot of personal attention to this as ultimately it is my responsibility, along with my Board colleagues and all our executives, to ensure that our governance frameworks work as they should and are best in class. A very important part of this is culture – not just talking about how our company should operate, but believing and doing what we mean. We want, by the end of 2018, to have a completely shared culture across the merged company without a hint of ‘them’ or ‘us’. I’m optimistic we will achieve this, not least because I already see imbued in both our heritages, traditional Scottish values of trust, caution and conservatism coupled with an entrepreneurial ‘let’s go and do it’ attitude. These values are going to serve us very well going forward.
We have to do more to promote diversity and inclusion in our business because, although we have already taken some action in this area, it has not been enough. We are giving a major emphasis to this in 2018 and it will be front of mind when we train, develop, recruit and promote people. We owe this to the communities in which we operate. Likewise, we will continue to up our engagement in the whole area of sustainability and corporate stewardship. This comes naturally to us but we need to do more and to be held accountable for what we do. People are increasingly sceptical about the ability of business to serve society rather than concentrate on its own selfish interests. We need to do all we can to demonstrate that the same scepticism shouldn’t apply in our case.
Likewise, your new Board greatly benefited from pooling the expertise of both sets of the predecessor directors when it was first established and that continuity has been an important factor in getting the merged company off to a good start. We did say at the time that we would progressively reduce the size of the Board going forward, and as the first stage of this, three directors will be stepping down at the next AGM. Lynne Peacock served on the Board of Standard Life plc for six years and has latterly been a very distinguished Chairman of Standard Life Assurance Ltd, Julie Chakraverty served on the Board of Aberdeen Asset Management for six years most latterly as the Senior Independent Director, and Akira Suzuki has represented the interests of Mitsubishi UFJ Trust and Banking Corporation (MUTB) on the Board of Aberdeen Asset Management since 2013. MUTB’s level of shareholding in the merged company is below the level at which Board representation would be customarily granted. I’m very grateful to all of them for their dedication and exemplary service. It is important to have new blood joining us from time to time and we are presently seeking to recruit an additional director with skills in the areas of platform and technology, ideally with an international background. As ever we will consider the general composition of the Board and our broader diversity aims when we make this appointment.
It has been very pleasing that, on behalf of our shareholders and other stakeholders, we have been able greatly to shift the shape of your company over the last 10 years in order to get it fighting fit and to take advantage of the many changes there have been in the external environment. A strong and independent Board has been central to this, and I have been very fortunate in the Directors who have served alongside me. Prior to the merger, my Board colleagues, encouraged by me, had started to think of arrangements for my succession. This was put on hold when the merger took place and I was asked to consider staying on for a period of around two years, subject of course to performance, in order to help ensure stability and to get the new company off to a good start. I was willing to do this but I have told my colleagues that I want to step down by the end of 2019 meaning that arrangements to choose my successor will need to commence in 2018. I will be sad to leave this great company but I have no doubt that someone excellent will be found to take my place.
Str ateg ic r epo r t 3Standard Life Aberdeen 2017
Our Co-CEOs Keith Skeoch and Martin Gilbert share responsibility for a number of core aspects of the role such as leading the executive committee, developing and promoting our strategy and objectives, and monitoring operational performance and strategic direction. They also have very clear individual responsibilities.
Key responsibilities • Growing our international business activities • Distribution including client engagement • Business development • Marketing and Brand
We’re making good strategic progress in building a world-class investment company. We have continued to deliver for clients, helping to grow assets and dividends and our integration is on track. Investment performance has been mixed, and we have seen net outflows over the year. However, with over £80bn of gross inflows, there’s momentum behind us.
We are in a strong position. Over the past year we have been through an unprecedented period of change in order to create our new global business and set ourselves up for the exciting opportunities ahead.
Our clients around the world are behind our strategy. They understand the possibilities that our enhanced scale, breadth of proposition and wide global distribution offers.
We’re proud of the hard work we’ve done to get here and remain confident of delivering long-term value for our clients, our people and our shareholders.
What have you learned from managing the business alongside each other?
KS When you’re sharing the management of the business with someone whose input and decision making you trust and respect, I think it can only be a good thing. We have very clear roles, complementary skills and we work well together. We have different ways of doing things, and I think that’s valuable – it means you approach challenges and problems in a different way.
The big challenge is in the size of the businesses we’re bringing together, but the early signs are very encouraging. The merger brings together many valuable insights and complementary skills, so one of the things that will define the integration’s success is a real commitment from all of our people to collaborate effectively. I’m also pleased that we’ve brought many people together geographically in a number of offices, including our new combined office in Edinburgh. Technology has a big part to play as well and we’re making good progress with our plans to integrate the platforms and systems we use.
What has been the impact of the merger on people working for the business?
What do you see as the biggest challenges for the savings and investments landscape?
When you think of the responsibilities we have as stewards of our clients’ investments, we have a huge role in helping to rebuild trust in our industry and we take our responsibilities seriously. We integrate environmental, social and governance principles across our investment processes, and use our influence to encourage companies to adopt good practices when it comes to investment. We see considering these issues as an important way of protecting investors and we believe it really adds to the value we offer to them.
Str ateg ic r epo r t 5Standard Life Aberdeen 2017
What is the business doing to keep up with the pace of innovation in the industry? KS
Strategic partnerships and working with a broader network of partners will play an increasingly important role in the industry, especially for companies focused on growing globally. It allows access to markets through established and locally recognised brands, while also providing services in an economically efficient way.
One example of this that we’re excited about is our Innovation Panel. The panel is made up of representatives from around our global business and builds on the previous work of Aberdeen’s Innovation Committee. Members of our Board also sit on the panel and they are able to bring external perspectives too. Its role is to investigate opportunities, threats and disruptors impacting the asset management and pensions and savings industries to ensure that colleagues – regardless of role or location – have the chance to offer ideas and solutions to some of the opportunities and challenges we face.
We’re also very active in collaborating with external organisations and in our wider industry. We play an important role in leading discussion and championing thought leadership among our peers.
The nature of long-term investing is that we will not always deliver short-term performance across all strategies. The return environment in 2017 was challenging for some of the many strategies and products we offer clients. For example, in a market that’s been driven by short-term growth and concentrated on a small number of stocks, quality-focused equity strategies have not performed as well. However, we believe that all of our strategies have merit for clients over the long term. As we integrate and develop the business, we continue to look to ensure that our investment processes are strong, well-resourced and fit-for-purpose to deliver the outcomes and risk profiles our clients demand.
The global market for ‘new active’ has almost doubled since 2008, and the scale of the merger means we can better meet this growing demand.
How will your brand strategy support the longer-term ambitions of the business? MG
Brand is becoming increasingly important for asset managers, and if you’re operating globally you have to recognise that. The name for our asset management business recognises the strengths in both teams coming together, which traditionally have had strong brand presences in different parts of the market – Aberdeen Asset Management in emerging markets and Asia, Standard Life Investments in developed markets and ‘new active’ investment solutions. The Aberdeen Standard Investments brand will be a really important tool as we keep growing our presence globally.
Another priority will be to deliver investment performance whatever scenario arises as a result of the UK’s departure from the European Union, we need to ensure that we have plans in place to let us provide continuity for our clients. We’re already making good progress with discussing the proposed timelines and outcomes with regulators. We believe the main impact will be on the European activities performed by our UK-domiciled regulated entities. Our contingency plans will focus on making use of our existing entities domiciled in other EU member states, such as our operations in Dublin and Luxembourg, and on creating additional EU-regulated entities where we feel they’re needed.
The investment case for Standard Life Aberdeen Strength of global asset management and UK pensions and savings businesses We are building a world-class investment company. Aberdeen Standard Investments is the largest active asset manager in the UK and one of the largest in Europe. We are also a market leader for UK adviser platforms, underpinned by strong relationships, and are expanding our 1825 financial advice business.
We have developed extensive reach in these key savings markets. The successful IPO of HDFC Life and proposed IPO of HDFC Asset Management in India provide greater transparency of the value of these businesses.
Broad and compelling client offering Through the scale that our merger creates, we now offer clients a broader range of investment capabilities with expertise across all major asset classes, and innovative products and services to help them achieve their financial goals.
A business model to create value and deliver a progressive dividend Our simple business model is designed to create value for shareholders and bring significant benefits to all our stakeholders – including our clients, customers and employees.
What is your long-term vision for Standard Life Aberdeen? KS To operate as a world-class investment company that delivers for our clients, people and shareholders. The integration of our businesses gives us the scale to compete globally – helping us to grow our distribution capabilities, our strategic relationships, the assets we manage and our revenue streams. Growth in these areas gives us the opportunity to reinvest in our talent and technology.
The proposed sale of the capital heavy insurance business completes our transformation to a fee based, capital light investment company.
A wider and deeper range of investment capabilities will help us keep up with client needs as they continue to change – from the largest institutions to individual customers investing in pensions or ISAs.
Standard Life Aberdeen has the scale and global reach to offer a broader range of investment capabilities to meet the evolving needs of our clients and customers around the world.
We strive for excellence in all we do for our clients and customers. Our commitment to teamwork allows us to draw on the shared expertise and complementary talents of our people. We aim to deliver the innovation and service to help us perform in today’s competitive and fast-changing investment and regulatory landscape.
Aberdeen Standard Investments, our asset management business, is dedicated to delivering positive long-term outcomes for our clients.
Our Pensions and Savings business, Standard Life, continues to build on nearly two centuries of experience.
The IPO of HDFC Life, our associate life business in India, successfully completed in November 2017. We have retained board representation and have a major shareholding of 29.3% of the newly listed business, which ensures we remain invested in a leading business in a market with significant growth potential.
In March 2017, we announced the proposed sale of Standard Life (Asia), our wholly owned Hong Kong insurance business to Heng An Standard Life (HASL), our joint venture business in China. The proposed sale remains subject to regulatory and other necessary approvals.
£1,039m IFRS profit after tax attributable to equity holders1 (Reported basis)
Products and distribution 1 Diagram excludes loss from ‘Other’. See page 39 for more information.
Aberdeen Standard Investments In the wholesale investment market, we support wealth managers, private banks and financial advisers, as well as making our investment products available directly to private investors. In the institutional market we are a chosen investment partner of pension funds, insurers, sovereign wealth funds, governments and local authorities, charities and financial institutions, to which we provide both pooled and segregated investment management. We manage investment funds and solutions across a broad spectrum of asset classes and geographic markets, including equities, fixed income, multi-asset, private markets/alternatives, real estate and quantitative.
Through our global network of offices, the role of our distribution team is to access potential investors and develop trusted, long-term relationships founded on high quality client service. We have a targeted approach to growth by concentrating on distributing Aberdeen Standard Investments products in the markets where we have a strong track record. Distribution of our products is supported by the promotion of the Aberdeen Standard Investments brand through a co-ordinated series of local and regional brand awareness initiatives and sponsorship opportunities.
We have a number of strategic distribution partnerships around the world. These include Phoenix Group in the UK, John Hancock in North America, Bosera in China, Challenger in Australia and Sumitomo Mitsui Trust Bank and Mitsubishi UFJ Trust and Banking Corporation in Japan. We also partner with HDFC in India through our associate business, HDFC Asset Management.
Our mature book includes older fee based business that was predominantly written before demutualisation and spread/risk products, such as annuities and protection, which provide a sustained contribution to our profits.
The Europe business comprises Ireland and Germany, where savings and investment products are offered to a variety of customers and clients. Distribution is primarily via brokers and advisers.
HASL has over 90 offices in China offering life and health insurance products on both a group and individual basis. Sales are predominantly made direct to customers and clients. HASL also maintains relationships with banks and insurance brokers.
These businesses help to look after the life insurance needs of over 60 million lives insured from individual and group customers.
Aberdeen Standard Investments 61% Standard Life Pensions and Savings 34% India and China life 5%
Through the merger we have created a well diversified investment company which is supported by investment professionals with broad skills across all major asset classes. As a result of the complementary nature of our offerings, clients now have access to a greater choice of investment capabilities to better serve their needs. We operate across multiple distribution channels delivering greater diversification by client type and geography. We are focused on providing innovative, world-class investment solutions to meet the current and future needs of our clients and customers across the globe. The breadth of our investment capabilities, coupled with our leading position in the UK savings market, benefit the customers, clients, employers and financial advisers that we serve. In addition, the increased capabilities further enhance the solutions we are able to provide through our global strategic partnerships.
Aberdeen Standard Investments (Fee) 63% Standard Life Pensions and Savings (Fee) 32% Standard Life Pensions and Savings (Spread/risk) 5%
Diversifying revenue generation Our revenues reflect the increasingly diverse nature of our business across our client and customer base, distribution channels, investment strategies and asset classes – leveraging the strengths of our existing relationships across the combined business.
The enlarged scale of the business, and the complementary skills of the investment professionals we bring together, improve our ability to develop innovative investment solutions for clients. The overall investment approaches of the companies we have brought together – long-term, team-based, and supported by proprietary research and insights – are also aligned. We are committed to active investment management throughout the risk-return spectrum, and believe it continues to offer customers and clients an effective way of realising their investment objectives over the long term.
Str ateg ic r epo r t 11Standard Life Aberdeen 2017
Global presence, local delivery We have created a global investment company with strong brands, established institutional and wholesale distribution franchises, and a leading platform offering in the UK.
We have forged further asset management partnerships around the world to drive product innovation and open up possibilities for clients. These include John Hancock in the United States, Bosera Asset Management in China, Challenger in Australia, and Manulife in Canada and in Asia.
UK 71% Europe, Middle East and Africa 13% Asia Pacific 4% Americas 9% India 3%
Europe, Middle East and Africa Abu Dhabi Amsterdam Brussels Budapest Copenhagen Dublin Frankfurt Geneva Graz Helsinki Jersey
Luxembourg City Madrid Milan Munich Oslo Paris Potsdam Stockholm Stuttgart Zurich
Str ateg ic r epo r t 13Standard Life Aberdeen 2017
We support the FCA’s recommendations and we will continue to work closely with them to encourage positive change. We believe that the recommendations will help people to understand the benefits of different approaches to investing and strengthen both confidence and competitiveness in the industry. Across our businesses, we put in place significant programmes of work to deliver against the requirements of MiFID II, ahead of the changes that came into effect on 3 January 2018. We will continue to focus closely on this area as the changes are embedded across our industry.
Our response We are committed to active investment management. We see it as an important way of protecting investors and improving their future financial prospects. The merger puts us in a strong position to meet the growing demand and develop the breadth and depth of our expertise in key areas of industry growth. The rise in passive investing also highlights that active approaches may not fit with all investment needs. The diversified capabilities that the merger provides mean that we can complement our active expertise with quantitative investment capabilities, which make use of systematic models and data in order to build investment portfolios. We can offer quantitative approaches on a standalone basis or combine these with active investing – for example, through ‘smart beta’ capabilities. We see increased opportunities for our quantitative investments to be used within low-cost workplace investment solutions or our MyFolio range of funds.
Change in the savings and investments landscape intensified and accelerated in 2017 – reflecting some major trends in an increasingly globalised society.
Across global markets in 2017 we saw a strong recovery in corporate cash flow and company profitability, on the back of a strengthening improvement in the global economy. For the first time since the immediate recovery following the financial crisis, there was sustained growth in North American, European and Asian economies, demonstrated by welcome increases in global trade and business investment. The US government focused less on trade barriers and more on tax cuts than the market had expected at the start of the year. Brexit has caused the UK economy to lag behind, a situation we expect to continue. Certain sectors stood out in 2017, especially technology in the US and Asia, as investors looked for growth opportunities.
Responding to the changing investment landscape “Our business model is designed to be sustainable and resilient over the long term. We are well positioned to benefit from four trends that continue to shape the global savings and investment landscape.” Keith Skeoch, Co-Chief Executive
This trend is driving the need for simpler products and services to help clients and customers invest and save effectively. As people are living longer, there’s also a growing need for products and investment solutions that help them plan effectively to provide for a longer retirement.
Source: Adapted from data from the Office for National Statistics licensed under the Open Government Licence v.2.0.
This trend is also driving the need for financial advice and guidance which, in turn, has led to increasing demand from financial advisers for platforms that help them to operate more efficiently and to offer the support that their clients expect.
In the UK, we have a leading position in the market for defined contribution workplace pensions. We support around 1.8 million workplace pension savers in the UK, including over 1 million UK employees who are saving through auto enrolment. We work with employers to engage their employees in their workplace pension and provide tools and materials to support them.
We continue to develop our UK-wide financial planning business, 1825, to meet the growing demand for financial advice.
Clients are looking for simple and transparent products with clear outcomes that will meet their investment needs. There has been a rise in passive investing in recent years, where investment portfolios are constructed to mirror a market index. While we recognise that passive investment does have a place for some investors, we’re seeing a continued demand for active investment solutions, particularly ‘new active’ solutions managed by a fund manager, but with a strong focus on achieving the outcomes that clients want. ‘New active’ solutions are forecast to represent almost two thirds of net inflows into investment funds globally over the next few years.
Str ateg ic r epo r t 15Standard Life Aberdeen 2017
• We communicate with our customers in a relevant, targeted way, using a mix of direct, printed and digital messages
• We use technology to stay in touch including optimising our social media channels
• Our largest clients and adviser relationships receive dedicated relationship management support, enabling us to better understand their needs and respond proactively
• Our annual general meetings – which alternate between London and Edinburgh – enable us to hear shareholders’ views while giving them the opportunity to hear directly from our Chairman and Board
• Our Annual report and accounts is made available on our website and we send a concise newsletter to our retail shareholders
Read more in the Governance section on pages 79 to 80
• We encourage an open dialogue between colleagues and leadership teams
• Employee groups gather views and represent employees through regular interaction with senior executives
• We engage with government to assist in policy development and ensure the needs of our customers are understood
• We are represented on a number of industry bodies, and senior leaders regularly represent us on industry panels, to contribute our expertise on long-term savings and investments issues
The rationale for the merger has always been about driving strategic, long-term value. To deliver on this, it is imperative to the success of our combined business that we consider and act in the interests of all our stakeholders. The Directors are also fully aware of their responsibilities in this area under section 172 of the Companies Act 2006.
Our growing business needs to be compelling for our people with the potential to take the best from each company to create an inclusive and dynamic culture. While synergies will come in part from some of our people leaving, as far as possible this will come from natural employee turnover. We will also continue to take all appropriate steps to mitigate the number of compulsory redundancies where possible.
Growing revenue Revenue is primarily generated from the management and administration fees we charge based on the value of the assets we look after for clients and customers.
Lowering unit costs We aim to reduce our unit costs by controlling expenses and investing strategically to improve both the scalability and efficiency of our business.
Lasting client and customer relationships We aim to build meaningful, long-term relationships through brands and strategic partners that have strong reputations in different parts of the market. We aim to help clients and customers make informed choices by providing innovative solutions and digital services to meet their needs, and by delivering the investment performance they expect.
Str ateg ic r epo r t 17Standard Life Aberdeen 2017
Our strategic objectives are the key areas we are focusing on to deliver against our business model, to help us make the most of our market opportunities.
Delivering our strategic objectives Through the skills and commitment of our workforce, we deliver innovative global solutions and market-leading services which allow us to build stronger and deeper relationships. The breadth and depth of our world-class investment solutions help our clients and customers to plan with confidence to achieve their long-term objectives.
Diversification helps to improve the resilience of our business model and the returns and value it delivers for our shareholders.
Building a world-class investment company Priority Key activities Highlights Key risks
• Launched a programme to enhance the client experience and create a single, consistent approach to client management
• Improved our processes in order to better engage with pension customers in their lead-up to retirement
• Continued work to upgrade our technology systems for our customers, clients and advisers in our Pensions and Savings business
• Improved our online learning curriculum to support personal development, career development and wellbeing for all employees
• Continued our work to address the findings of the Financial Conduct Authority’s thematic review into the sale of non-advised annuities
• Investment performance • Strategic transition and delivery • Distribution and client management • Client and customer preferences and demand • Oversight of third parties • Client and customer outcomes
• Transformed the breadth and depth of our investment capabilities as a result of the merger
• Successful launch of the innovative Secure Income & Cash Flow fund
• Delivered a next-generation investment data platform for our asset management business
• Announced proposed transaction with Phoenix which will complete our transformation to a fully fee based, capital light business
• Revenue benefited from diversification across our growth channels. However, revenue was impacted by net outflows partly due to weaker short-term investment performance in 2016.
• As we integrate our businesses post-merger, we have progressed appointments to senior roles and also began employee consultations in key areas
• Surveyed colleagues across the Group to capture their views, to help define our culture
Accredited for our support to carers by Carer Positive, a Scottish Government-funded initiative
Objective We develop relationships with our customers and clients based on trust and our ability to effectively meet their needs. We aim to understand what they want and put that at the centre of our decision making.
Changes in the way customers interact with service providers mean we need to offer a broad range of support and digital services.
• Further develop our UK retail platforms and financial advice businesses in order to continue to meet the evolving needs of customers and clients
• Deliver on investment in local distribution in Asia and the US to deepen relationships with existing clients
A compelling proposition The strength of our relationships with customers and clients relies on our ability to provide them with effective products and services. We’re an investment company, which means we manage assets, but we also administer savings products and services and can offer financial planning and advice. As a result, customers can benefit from the complementary nature of our capabilities, enhancing engagement and our ability to serve their needs.
As a pensions and savings provider, we offer innovative products and services that allow customers, or their advisers, to manage their investments. We make the most of technology to ensure people can easily access, update and consolidate their assets.
As we grow our advice capability, we are able to offer financial planning and advice to help our customers and clients achieve a wide range of financial goals.
Str ateg ic r epo r t 21Standard Life Aberdeen 2017
• Develop quantitative investing capabilities – including enhanced index, and ‘smart beta’ approaches which combine the benefits of active and passive
• Further integrate and market our stewardship and ESG capabilities across all asset classes to help make a positive impact on society and add value to investment performance 22 Standard Life Aberdeen 2017
Our first combined investment trust In recent years the e-commerce industry across Europe has grown rapidly. This has seen growing demand from retailers for logistic properties: from large, specialised warehouses where goods are picked, sorted and distributed, to smaller local units used to help transport goods to their final destination. Aberdeen Standard Investments is the second largest real estate investment manager in Europe, and we have an established track record of managing real estate assets in this area of the market.
In response to this growing demand, we launched our first investment trust as a combined business: Aberdeen Standard European Logistics Income PLC. The trust raised £187.5m of equity through an Initial Placing and Offer for Subscription, and the first day of trading in the shares was 15 December 2017.
Our discussions with a broad range of investors had suggested that there would be wide interest in the launch and this has proven to be the case – with pension funds, multi-asset managers, wealth managers and retail investors subscribing to the initial offer.
Str ateg ic r epo r t 23Standard Life Aberdeen 2017
When we announced the merger we originally targeted annual cost savings of approximately £200m and expected that these synergies would result in integration costs of approximately £320m in aggregate. The integration is progressing well and we have now increased this target to at least £250m of annual cost savings. The estimated integration costs have increased to around £370m in order to achieve these higher synergies. These merger cost synergies include opportunities to consolidate our operating, trading and other platforms, as well as reduce the number of third party service providers we use.
Objective We are focused on ensuring we have an operating platform that’s modern, flexible and scalable. We are also focusing on efficiency, allowing us to deliver new products to market faster while managing our costs effectively. We aim to make sure that the surrounding architecture, which includes our IT systems, the processes we follow and external service providers we use, gives us greater flexibility and helps us to reduce ongoing maintenance costs.
Regulation is also shaping how we interact with clients, including European Union regulations to improve the quality and transparency of transaction reporting on different types of products.
Our reliance on a wide range of IT systems and online functionality, to meet customer preferences and improve efficiency, exposes us to the risk of key systems underperforming and security risks such as cyber-attacks. You can read more about these risks on page 56.
As part of our programme to improve how we collect, store and interpret data, we delivered an improved technology platform in our asset management business. This is to ensure that our investment professionals have easy access to quality, timely investment data, and better insights into our clients’ changing needs across the globe, to make more informed investment decisions on their behalf. We also made improvements to our order management system – the core investment platform for our fund managers – to take advantage of new features that improve our effectiveness and help us comply with new regulations.
We’ve also been upgrading the technology infrastructure for our Pensions and Savings business, to allow greater agility to meet changing customer demand and offer a more customer-orientated digital experience. The process of undertaking a significant IT transformation suitable for the future has been challenging, and we incurred an impairment charge of £31m following the discontinuation of part of an IT transformation project. However, good progress has been made with simplifying our infrastructure, delivering benefits to customers and corporate clients.
We’ve remained committed to ensuring that our IT capabilities can protect our customer and corporate information from misuse and cyber crime, and can minimise the impact of disruption to our operations. This includes maintaining security programmes, partnerships with third party specialists and a dedicated internal IT function.
Our cyber security policy and standards are aligned with industry good practice and the UK Government’s ‘Cyber Essentials’ scheme, and we are certified for business continuity according to the internationallyrecognised ISO22301 standard. Internal teams and external consultants carry out regular, independent assurance and benchmarking to measure the effectiveness of our security controls.
Since the merger completed, we have brought together 2,600 of our people. This includes moves in London, New York, Singapore, and the opening of our new headquarters for the combined business at St Andrew Square in Edinburgh. Co-locating colleagues in Edinburgh and across the globe has helped us to improve collaboration and begin to create cost efficiencies.
Outlook and 2018 objectives • Maintain momentum with our merger integration programme, consolidate our operations and save costs
Objective We remain focused on growing and diversifying revenue and profit, to deliver sustainable value for our shareholders and other key stakeholders. We aim to do this by building a world-class investment company that is well diversified by geography, distribution channel, client type, asset class and across the value chain. We’re well positioned to capture revenue by providing our customers and clients with asset management, administration and advice.
In November 2017, the IPO of HDFC Life successfully completed. As a result, we received £359m for the proportion of shares we sold to facilitate the IPO and have also maintained a major shareholding in a leading business in a market with significant growth potential. See page 50 for more information.
• Proposed IPO of HDFC Asset Management in India provides greater transparency of the value of this well positioned and well performing business 26 Standard Life Aberdeen 2017
• Opportunities arising through enhanced access to a number of global markets with structural growth potential, including in India, China, Hong Kong, Latin America and the Middle East. This is in addition to our positions in Japan and in the US, two of the world’s largest retirement markets.
• Revenue opportunities arising as a result of the deeper pool of investment componentry created as a result of our merger, which will allow the development of innovative investment solutions for our strategic partners
Social mobility is an area of growing importance in society and our industry. We remain committed to supporting social mobility, including programmes for people in the early stages of their careers. It’s an important part of our strategy to build and sustain a more diverse and inclusive workforce, one that also reflects the diversity and perspectives of our customers and clients.
As part of the integration we are working to align our policies and processes. This includes the work we’ve started to align our appraisal and remuneration processes, using a system based on individual and business unit performance.
Ongoing training and career development support help us make sure our people feel engaged with their roles, and have the skills and knowledge to help us support clients and customers. Around 1,300 managers took part in programmes to improve their ability to manage and lead through change, which included extensive online resources. And we’ve continued to provide support for employees aiming for a future role on a plc board, including opportunities to volunteer on a local government body or as a charity trustee.
60% (5,486) of our employees took part in the survey. Key findings included: • 87% of participants felt the merger represented an opportunity, while 2% felt the opposite and 11% were yet to be convinced
• 52% said they felt positive about coming to work and 28% felt neutral, with the remaining 20% feeling negative
Str ateg ic r epo r t 29Standard Life Aberdeen 2017
In any merger, integrating two cultures is an area of significant risk. So before defining the shared values that support our desired culture, we need a deep understanding of the existing cultures within each business.
There are a number of shared values that make the merger beneficial – from a focus on delivering excellent customer and investment outcomes to supporting a diverse and inclusive workplace. Our integration strategy aims to protect and build on these strengths as we deliver a programme of work to articulate our desired company values and leadership behaviours.
In creating an inclusive workplace, we aim to empower our employees to take an active and collaborative approach. Our diversity and inclusion strategy groups, for example, are made up of employees from across the combined business. Their role is to help us shape an approach that reflects the diverse needs of our people and make the most of their talents, while also supporting us in achieving our business objectives.
Engaging with wider society As a global investment company we have a responsibility not just as an employer, but also in terms of the influence we can have on our industry and wider society. Our involvement with external initiatives helps us to evaluate the progress we’ve made and what we can do in the future. It also plays a big role in helping us attract and develop diverse talent.
• We were ranked fourth in the first ever UK Social Mobility Employer Index – and we continue to support programmes to help people across society gain skills and opportunities for work, such as the Edinburgh Guarantee scheme and Investment 2020
• We’re a signatory to the UK Armed Forces Corporate Covenant, committing to activities that support current and former members of the armed forces, as well as their families and reservists, in the workplace. These activities include the support, business expertise and funding we offer the Scottish Veterans Fund.
Wellbeing An important part of helping our people to remain engaged and motivated at work is ongoing support for their wellbeing. We use insight and research to inform our wellbeing strategy and the activities which support it.
We also want our employees to feel they have a supportive workplace where they can talk openly about mental health issues. During the year we ran activities to support national and global initiatives that raise awareness of mental health issues, including Time to Talk Day, World Mental Health Awareness Week and Children’s mental health week in the UK. We shared stories and organised events – from mindfulness sessions, to seminars on managing stress, to workshops on maintaining a supportive working environment.
Our people took part in fundraising and volunteering activities globally throughout 2017, and we will work to grow this activity with our increased size and capabilities.
You can read more in our Corporate sustainability and stewardship report 2017 on our website www.standardlifeaberdeen.com/annualreport
The gender pay gap Under new legislation, UK companies with more than 250 employees are required to report their gender pay gap – the difference between the average amount that women and men are paid across the whole workforce. We believe increasing transparency is vital to close the gender pay gap and we welcome this legislation as a catalyst for change.
• Our industry: addressing industry-wide practices and influencing across our sector to help make senior roles more accessible to women
Board 33 25 4 of 16 Executive1 33 27 49 of 183 Entire global workforce
Q The Group recently raised US$750m through a debt issue and around £360m from the IPO of HDFC Life, how will this extra cash be used?
A Firstly, US$500m of the proceeds of the debt issue will be used to repay more expensive existing debt, which will save approximately £13m of annual interest costs. We remain well capitalised and the actions taken this year mean that we retain a strong cash buffer within Standard Life Aberdeen plc. This allows us to support the merger integration whilst continuing our progressive dividend policy. It also provides capacity to fund the organic growth of the business and bolt-on acquisitions should suitable opportunities arise.
We announced the proposed transaction with Phoenix on 23 February 2018. Further details of this post balance sheet event are disclosed in the Directors’ report and in Note 48 of the Group financial statements.
IFRS requires the Aberdeen results to be included only from the date of the merger, 14 August 2017, onwards. The financial statements have been prepared on this basis, which we refer to as the Reported basis. However, we believe that it is helpful to also provide additional information which is more readily comparable with the historic results of the combined businesses. Therefore we also discuss the results on a Pro forma basis, combining the full 12-month results of the two companies for both the current year and prior years. Pro forma basis reporting is applicable to the results of the Standard Life Aberdeen Group and the Aberdeen Standard Investments segment. For certain metrics such as AUMA and flows, only Pro forma basis reporting is provided.
A reconciliation between the results on a Pro forma basis and a Reported basis is included on page 35.
Alternative performance measures We assess our financial performance using a variety of measures. Some of these measures are defined under IFRS such as IFRS profit. Others, such as adjusted profit, are not defined under IFRS and are therefore termed alternative performance measures (APMs). APMs are used to help provide a fuller understanding of the performance of our business.
APMs should be read together with the Group’s IFRS consolidated income statement, IFRS consolidated statement of financial position and IFRS consolidated statement of cash flows, which are presented in the Group financial statements section of this report. Further details on alternative performance measures including reconciliations to relevant IFRS metrics are provided in the Supplementary information in Section 10.
The merger transformed the scale of the business, adding over £300bn of assets under management and administration (AUMA). On a Pro forma basis, AUMA increased slightly to £655bn, benefiting from markets and investment performance offset by net outflows. Flows and AUMA (Pro forma basis)
Aberdeen Standard Investments growth 50.9 55.1 (22.1) (26.1) 303.9 309.1 Standard Life Pensions and Savings growth 18.4 13.5 8.1 5.9 127.9 111.1 Eliminations (4.0) (3.5) (0.9) (1.1) (21.5) (19.0) Total growth channels 65.3 65.1 (14.9) (21.3) 410.3 401.2 Aberdeen Standard Investments mature (Third party) 12.3 12.9 (12.5) (11.5) 179.6 181.3 Aberdeen Standard Investments mature (Standard Life Pensions and Savings) 3.3 3.5 (2.7) (2.1) 92.2 90.2 Aberdeen Standard Investments mature total 15.6 16.4 (15.2) (13.6) 271.8 271.5 Standard Life Pensions and Savings mature 1.5 1.5 (4.1) (4.4) 60.2 60.5 Eliminations (3.3) (3.5) 2.7 2.1 (92.2) (90.2) Total mature books 13.8 14.4 (16.6) (15.9) 239.8 241.8 India and China life 1.0 0.9 0.5 0.4 4.8 4.6 Total 80.1 80.4 (31.0) (36.8) 654.9 647.6
Assets under management and administration AUMA on a Pro forma basis increased by 1% to £654.9bn (2016: £647.6bn), benefiting from positive investment returns which were largely offset by net outflows.
Aberdeen Standard Investments growth channel net outflows were £22.1bn (2016: £26.1bn) with net outflows from equities reduced to £8.2bn (2016: net outflows £13.9bn). Sentiment improved towards Asia and Emerging Markets but our flows continue to be impacted by a period of weaker investment performance. Net outflows from GARS increased to £10.7bn (2016: £4.3bn) as investment performance sentiment resulted in a slow down in gross inflows and an increased rate of redemptions.
On a Pro forma basis, fee based revenue increased by 3% to £2,763m (2016: £2,686m), primarily reflecting the Pensions and Savings fee growth set out above.
In Aberdeen Standard Investments the impact of net outflows was broadly offset by favourable market and foreign exchange movements. Performance fees represent 1% of total fee based revenue at £26m (2016: £33m).
The UK Pensions and Savings average fee revenue yield reduced to 53bps (2016: 58bps) reflecting the impact of changes to business mix, including the growing proportion of newer style propositions, and the fact that some elements of revenue do not rise in line with marketrelated AUA growth.
The 2016 result included a £22m benefit from an acceleration of payments from our main with profits fund relating to changes to the Scheme of Demutualisation in response to the transition to Solvency II.
Pro forma adjusted operating costs rose 8% to £1,994m including Pensions and Savings business growth and IT related costs. Adjusted operating expenses On a Reported basis, total adjusted operating expenses increased to £1,527m (2016: £1,156m) including Aberdeen costs of £276m in the period since the merger completed.
On a Pro forma basis, adjusted operating expenses increased to £1,994m (2016: £1,853m) mainly due to the higher costs in Pensions and Savings discussed above.
On a Reported basis, adjusted profit before tax increased to £854m (2016: £718m), primarily due to the inclusion of Aberdeen adjusted profit before tax of £131m for the period since the merger completed.
Fee based revenue 2,763 2,686 (652) (1,035) 2,111 1,651 Spread/risk margin 165 134 – – 165 134 Total adjusted operating income 2,928 2,820 (652) (1,035) 2,276 1,785 Total adjusted operating expenses (1,994) (1,853) 467 697 (1,527) (1,156) Adjusted operating profit 934 967 (185) (338) 749 629 Capital management 6 11 – 2 6 13 Share of associates’ and joint ventures’ profit before tax 99 76 – – 99 76 Adjusted profit before tax 1,039 1,054 (185) (336) 854 718
Adjusted diluted earnings per share 28.9p 28.8p 29.9p 29.3p Diluted earnings per share 29.6p 18.6p
Restructuring and corporate transaction expenses increased to £173m (2016: £67m). As a result of the merger, 2017 included Standard Life Group transaction costs of £59m and integration and merger related costs of £50m. Further detail on restructuring and corporate transaction expenses is provided in the Supplementary information section.
The amortisation and impairment of intangible assets acquired in business combinations increased to £138m (2016: £38m). This includes an amortisation charge of £62m resulting from intangible assets recognised as a result of the merger and an impairment charge of £40m relating to the Lloyds Banking Group customer relationship intangible asset.
See pages 149 and 176 for further details on adjusted profit and reconciliation of adjusted profit to IFRS profit
• During the year the Group made a charitable donation of £81m to the Standard Life Foundation which was tax deductible
• We revalued tax assets relating to Standard Life’s Pensions and Savings German business to reflect an updated transfer pricing approach based on the changed economics of that business and the expected impact of Brexit restructuring
The tax expense attributable to adjusted profit before tax totalled £149m (2016: £139m), of which £41m (2016: £13m) represents equity holders’ share of tax which is borne directly by our associates and joint ventures. The effective tax rate on adjusted profit is 17.4% (2016: 19.4%). We would expect the effective rate on adjusted profit to be lower than the UK corporation tax rate in future years, principally due to the profits of our Asian subsidiaries which are taxed at a rate lower than the UK corporation tax rate.
Total tax contribution Total tax contribution is a measure of all the taxes the group pays to and collects on behalf of governments in the territories in which we operate. We have reported this on a Standard Life Group basis for 2017 and 2016 and this therefore excludes any tax contribution from Aberdeen. From 2018, we will report our total tax contribution for the combined Standard Life Aberdeen Group. Our total tax contribution on this basis was £1,200m (2016: £1,149m). Of the total, £473m (2016: £451m) was taxes borne by the Standard Life Group whilst £727m (2016: £698m) represents tax collected by us on behalf of tax authorities. Taxes borne are slightly higher than 2016 due to stamp duty relating to the merger. Taxes collected are comprised of pay-asyou -earn (PAYE) deductions from pension payments made to customers, tax deducted from employee payroll payments and VAT collected. The increase in taxes collected is mainly due to an increase in VAT collected on property transactions.
You can read our tax strategy on our website www.standardlifeaberdeen.com/annualreport 36 Standard Life Aberdeen 2017
Solvency II Our Solvency II position presented here reflects draft returns and does not reflect any adjustment for the proposed sale of the majority of the Pensions and Savings business to Phoenix.
We are strongly capitalised with a Solvency II capital surplus (Investor view) of £3.8bn (2016: £3.3bn) representing a solvency cover of 225% (2016: 214%). The Investor view of our solvency position gives insight into the solvency capital provided by equity and debt investors. The £0.5bn increase in Investor view surplus in 2017 includes a £0.4bn increase from the IPO of HDFC Life.
The Solvency II Investor view capital surplus of £3.8bn would change by £0.2bn or less following a: • 20% rise or fall in equities, or • 100bps rise or fall in fixed interest yields, or • 50bps rise or fall in credit spreads The Regulatory view solvency cover prescribed by Solvency II regulations is 197% (2016: 177%). This capital surplus excludes £0.2bn (2016: £0.2bn) of capital in insurance subsidiaries that is not deemed to be freely transferrable around the Group.
Dividends received from subsidiaries consisted of £180m (2016: £170m) from Standard Life Assurance Limited, £205m (2016: £287m) from Standard Life Investments (Holdings) Limited and £80m from Aberdeen Asset Management PLC (2016: £nil). Dividends from Standard Life Investments in 2016 included approximately £50m related to capital released following the integration of Ignis. Net remittance following the HDFC Life IPO was £359m of IPO proceeds plus £8m of accumulated dividends. In October 2017 Standard Life Aberdeen plc raised $750m subordinated debt on which it swapped the future obligations into GBP. £400m was injected into Aberdeen Asset Management PLC in advance of the anticipated repayment of capital notes in March 2018.
In May 2017 we extended the maturity date of our £400m syndicated revolving credit facility by a further year to 2022. This facility is held as a part of our contingency funding plans and is currently undrawn.
Opening 1 January 900 1,012 Net remittance following HDFC Life IPO 367 – Dividends received from subsidiaries 465 457 Cash dividends paid to shareholders (469) (370) Proceeds from 2017 debt issue 565 – Cash investments in subsidiaries, associates and joint ventures (413) (208) Expenses (including merger related) (128) (61) Acquisition of shares by Employee Share Trust (79) – Other (13) 70 Closing 31 December 1,195 900
Reconciliation of Standard Life Aberdeen Investor view and Regulatory view 31 December 2017 (Draft returns) 31 December 2016 (Standard Life Group final returns)
Dividends Proposed dividend Our progressive dividend policy is to grow the annual dividend from the prior year pence per share payment at a rate that is sustainable over the medium term.
The dividend payment which is expected to be £421m is strongly supported by adjusted cash generation. At 31 December 2017 Standard Life Aberdeen plc held £1.2bn of cash and liquid resources and £1.8bn of distributable reserves.
How the dividend is funded External dividends are funded from the cumulative dividend income that Standard Life Aberdeen plc receives from its subsidiaries. To provide some protection against fluctuations in subsidiary dividends, Standard Life Aberdeen plc holds a buffer of distributable cash and liquid resources. This buffer is dynamic and takes into account expected future subsidiary dividend flows and the risks to those dividends. Further information on the principal risks and uncertainties that may affect the business and therefore dividends is provided in the Risk management section of this Strategic report.
Business performance Our reportable segments have been identified in accordance with the way that we are structured and managed.
Fee based revenue 1,912 1,920 964 861 12 17 – – (125) (112) 2,763 2,686 Spread/risk margin – – 165 134 – – – – – – 165 134 Total adjusted operating income 1,912 1,920 1,129 995 12 17 – – (125) (112) 2,928 2,820 Total adjusted operating expenses (1,278) (1,231) (769) (655) (11) (22) (61) (57) 125 112 (1,994) (1,853) Adjusted operating profit 634 689 360 340 1 (5) (61) (57) – – 934 967 Capital management 2 (2) 21 22 – – (17) (9) – – 6 11 Share of associates’ and joint ventures’ profit before tax 41 35 – – 58 41 – – – – 99 76 Adjusted profit before tax 677 722 381 362 59 36 (78) (66) – – 1,039 1,054
Restructuring and corporate transaction expenses (58) (23) (38) (38) – (3) (77) (3) – – (173) (67) Amortisation and impairment of intangible assets acquired in business combinations (117) (25) (8) (13) (13) – – – – – (138) (38) Gain on sale of share in associates 14 – – – 305 – – – – – 319 – Provision for annuity sales practices – – (100) (175) – – – – – – (100) (175) Other 10 (5) 66 19 (24) – – (3) – – 52 11 Total adjusting items (151) (53) (80) (207) 268 (3) (77) (6) – – (40) (269)
Share of associates’ and joint ventures’ tax expense (29) (11) – – (12) (2) – – – – (41) (13) Profit attributable to non-controlling interests (preference shares and perpetual notes) (8) – – – – – – – – – (8) – Total tax expense (61) (63) (31) (25) – – 26 20 – – (66) (68) Profit for the year attributable to equity holders of Standard Life Aberdeen plc 243 259 270 130 315 31 (129) (52) – – 699 368
Further details on how adjusted profit before tax and other alternative performance measures reconcile to the most appropriate measure prepared in accordance with IFRS are provided in the Supplementary information in Section 10
Str ateg ic r epo r t 39Standard Life Aberdeen 2017
Focused on delivering more choice and the highest level of client service
The merger of our complementary investment businesses created one of the world’s largest investment companies and one of the largest active fund managers in Europe, offering our clients access to a comprehensive range of developed and emerging market equities, multi-asset, fixed income, real estate, private markets/alternatives, cash/liquidity and quantitative solutions.
Our client focus The investment needs of our clients drive everything we do. We look to support investors with a full range of investment opportunities and solutions, and provide the highest level of service and support. We have the resources to transform new investment ideas into practical investment products and the scale to deliver value to investors.
A diversified business We are well diversified by revenue, asset class, client type and geography. This provides us with the resources and resilience to compete in a constantly changing investment and regulatory environment. Through our breadth of expertise, we aim to lead the way with innovative investment approaches which can target investors’ specific needs for income, return, risk control or liability management – as well as seeking to provide sources of performance across different market cycles.
Leading active management As one of the largest active managers in Europe, we will build on our shared commitment to active investment management underpinned by fundamental research. We offer a comprehensive range of developed and emerging market equities and fixed income, multiasset, real estate, private markets/alternatives and quantitative solutions and now have the expertise and scale in key areas of industry growth to meet the needs of clients globally.
A forward-looking partner The investment landscape continues to evolve. Demand for investment solutions focused on specific investor outcomes has grown rapidly. Multi-asset, target return, unconstrained and enhanced diversification approaches are some of the fastest-growing sectors of our market. By combining the strengths of our two investment businesses, we can deliver next-generation solutions and stay relevant to the changing needs of our clients.
Equities, multi-asset and fixed income account for 75% of growth channel AUM, demonstrating the scale and strength of our investment capabilities. The remaining 25% of growth channel AUM relates to private market/alternatives, liquidity, quantitative and real estate, as evolving client needs demand next generation investment solutions.
Multi-asset also saw net outflows of £6.9bn (2016: £3.6bn). GARS dominated flows in this asset class with net outflows of £10.7bn (2016: £4.3bn). Investment performance sentiment resulted in a slowdown in gross flows and increased rate of redemptions. GARS performance is ahead of benchmark but behind target over one, three and five years.
We manage a full range of equity strategies with distinct risk tolerances and return objectives to meet specific client outcomes. While different in their risk tolerances and return objectives, equity portfolios share a common approach: to consistently add value through fundamental stock selection and active management. The core features of our investment processes include: • Fundamental research • Ownership of ideas • Risk focused • Long-term view • Investment stewardship
With regards to client flows through the year, we witnessed reasonably stable gross inflows into the Aberdeen global emerging market equities franchise as investor appetite returned after significant redemptions at the end of 2016. However, recent weaker performance has created some challenges. Our broad small cap franchises experienced strong performance and gross inflows respectively across the year. SLI UK equity performance recovered strongly in 2017.
Across our combined equity franchise, we launched our Global Emerging Markets Socially Responsible Investing Fund and our Global Equity Impact Fund, the latter of which aims to invest in companies that are thriving by making a positive societal impact.
Review of the year The year was characterised by bond markets remaining in fairly tight yield ranges. Volatility continued to fall through the year and political issues in Europe did not produce the risk scenarios that had concerned the markets. Fundamentally 2017 was a year when economic growth statistics beat expectations, particularly in Europe, although low inflation helped to ensure positive Government bond market performance. The environment remained supportive for corporate earnings, which drove strong returns for credit markets, while low interest rate volatility also protected returns.
Against this backdrop performance across our fixed income franchise remained solid, particularly in credit markets. Institutional demand for fixed income remains focused in corporate bonds and absolute return products, with new business flow good in these areas. There remains a need for yield, so clients are favouring emerging market debt and corporate bonds at present. Our performance was strong in both these two assets classes, and also in inflation linked bonds, which saw rising demand too from more than one region.
Our MyFolio range, which competes in the risk-based fund market, experienced the largest calendar year asset inflows since inception.
Developed markets – credit £32.9bn Developed markets – rates £5.7bn Emerging markets – fixed income £12.8bn Total growth £51.4bn
We manage a range of products including passive, smart beta, and active quant strategies across quantitative equity, fixed income and derivative portfolios in all markets.
Review of the year The money market business continued to see interest from investors during the course of the year and relative performance was good compared to the competitor funds. AUM was stable and over 40 new liquidity fund clients were added. Looking ahead the combined assets in this area of the business make the Group one of the key managers of money market funds in Europe.
Our private markets and alternatives offering includes: private equity, infrastructure, private credit, real assets and alternative investment strategies, managed by our global investment teams. Our investment strategies range from indirect to direct, within private markets these are through fund, secondary, co-investment and direct investment activity. The alternative investment strategies capability spans across the entire range from alternative credit, traditional hedge fund strategies, liquid alternatives through to alternative risk premia. These strategies can be tailored to meet client needs.
Review of the year The merger has seen the creation of a global offering across our private markets and alternatives franchises. We continue to see strong client demand and the private markets teams have enjoyed fund raising success, including a first secured income and cash flow (private credit and real estate based) fund. We are also completing successful fund raisings for US private equity and Andean concession based infrastructure.
Str ateg ic r epo r t 43Standard Life Aberdeen 2017
UK £15.8bn European £11.1bn Global £0.1bn Multi-manager £1.5bn Total growth £28.5bn
On a Pro forma basis adjusted operating expenses increased 4% to £1,278m (2016: £1,231m). Costs increased primarily due to the full year impact of an increase in headcount in 2016. The 2017 premerger Aberdeen results include a £20m one-off impact relating to the alignment of the accounting treatment of staff costs. Other cost increases were driven by additional expenses associated with the outsource of back office functions, accommodation costs, information services and research costs.
On a Pro forma basis, adjusted profit before tax decreased 6% to £677m (2016: £722m) as a result of increased operating expenses, with both Aberdeen and Standard Life Investments profit decreasing year-on-year.
Merger integration update When we announced the merger we originally targeted annual cost savings of approximately £200m and expected that these synergies would result in integration costs of approximately £320m in aggregate. The integration is progressing well and we have now increased this target to at least £250m of annual cost savings. The estimated integration costs have increased to around £370m in order to achieve these higher synergies.
Investment performance over three years was mixed with 63% of total assets under management ahead of benchmark. Within this, 59% of growth channel assets were ahead of benchmark. Positive performance was broad based across most asset classes with solid results from our fixed income franchise and continued recovery in absolute return strategies. Relative performance within our key equity strategies was mixed over the year. Shorter-term performance over one year stands at 70% and longer-term performance over five years stands at 64% of assets ahead of benchmark respectively. The growth channel results stand at 65% and 54% over one and five years respectively. The performance results of our investment capabilities and their underlying investment processes are actively monitored and independently evaluated by our Investment Governance and Oversight team, with the insights then used to drive enhancements across our investment processes.
Standard Life is a leading provider of long-term savings and investment propositions in the UK and Europe.
We have established a market-leading position through a long-term commitment to support the needs of our customers. Our ambition is to be customers’ first choice for their life savings.
On 23 February 2018, we announced the proposed transaction with Phoenix which is expected to complete in H2 2018, subject to shareholder, regulatory and other necessary approvals.
• Workplace: pensions, savings and flexible benefits to employees through their employers
We also own businesses that specialise in financial advice and risk and compliance services.
Upgrade our infrastructure Upgrading our infrastructure is a key enabler to offer a world-class service to our customers and provide our colleagues with the best tools to do their jobs. This IT transformation will enable greater agility to meet changing customer demands and also allow for a more customer-orientated digital experience.
UK Retail2 12.9 8.1 6.4 3.7 75.7 62.9 UK Workplace 4.2 4.1 1.4 1.7 40.2 37.4 Europe growth fee2 1.3 1.3 0.3 0.5 12.0 10.8 Total growth channels 18.4 13.5 8.1 5.9 127.9 111.1 UK mature Retail3 0.6 0.6 (3.3) (3.4) 35.2 34.9 Spread/risk 0.2 0.2 (0.9) (0.9) 15.1 16.1 Europe mature fee 0.7 0.7 0.1 (0.1) 9.9 9.5 Total mature books 1.5 1.5 (4.1) (4.4) 60.2 60.5 Total Standard Life Pensions and Savings 19.9 15.0 4.0 1.5 188.1 171.6 1 2016 AUA has been restated to exclude Assets not generating revenue from products of £9.9bn (£8.9bn in the UK, £1.0bn in Europe). 2 Platform AUA of £54.0bn (Wrap, Elevate and Fundzone) comprises of £51.2bn (2016: £41.7bn) reported within UK Retail and £2.8bn (2016: £2.5bn) relating to Wrap
International Bond reported within Europe growth fee. 3 UK mature Retail AUA now includes Conventional with profits (2017: £0.5bn, 2016: £0.6bn).
Growth channels UK Retail UK Retail AUA increased by 20% to £75.7bn (2016: £62.9bn) reflecting record net inflows, which increased by 73% to £6.4bn (2016: £3.7bn), and positive market movements.
Europe growth fee Europe growth AUA of £12.0bn is up 11% (2016: £10.8bn) benefiting from foreign exchange, market movements, and net inflows of £0.3bn.
Further information on AUA and net flows are included in the Supplementary information section of this report
£188.1bn UK Retail gross inflows £12.9bn Platform AUA (Wrap, Elevate and Fundzone)
Str ateg ic r epo r t 47Standard Life Aberdeen 2017 £141.8bn £188.1bn £171.6bn
Fee based revenue 757 664 207 197 964 861 Spread/risk margin 159 119 6 15 165 134 Adjusted operating income 916 783 213 212 1,129 995 Adjusted operating expenses (599) (487) (170) (168) (769) (655) Adjusted operating profit 317 296 43 44 360 340 Capital management 22 23 (1) (1) 21 22 Adjusted profit before tax 339 319 42 43 381 362 Adjusting items (82) (213) 2 6 (80) (207) Total tax expense (66) (13) 35 (12) (31) (25) IFRS profit after tax 191 93 79 37 270 130
Revenue Fee based revenue UK fee based revenue increased by £93m to £757m. Fee based revenue benefited from higher asset levels due to strong net inflows within our growth channels together with positive market movements.
We remain focused on growing and diversifying our sources of revenue. In 2017, the acquisition of Elevate and the growth of 1825 have contributed £43m to the increase in fee based revenue.
The average fee revenue yield reduced to 53bps (2016: 58bps) reflecting the impact of changes to business mix, including the growing proportion of newer style propositions, and the fact that some elements of revenue do not rise in line with market-related AUA growth.
UK fee based revenue Fee based revenue Fee revenue yield 2017
Workplace 194 185 50 54 Retail 303 228 44 48 UK growth channels 497 413 46 50 UK mature books 260 251 75 77 Total UK fee based revenue 757 664 53 58
Profit Adjusted profit before tax Standard Life Pensions and Savings adjusted profit before tax increased by £19m to £381m (2016: £362m) driven by the UK result.
Europe Europe adjusted profit before tax reduced by £1m to £42m (2016: £43m). The spread/risk result decreased by £9m, impacted by movements in mortality experience and refinements to our reserving methodology. Operating assumption and actuarial reserving changes provided a benefit of £12m (2016: £4m). The 2016 result also included the benefit of a £4m payment from our main with profits fund relating to changes to the Scheme of Demutualisation in response to the transition to Solvency II.
Enhancing investment solutions To help improve potential outcomes for over a million of our customers we made changes to one of the funds used in our ‘lifestyling’ investment solution. Phased switching or lifestyling, often the default investment option for pensions, was designed to help maintain the level of annuity that people can buy by gradually investing their funds in assets that change in line with annuity rates as they approach retirement. However the new pension freedoms rules mean fewer people are buying annuities and instead are remaining invested after retirement or taking lump sums, so annuity targeted lifestyling is not always the best option. These changes are all customer-driven and address the increasing choices people now have.
Vulnerable Customers Policy We recognise that some of our customers will be facing challenges or difficulties in their lives. To ensure we identify and provide the right support and guidance to them, we’ve put in place our Vulnerable Customers Policy. The policy focuses on areas such as the design and promotion of our products and propositions, communications and interactions with our customers, and the training and development of our people who engage with our customers to ensure we are always focusing on our customers’ best interests.
KickStart money Research by the Money Advice Service and the UK Financial Capability Strategy shows that a significant proportion of the UK population have never received financial education and lack the skills and knowledge to effectively manage their money. To help increase the financial capability of a generation, we have joined with a number of other savings and investment firms to back an initiative called KickStart Money. This collaborative project aims to deliver financial education to over 18,000 primary school children across the UK, building a case for the impact you can have through early interventions and helping to create a national savings culture.
Str ateg ic r epo r t 49Standard Life Aberdeen 2017 £357m £381m£362m
Our India and China life business consists of our life associate in India, HDFC Life; our life joint venture in China, Heng An Standard Life; and our wholly owned business in Hong Kong. The results of our Indian asset management associate business, HDFC Asset Management Company, are included in the Aberdeen Standard Investments section of this Strategic report.
Recognising the value of our life associate in India HDFC Life is currently one of India’s leading life insurance companies with an 18.4% market share in the private sector for the nine month period to December 2017. It provides innovative insurance and savings solutions to over 50 million lives insured from individual and group customers.
In November 2017, HDFC Life listed on the National Stock Exchange of India and the Bombay Stock Exchange through an initial public offering (IPO). As part of the IPO, we sold 5.4% of shares in HDFC Life for net proceeds of £359m. We continue to maintain a significant shareholding of 29.3% in HDFC Life. The aim of listing HDFC Life has been a long standing strategic objective providing improved visibility of the value of our shareholding and allowing the business to move to the next stage of its development.
Positioned for future growth in China and Hong Kong Heng An Standard Life, continues to build a sustainable and profitable business by offering a range of insurance and savings products to a growing customer base in mainland China. Both profitability and sales are well ahead of 2016.
DFC Life continu x delivering a s ith a continued stribution netwo vate market an usiness policies eng An Standar creased by 34%
UA and net f d flows sed by 4% to £4 et movements. I .4bn). A strong e reduction in o The drop in sha ng AUA by £0.6
Standard Life re g Kong increase nued to increase £421m (2016: £ reased to £90m et inflows decrea emium income f ns.
AUA split b £4.8bn d o was PO in of 6: nture DFC g An 67m in s a s and roduct n-year. d f the ew 2017.
RS profit after te: Results are p nership percent 2% share in HD ults for Aberdee s c26% until the tober 2017 and nership is 50%
ore tax increase m HDFC Life to £ ard Life to £10m owth in premium ore tax in Hong x increased to £ tems of £268m e £302m gain on hrough the IPO a 2017 relating to g insurance com ased revenue ted operating e g profit before es’ and joint ve before tax es’ and joint ve ms e tax presented on th ages during 20
Adjuste £59m nage costs whi pares for the com ed to £59m driv £48m (2016: £3 m (2016: £7m). T m income and fa
ed profit bef m lst investing in n mpletion of the en by an increa 34m) and an inc The results ben avourable excha 2016: loss of £5 £31m) mainly du £3m). Adjusting hares in HDFC L mpairment loss sale of our wholl £m
ndard Life Aberd nd do not includ h is included in t FC Life ownersh May 2016 to
Str ateg ic r epo r t 51Standard Life Aberdeen 2017 £2.8bn £4.8bn £4.6bn
Strong risk management will enable delivery of our strategy and allow us to manage business headwinds
Our approach to risk management The merger and proposed sale of our capital heavy insurance business has accelerated our transition to becoming a world-class investment company. Effective risk management is an essential part of delivering this strategy.
We aim to ensure that: • Well informed risk-reward decisions are taken in pursuit of our business plan objectives
• Our fiduciary responsibilities are prioritised • Capital is delivered to areas where the most value can be created from the risks taken
The evolution of our business provides an opportunity to enhance our risk management approach, ensuring that the business continues to raise standards in risk management as we build a world-class investment company.
Business and risk environment The merger has resulted in a material change to the risk profile of the Group. Once completed the proposed sale of our capital heavy insurance business will simplify our risk profile but in the short term it creates additional challenges. Whilst the most significant risks affecting the Group are currently largely unchanged, there are heightened exposures to a number of key risks, particularly those arising from internally driven change and the proposed sale.
Given the increased asset management focus of the Group, delivering consistently strong investment performance will be fundamental to our success. Failure to deliver this may cause clients and customers of affected funds to reduce or withdraw their investments. While markets have performed well, they remain vulnerable to sharp reversals. Increasing geopolitical concerns, particularly across emerging markets, an important location for the Group, may lead to further market uncertainty. We continue to have robust investment practices in place so we are prepared for whatever market conditions we face.
Integration of our asset management business presents its own unique challenges. The strength of Standard Life Aberdeen is built on our people; therefore, the continued success of the Group will be dependent on successful cultural integration and retention of key talent. Organisational changes to support the delivery of planned synergies are taking place and we are ensuring that clear and consistent information is provided to our people to remove any uncertainty.
The scale of the integration programme, and the required resource and management focus, presents distraction risks that have the potential to impact on business as usual activities, strategic priorities and delivery of planned integration synergies. We have undertaken careful resource planning, with business leaders and risk committees providing oversight. In the short term our transaction with Phoenix will add to these pressures.
The departure of the UK from the EU in 2019 will have major implications for our business. Whilst negotiations between the UK and EU are progressing, the final outcome is still unclear. Drawing on our larger EU-27 footprint post-merger, we are better placed to address some of the challenges faced by our asset management business. Contingency plans will ensure consistent and continuous service to our EU-27 clients and customers, and we have a strong track record of successfully responding to changing circumstances.
As our strategic development continues and we respond to changes in the external environment, it is to be expected that both the risks themselves and their relative importance may change.
• Risk and capital models: The models that we use to measure our risk exposures and capital position and the work that we do to test and understand the sensitivity of these positions
• Emerging risks: The aim of emerging risk management is to identify risks before they materialise to help us anticipate future threats. This gives us time to engage with the risk, understand it and respond accordingly. Our screening process looks across broad sources of risk, including geopolitical, technological, environmental and societal, and informs stress testing and capital adequacy requirements across Standard Life Aberdeen.
The ORSA and ICAAP processes inform and develop: • Our understanding of the current and potential risks to the business over product lifecycles. This includes both financial and nonfinancial risks and their potential to affect both long and short-term value.
• Our appetite to accept these risks and how we manage them • Our internal assessment of current solvency and capital requirements with respect to the risks • A forward-looking assessment of the risk and solvency needs of
Standard Life Aberdeen over a multi-year time horizon in light of business plans, considering a range of stress scenarios
Three lines of defence We operate a ‘three lines of defence’ model of risk management, with clearly defined roles and responsibilities for individuals and committees: • First line: Day-to-day risk management, including identification and mitigation of risks and maintaining appropriate controls, is delegated from the Board to the Co-Chief Executives and, through a system of delegated authorities and limits, to business managers
Str ateg ic r epo r t 53Standard Life Aberdeen 2017
The risks to our business and how they have evolved in 2017 Our approach in managing these risks Link to strategy
• We review our internal processes and investment decisions in light of results on an ongoing basis
In the short term the proposed sale of our capital heavy insurance business may impact on customer flows as the implications of the proposed sale are assessed by our distribution partners.
• There are first line processes for ensuring that client marketing materials are consistent with products and capabilities. These are overseen by second line assurance activity.
• We regularly seek customer feedback on our performance and use focus groups to help with proposition development
• While Standard Life Aberdeen is strictly apolitical, we engage with government ministers, politicians and officials on a regular basis to represent the interests of our stakeholders. We also work closely with our trade organisations and contribute to formal consultations on policy issues.
• Detailed contingency planning is in place to manage the consequences of Brexit
Operational risk Our definition and appetite We define operational risk as the risk of loss or adverse consequences for the business resulting from inadequate or failed internal processes, people or systems, or from external events. We accept a degree of exposure to operational risk where exposures arise as a result of core strategic activity; however, we have no appetite for systemic operational risk and large operational losses. The Group will seek to manage existing operational risk exposures and proactively control new exposures, making resource available where required.
Talent Management The strength of our business is built on our people. It is essential that we continue to attract and retain a diverse workforce with the skills and experience that we need to deliver our business plans. The continued success of the Group will be dependent on successful cultural integration of our asset management business and retention of key talent. We are exposed to the risk that the proposed sale of our capital heavy insurance business and merger integration activity will result in unplanned departures of key individuals and an inability to replace them with individuals who possess the right skills and experience. Uncertainty around the UK’s exit from the EU and higher income tax rates for Scottish rate taxpayers compared to the rest of the UK may impact our ability to attract and retain staff. The trend reflects the increasing risk of disengagement of employees and loss of key talent while organisational structure changes progress.
• We continue to work towards meeting the commitments made under the Women in Finance Charter
• Our new global internal idea-sharing platform, Ignite, engages our people and gives them the chance to innovate and offer solutions to some of the opportunities and challenges we face
• We utilise employee networks to support development and social mobility for minority groups
Change Management Our strategy and business plan is dependent on delivery of a large, complex, and growing change portfolio. We face a significant challenge to deliver this against a backdrop of increasing regulatory change, competing demands for resource, and demand to support strategic initiatives underpinning our growth plan. We are exposed to the risk that change takes longer or costs more than expected or that the change does not meet its intended objective. These risks are amplified by the complexity of solutions required for some key projects and by the resources and attention demanded by the merger integration. Delivery of aspects of our change portfolio has proved to be particularly challenging, notably delivery of key IT change projects, and these issues are being addressed as a matter of urgency. We are experiencing an increased level of activity arising from regulatory changes. Our expectation is that high volumes of regulatory change are set to continue.
• Change management forms part of our operational risk management framework, under which change is managed, reported and implemented
IT Failure and Security, including cyber risk From an internal perspective, our business relies on a wide range of IT systems and requires greater use of online functionality to meet customer preferences, improve efficiency and manage costs. This exposes us to the risk of failure of key systems, and cyber-attacks. There is also a risk that the technical capability of our IT systems may not scale with business demand nor keep pace with requirements, resulting in degraded systems performance, or inability to serve client and customer demands. Externally, 2017 saw a number of industries and countries falling victim to cyber ransomware attacks. Over time the increased size, brand familiarity and global presence of the Group means we may become a more high profile target for cyber-attacks, increasing the risks associated with data security and data management. Additionally, we are exposed to collateral cyber risk in relation to our partners falling victim to cyber-attacks. For a period after the proposed sale of our capital heavy insurance business, Phoenix will be an outsource service provider for certain IT services.
• We continue to invest in modernising our IT infrastructure via internal change programmes
• We work with specialist external cyber risk experts to identify new risks and develop our response to them
• IT failure, security and cyber risk are considered under our stress and scenario testing programme and emerging risk process
• We maintain appropriate business continuity and contingency plans which have been independently certified to International Standard ISO22301. These are regularly reviewed and tested.
Process Execution Failure Failure or poor execution of significant operational processes in accordance with their design may result in unfair customer outcomes, operational losses, reputational damage, the potential for remedial costs or a requirement to hold increased capital. We recognise that process execution failure is a significant risk for our asset management business, particularly in relation to trade execution, collateral management and client money processes. Due to the long-term nature of our Pensions and Savings business we are not only at risk of new process execution failures but also those related to historic activities. Our robust risk control processes ensure the effective management of this risk and we view the trend as stable.
• Our Operational Risk team provides effective oversight and challenge of the management of process controls
• Client and investment mandate restrictions are automated as much as possible to reduce areas where judgement or manual intervention is required
• Our Conduct Risk Policy helps to ensure that the standards and outcomes we set are implemented consistently across the business
• Strong oversight and challenge is provided by our Conduct and Compliance team and Conduct Risk governance committees
• Conduct Risk management information will continue to be embedded in the business and is subject to continuous improvement to enhance underlying metrics and benchmarks
Str ateg ic r epo r t 57Standard Life Aberdeen 2017
Regulatory and legal risk Our definition and appetite We define regulatory and legal risk as the risk arising from violation, or non-conformance with laws, rules, regulations, prescribed practices or ethical standards which may in turn expose the Group to fines, payments of damages, the voiding of contracts and damaged reputation. We have no appetite for wilful breaches or violations of regulatory and legal requirements or prescribed practices. However, we do accept that minor infringements or breaches of compliance may happen from time to time. These will be remedied as soon as practicable, ensuring that customers’ best interests are put first.
Regulatory and Legal The industry in which we operate is highly regulated and our large global footprint exposes us to an increasing number of regulatory regimes. New or changing regulations can create opportunities for our business. However, the congested regulatory horizon has the potential to impact core growth areas for the Group, including asset management and platforms. The busy and demanding regulatory horizon can also distract the business from delivering initiatives to support growth. This can increase compliance costs, impact profitability and demand for our propositions. The increasing trend reflects the potential for the evolving regulatory agenda to significantly impact key growth areas of the business.
• Ongoing regulatory compliance is governed via our Standard Life Aberdeen Policy Framework
• We set limits for market risk exposures where this is appropriate
• We use our stress and scenario testing programme to understand our sensitivities to markets and identify mitigating actions
• The proposed sale of our capital heavy insurance business will strengthen our liquidity resources
• We are strongly capitalised and able to withstand increased capital costs due to the merger and Brexit
• We perform regular monitoring of liquidity projections and management actions exist which could be taken in adverse scenarios
• Our stress and scenario testing programme provides forward-looking insight and ensures proactive management of liquidity risks
• We have a reinsurance arrangement with Canada Life which transfers a material part of our longevity exposure. We monitor opportunities to implement further transactions to reduce our exposure
Growing and diversifying our revenue and profit 58 Standard Life Aberdeen 2017
• Limits for individual counterparties are overseen by our Group Credit Risk Committee
• We consider longevity scenarios under our stress and scenario testing programme
Code of conduct We recently updated our global code of conduct which details the standards of behaviour we expect across the Company. All of our employees are required to read, agree and adhere to the principles of the code which focuses on doing the right thing and putting our customers and clients at the heart of our business.
Bribery and corruption We have a zero tolerance approach to financial crime, bribery and corruption. We have policies in place to help ensure that we only receive or pay money to or from clients, third parties, partners and suppliers that we’ve identified as suitable to do business with. We run mandatory annual training for our employees which requires passing a test that confirms their understanding of both our policies and the part our people play. We also maintain a register for any gifts and entertainment provided or received. We have processes for reporting and reviewing breaches of our policies. In 2017 we had no breaches.
Managing our environmental impact Our greatest environmental impact is through the investments we hold. You can read more about our approach to integrating environmental considerations on our website.
The impact of climate change has continued to be the subject of much interest over 2017. It is an investment risk we must consider across all asset classes so have been actively supporting efforts to promote more transparency on the climate risks that companies may be facing and how they are tackling them. We have publicly declared our support for the G20’s Task Force on Climate-related Financial Disclosures (TCFD). We believe its recommendations will contribute to improving the quality and usefulness of climate change disclosures. As an investor, a systematic assessment by companies of the impact of climate change on their business model will help us to determine the nature, scale and management of this factor. For our own operations, we will follow the recommendations to demonstrate to markets why climate change analysis is relevant and how it informs our approach to strategy, governance and risk management.
Real estate investment assets owned by SLA plc subsidiaries – Greenhouse gas emissions (tonnes CO2e)4
All APMs should be read together with the Group’s IFRS consolidated income statement, IFRS consolidated statement of financial position and IFRS consolidated statement of cash flows, which are presented in the Group financial statements section of this report.
After making enquiries and having assessed the principal risks, the Directors are satisfied that the Group has and will maintain sufficient resources to enable it to continue operating for at least 12 months from the date of approval of the financial statements and therefore considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements. In addition, the Directors have assessed the Group’s viability over a period of three years.
Adjusted profit The 2017 reconciliation of consolidated adjusted profit to IFRS profit for the year, presented on page 149 of this report, presents profit before tax expense attributable to equity holders amended for adjusting items. Further details on the calculation of adjusted profit is presented in Supplementary information in Section 10. Adjusted profit reporting provides further analysis of the results reported under IFRS and the Directors believe helps to give shareholders a fuller understanding of the performance of the business by identifying and analysing adjusting items.
Str ateg ic r epo r t 61Standard Life Aberdeen 2017
Chair 1 Sir Gerry Grimstone Chairman NG Sir Gerry was appointed Chairman in May 2007, having been Deputy Chairman since March 2006. He is also deputy chairman and senior independent director of Barclays PLC, an independent non-executive board member of Deloitte North West Europe and the lead nonexecutive at the Ministry of Defence. Previously, he held senior positions within the Department of Health and Social Security and HM Treasury until 1986. He then spent 13 years with Schroders in London, Hong Kong and New York, and was vice chairman of Schroders’ worldwide investment banking activities from 1998 to 1999. He is British, aged 68 and holds 206,626 shares.
2 Simon Troughton Deputy Chairman NG Simon was appointed Deputy Chairman on 14 August 2017, having been a non-executive director of Aberdeen Asset Management PLC since July 2009 and chairman since July 2016. Simon is also chairman of Redburn (Europe) Limited. Previously, he was a partner at Cazenove and Company Limited before moving to Fauchier Partners in 2003 where he became chief operating officer. He is British, aged 64 and holds 52,990 shares.
4 Keith Skeoch Co-Chief Executive Keith was appointed Co-Chief Executive on 14 August 2017. He was formerly Chief Executive of Standard Life plc, having been a Director since 2006 and Chief Executive of Standard Life Investments since 2004. He joined Standard Life Investments Limited in 1999 as Chief Investment Officer after nearly 20 years’ investment experience at James Capel & Company Limited in a number of roles, including chief economist and managing director international equities. He is also a non-executive director of the Financial Reporting Council and a member of the Asset Management Taskforce led by HM Treasury. He is British, aged 61 and holds 2,347,507 shares.
5 Bill Rattray Chief Financial Officer Bill was appointed Director and Chief Financial Officer on 14 August 2017, having been finance director of Aberdeen Asset Management PLC from January 1991. He is also a non-executive director of Curtis Banks Group Plc. Prior to joining the Aberdeen Group, Bill trained as a chartered accountant with Ernst & Whinney, qualifying in 1982. He is British, aged 59 and holds 1,743,549 shares.
Appointed Director in October 2014, Kevin is the Company’s Senior Independent Director. He is also chairman of Intermediate Capital Group plc and non-executive director of Daily Mail and General Trust plc and Nationwide Building Society. Kevin was previously with Schroders plc, firstly as a non-executive director between 2002 and 2008 and, latterly, as CFO between 2009 and 2013. Prior to this, Kevin served as CEO of Management Consulting Group between 2000 and 2008. He was awarded an OBE for charitable services in the New Year’s Honours List. He is British, aged 56 and holds 60,754 shares.
Julie was appointed Director on 14 August 2017, having been a nonexecutive director of Aberdeen Asset Management PLC since May 2011 and senior independent director since October 2016. Julie is also a director of Rungway Limited. Previously, she served on the boards of MS Amlin plc, Spirit Pubs and Paternoster Insurance, and as a board member of UBS Investment Bank where she held a number of global leadership positions. She is British, aged 46 and holds 2,302 shares.
Appointed Director in November 2015, Melanie is also a senior adviser at Lazard and Co. Limited, having been a managing director between 2008 and 2012. Previously, she held various roles with UBS, and was appointed a managing director in 1999. Melanie was a nonexecutive director of The Weir Group PLC between 2011 and 2017 and the Drax Group plc between 2013 and 2016. She is also a nonexecutive director of Ridgeway Partners Holdings Limited. She is British, aged 56 and holds 20,000 shares.
Martin was appointed Director in September 2013. He is also a nonexecutive director of esure Group plc and Faraday Underwriting Limited and a non-executive advisor to Travers Smith LLP. He joined R Watson & Sons in 1983, and progressed his career with the firm to partner level. His senior roles included head of european insurance and financial services practice, Watson Wyatt from 2006 to 2009, vice-president and global practice director, insurance and financial services, Watson Wyatt during 2009 and, latterly, managing director, risk consulting & software, EMEA, Towers Watson from 2010 to 2013. He is British, aged 56 and holds 32,727 shares.
The main trends and factors likely to affect the future development, performance and position of the Group are outlined in the Co-Chief Executive’s overview section of the Strategic report. Reviews of the operating and financial performance of the Group for the year ended 31 December 2017 are given in the Strategic report.
Using the IFRS basis, the results of the Group are presented in the Group financial statements. A detailed description of the basis of preparation of the IFRS results (including adjusted profit) is set out in the Group financial statements section. More information about the Group’s use of financial instruments and related financial risk management matters can be found in Note 21 and Note 39 to the Group financial statements.
Dividends The Board recommends paying a final dividend for 2017 of 14.30p per ordinary share. This will be paid on 30 May 2018 to shareholders whose names are on the Register of members (the Register) at the close of business on 20 April 2018.
Holders of ordinary shares of 10 pence each in the capital of Aberdeen Asset Management PLC (Aberdeen Shares) on the register at the Scheme record time, being 6.00 p.m. on 11 August 2017, received 0.757 of an ordinary share of 12 2/9 pence each in the capital of Standard Life Aberdeen plc (New Shares) in exchange for each Aberdeen Share. As a result, 997,661,231 New Shares were listed on the Premium Listing segment of the Official List of the UK Listing Authority and were admitted to trading on the London Stock Exchange's main market at 8.00 a.m. on Monday 14 August 2017.
In 2016, in accordance with the terms of the Standard Life Employee Trust Deed, the trustees of the Standard Life Employee Trust waived all entitlements to current or future dividend payments for shares they hold under option on behalf of participants in the Company’s discretionary share plans between the grant and vest dates. Details of ordinary shares under option in respect of the Company’s discretionary share plans are shown in Note 45 to the Group financial statements.
The trustees of the Standard Life (Employee) Share Plan voted the appropriate shares in accordance with any instructions received from participants in the plan. Details of the Company’s employee share plan can be found in Note 45 to the Group financial statements.
You can also obtain a copy from Companies House or by writing to the Company Secretary at our registered address (details of which can be found in the Contact us section). The Articles may only be amended by a special resolution passed by the shareholders.
The Directors are not aware of any other agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.
Every member and duly appointed proxy present at a general meeting or class meeting has one vote on a show of hands, provided, that where a proxy is appointed by more than one shareholder entitled to vote on a resolution and is instructed by one shareholder to vote ‘for’ the resolution and by another shareholder to vote ‘against’ the resolution, then the proxy will be allowed two votes on a show of hands – one vote ‘for’ and one vote ‘against’. On a poll, every member present in person or by proxy has one vote for every share they hold. For joint shareholders, the vote of the senior joint shareholder who tenders a vote, in person or by proxy, will be accepted and will exclude the votes of the other joint shareholders. For this purpose, seniority is determined by the order that the names appear on the Register for joint shareholders.
 Disapply, up to a maximum total nominal amount of £12,094,255 of its issued ordinary share capital, shareholders’ pre-emption rights in respect of new ordinary shares issued for cash
3. Directors’ report continued and all such outstanding Loans and amounts will become immediately due and payable. Prior to the merger, written waivers were obtained from each of the Lenders, agreeing to the change of control.
China – under a joint venture agreement dated 12 October 2009 (as amended) between the Company and Tianjin TEDA International Holding (Group) Co. Limited (TEDA), pursuant to which the Company holds its interest in Heng An Standard Life Insurance Company Limited (Heng An Standard Life), upon a change of control of the Company, TEDA has the right to terminate the venture and to purchase, or nominate a third party to purchase, the Company’s shares in Heng An Standard Life for a price determined in accordance with the agreement.
August 2017. Having been appointed since the last AGM, these Directors, apart from Julie Chakraverty and Akira Suzuki, will stand for election at the 2018 AGM. Julie Chakraverty and Akira Suzuki will stand down as Directors at the conclusion of the 2018 AGM.
All remaining Directors as at the date of the AGM will retire at the 2018 AGM and, if they wish to continue in office, will stand for re-election. Lynne Peacock will stand down as Director at the conclusion of the 2018 AGM.
We all have a role in creating an inclusive environment, and empower our people to take an active and collaborative approach. Our seven employee network groups, for example, support members of the diverse groups and communities they represent, and raise awareness of issues that affect them. With over 1,900 members, our networks continue to expand their global reach, and focus on gender, LGBT+, ethnicity, disability (including a mental health group), young people, carers and armed forces.
We consider diversity in the broadest sense – in our backgrounds, experiences, strengths and thinking. We treat those with disabilities fairly in relation to job applications, training, promotion and career development. Adjustments are made to train and enable employees who become disabled while working at Standard Life Aberdeen to allow them to continue and progress in their career.
Achieving a better gender balance at all levels is a priority for us. We have published our gender pay gap this year and know we have more to do to improve the number of women in our senior roles and certain parts of our business (which will therefore improve our gender pay gap). For example, our senior female representation is currently 27%. For this reason, we have a gender diversity action plan which is owned by our CEOs, and our Nomination and Governance Committee formally oversee progress against this every six months. We have had targets in place to increase the representation of women at different levels since 2016, however our CEOs have now recommitted to new targets for Standard Life Aberdeen to accelerate our progress and focus.
Talent The recruitment and development of early careers talent is a critical and integral part of our talent management agenda. Over the past 12 months, we have recruited a total of 185 individuals on early careers programmes into a variety of programmes across Standard Life Aberdeen. These include our Graduate and Intern programme, Investment 2020 and the Edinburgh Guarantee Scheme. Since 2010, we have increased the number of employees aged 25 and under in the UK and Ireland from 0.5% to 8.5%. This illustrates our direct commitment to youth employment and the strategic development of young people to meet our business demands. This commitment extends to young people who are currently in education through our strategic partnership with Career Ready. In 2017, we aligned 40 individuals with mentors and paid internships in Edinburgh and London.
Looking forward, our newly combined business is starting from a strong foundation to continue to attract talent into our organisation. Both businesses have historically been recognised as employers of choice within the UK early careers market. For example, Standard Life Aberdeen currently holds the 19th position in the Top 100 UK Undergraduate Employers for 2017-2018. We have a unique opportunity to bring together and create one powerful market offering which illustrates our ongoing commitment to attracting and retaining the best talent to grow our organisation.
Measuring employee engagement remains key to understanding how our people feel about working at Standard Life Aberdeen. The merger on 14 August 2017 between Standard Life plc and Aberdeen Asset Management PLC meant that surveying employees in 2017 focused on sentiment towards the merger, mood, and providing employees with an opportunity to describe the current culture and define the culture in the new company. This type of survey was new to both heritage organisations and provided an expanded baseline measure of additional employee insights that go beyond engagement and enablement. The survey was carried out between 17 August and 6 September.
Our employee insights partner Karian and Box believes that our results show high levels of positivity towards the opportunity that the merger presents. In comparison to others in a merger/acquisition situation this presents a very strong baseline to build on. There is a sense of momentum and excitement around the merger, particularly towards the potential for global reach, world-class investment and
G o ver n an c e 69Standard Life Aberdeen 2017
Engagement  Standard Life plc – October/November 2016: 65% Engagement and
In 2018 we will continue to measure mood, sentiment and culture whilst reviewing our approach to engagement and enablement for the newly formed Standard Life Aberdeen plc.
Developing our People We’ve continued to invest in our people with a focus on development across Standard Life Aberdeen. To help our leaders manage through change, the ‘Engaging Leader’ workshop was held between April and September for 852 leaders and achieved an overall course rating of 8.4 out of 10.
We’ve trialled a new approach in 2017 to focus on ‘Developing Leadership’ in bite-sized learning format to all employees. These courses have focused on a broad range of topics including coaching, non-executive Director skills and deeper leadership. To date, 575 employees have participated, with plans for further roll out in 2018.
Eighty four per cent. of our employees told us financial education in the workplace is important. Consequently we embarked on a financial wellness programme that tackled subjects such as tax planning, retirement planning, advice on wills and estate planning. During 2017 we have held financial wellness sessions with over 1,200 employees and received very positive feedback. Sixty per cent. felt more confident about their company pension and 87% said they would recommend the programme to a colleague.
In 2017 we have continued to develop our intranet to ensure it retains its employee focus, making significant changes to content structure in response to employee feedback. In addition colleagues in Germany and Austria, as well as former Elevate employees based in Bristol, now have access. Planning has commenced for the next major iteration of the intranet to ensure that it continues to support the business fully during the merger integration period and beyond.
Reward We believe that when our employees own shares in the Company they understand better the interests of the Company’s shareholders.
In September 2017, the Standard Life Sharesave Plan, launched by Standard Life Group in 2011, was extended to the UK based employees of Aberdeen and invitations were made to employees of Standard Life Aberdeen in UK and Ireland. The invitation was accepted by 2,999 employees who will have the opportunity to acquire Standard Life Aberdeen plc shares for £3.449 (UK) and €3.749 (Ireland) with their accumulated savings when their savings contracts end in three or five years’ time.
On 1 November 2017, the 2014 three-year UK and Ireland Standard Life Sharesave invitations matured. Participating employees have the opportunity, until 1 May 2018, to buy Standard Life Aberdeen plc shares at a price of £2.961 per share (UK) and €3.70 per share (Ireland) with their accumulated savings. On 1 November 2017 the 2012 five-year Sharesave invitation also matured. Participating employees have the opportunity, until 1 May 2018, to buy Standard Life Aberdeen plc shares at a per share price of £2.208 (UK) and €2.8112 (Ireland) with their accumulated savings.
As a result, there are now over 4,298 employees in the UK and Ireland participating in Sharesave plans.
Standard Life Aberdeen now has employees in a number of countries and we will take account of this in shaping our employee share ownership offering.
Sustainability The commercial aims of our business are linked to our environmental, social and governance responsibilities. You can find out more about how we run our business sustainably throughout the Strategic report. For details of our greenhouse gas emissions, please see page 60.
Political donations We have a long-standing policy of not making political donations and we have no plans to do so. The Company has limited authorisation from shareholders to make political donations and incur political expenditure (Resolution 8, 2017 AGM). We request this as a precaution against any inadvertent breach of political donations legislation. While Standard Life Aberdeen has regular interaction with government and elected politicians in the UK and other jurisdictions in which we operate, we are strictly apolitical.
Auditors The Audit Committee is responsible for considering the Group’s external audit arrangements. Resolutions proposing the reappointment of KPMG LLP as auditors of the Company and giving authority to the Audit Committee to determine their remuneration will be submitted at the 2018 AGM.
Other information Under Listing Rule 9.8.4.CR, a listed company must include all information required by LR 9.8.4R in a single identifiable location or crossreference table. For the purposes of LR 9.8.4CR, the information required to be disclosed can be found in the following locations. All the relevant information cross-referenced below is hereby incorporated by reference into this Directors’ report.
G o ver n an c e 71Standard Life Aberdeen 2017
4. Corporate governance statement 4.1 Nomination and Governance Committee report The Nomination and Governance Committee oversees the governance framework so the report on its activities is presented both in summary and integrated in more detail into the relevant parts of the corporate governance statement.
Dear Shareholder It is my pleasure to introduce the 2017 Corporate governance statement and Nomination and Governance Committee report, in line with my responsibility to ensure effective corporate governance throughout the Group. During 2017, our main focus was to ensure that our leadership and governance processes remained robust in the run up to the completion of the Merger with Aberdeen Asset Management PLC, and that the post Merger leadership and governance structures and processes we put in place were the right ones for the new Board and the new Group. Throughout these significant changes, the members of your Board, both pre and post the Merger, continued to adhere to the highest standards of corporate governance and ethical behaviour in directing the Group’s affairs and in their accountability to you as shareholders. As Directors, we believe these commitments are key to understanding and managing our business effectively, providing engaged leadership, and delivering shareholder value over the longer term. Your Board takes the quality of its performance seriously and strives to improve performance through annual reviews and continuing self-assessment as well as learning from the best elements of both the predecessor boards. Our key governance activities during the year related to the Merger and included:  Establishing the highest quality membership of the Board and Committees post-Merger
 Establishing the Investment Performance Committee to provide insight into investment performance
The Committee supports the composition and effectiveness of the Board, and oversees the Group’s activities to strengthen its talent pipeline at all levels. It also oversees the development and implementation of the Group’s governance framework.
In this statement you can read about the Committee’s role, both in the context of business as usual activities and in the Merger discussions in relation to:  Identifying and recommending Directors to be appointed to the Board
The Committee’s work in 2017 An indicative breakdown as to how the Committee spent its time is shown below:  Reviewed compliance with the Corporate Governance Code
 Appointment of subsidiary board members 72 Standard Life Aberdeen 2017
Roles and responsibilities The roles and responsibilities of the Board, Chairman and Co-Chief Executives are outlined below. The role of the Deputy Chairman is to stand in for the Chairman in his absence.
The Board The Board’s role is to organise and direct the affairs of the Company and the Group in accordance with the Company’s constitution, all relevant laws, regulations, corporate governance and stewardship standards. The Board’s role and responsibilities, collectively and for individual Directors, are set out in the Board Charter. The Board Charter also identifies matters that are specifically reserved for decision by the Board. These include approving, overseeing and challenging:  The development and implementation of strategy, objectives and business plans
 Capital and management structures including capital allocation strategy and how it supports the Group’s long-term sustainable growth
 Dividend policy  Appointment of the External auditor  Financial reporting which, during 2017 included the impact of the merger and the agreement of the level of provision in respect of past annuity sales practices
The Board regularly reviews reports from the Co-Chief Executives and from the Chief Financial Officer on progress against approved strategies, plans and budgets, as well as updates on stock market and global economic conditions. There are also regular presentations from key business units and corporate centre functions including from the Chief Risk Officer. The Chairman reports at each Board meeting on the activities he has undertaken on behalf of the Board and the Group since the previous meeting.
The Chairman  Leads the Board and ensures that its principles and processes are maintained  Promotes high standards of corporate governance  Together with the Co-Chief Executives and the Company
As identified above, the Co-Chief Executives have clear accountabilities in the combined business. At the time of the Merger both boards thought about the key responsibilities and believed that the division of responsibilities would play well to Keith’s and Martin’s respective leadership strengths. We believe that this blend of complementary skills and experience serves the Company well. A Chairman’s committee has been established to continually review the effectiveness the Co-Chief Executive arrangement. It is chaired by Sir Gerry Grimstone, with Simon Troughton, Keith Skeoch and Martin Gilbert as its other members.
Code compliance As well as covering the formal disclosure requirements of the UK Corporate Governance Code (the Code) issued by the Financial Reporting Council (FRC), this statement describes how the Board meets its governance responsibilities.
Governance framework The Group’s governance framework is approved by the Board and documented in the Board Charter.
The Board expects the Group to be a leader in corporate governance activities through its own actions and through its stewardship activities. The Nomination and Governance Committee regularly reviews the Group’s corporate governance framework against relevant directors’ duties, generally accepted standards, guidance and best practice, and, as appropriate, recommends to the Board changes to the Board Charter.
During 2016, the Committee oversaw the implementation of the governance map and processes to support the Senior Insurance Managers Regime (SIMR). During 2017, we began the process to implement the Senior Managers and Certification Regime (SMCR) across the rest of the combined business.
The heads of each business unit and the corporate centre functions manage their teams within authorities set out in the Board Charter and within an approved scheme of delegation. This includes reporting to the Co-Chief Executives on how they are complying with Group policies and performing against approved plans and budgets.
Each non-executive Director is appointed for a three-year fixed term and shareholders vote on whether to elect/re-elect him or her at every AGM. Once a three-year term has ended, a non-executive Director can continue for further terms if the Board is satisfied with the nonexecutive Director’s performance, independence and ongoing time commitment. There is no specified limit to the number of terms that a non-executive Director can serve, although two terms are generally considered appropriate. The Board recognises the Code provisions regarding length of service when considering whether or not their
The letter of appointment confirms that the amount of time we expect each non-executive Director to commit to each year which, once they have met all of the approval and induction requirements, is around 35 days. 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 (which can be found in the Shareholder information section) and at the 2018 AGM. Nonexecutive Directors are required to confirm that they can allocate sufficient time to carry out their duties and responsibilities effectively. You can read more about the induction and development programme later in this section.
Sir Gerry Grimstone was Chairman of the Board throughout the year. He has retained his non-executive positions with Barclays PLC, where he serves as deputy chairman and senior independent director,
In January 2018, the Board reviewed all previously authorised potential and actual conflicts of interest of the Directors and their connected persons, and concluded that the authorisations should remain in place until January 2020. Under the terms of the approval, conflicted Directors can be excluded from receiving information, taking part in discussions and making decisions that relate to the potential or actual conflict. The Board and relevant Committees follow this process when appropriate.
The Board’s policy encourages executive Directors to take up one external non-executive director role. Keith Skeoch continued as a nonexecutive director of the Financial Reporting Council. Martin Gilbert is a non-executive director of Glencore plc and Sky plc (as noted above, he has given a commitment to the Board that by the time of the Company’s AGM, he will hold only one non-executive director position). Bill Rattray is a non-executive director at Curtis Banks Group Plc.
You can read more about the Directors’ outside appointments in their biographies in Section 2
Advice Directors may sometimes need external professional advice to carry out their responsibilities. The Board’s policy is to allow them to seek this where appropriate and at the Group’s expense. Directors also have access to the advice and services of the Company Secretary, whose appointment and removal is a matter for the Board. No Directors sought external advice in 2017.
Appointments to subsidiary boards Following the Merger in 2017, the Committee considered and strengthened the oversight of the key investment management subsidiaries Standard Life Investments (Holdings) Limited (SLIH) and Aberdeen Asset Management PLC (Aberdeen). Specifically, the Committee supported changes to make the boards of these two entities mirror the Board of Standard Life Aberdeen plc.
Outcome Following the review process, the Secretariat analysed the selfassessment responses and prepared a summary report. The report was discussed with the Chairman and then considered in detail by the Nomination and Governance Committee before being formally presented to the Board at its meeting in October.
The key outputs from the review included:  Strategy: Progress has been made in defining and understanding the strategic direction but there is still opportunity to learn from the outcomes of previous decisions
 Risks: Risk appetite reporting could be stronger, as well as reporting on specific risks
Before these meetings, the Directors assessed their own performance by completing a confidential online questionnaire. Individual development and engagement schedules were prepared to support each meeting. These built on the responses to particular questions and areas of interest and training needs identified by each Director. The meetings were designed to review whether each Director was contributing effectively to the Board and to the Board Committees, meeting all of their statutory and regulatory duties, and continued to have sufficient time to commit to the role. The meetings also considered individual training, development and engagement opportunities for each Director. The schedules summarised the internal and external continuing development the non-executive Directors had undertaken during the year and considered the extent to which each non-executive Director had implemented the points raised in the previous year’s review. Each Director takes forward the resulting actions, supported by the Chairman and the Company, using either internal or external resources.
The formal preparation and induction programme includes:  Meetings with the executive Directors, key members of senior management, the heads of the operating businesses and our corporate centre functions
 Visits to business units to meet our people and gain a better insight into the operation of the business and its culture
At its meetings, the Committee discussed the future leadership and talent needs of the Group and how the current programmes would be revised to take account of the skills and expertise required by the Board and senior management. The programmes recognise the changing shape of the Group, and also identify both the talent available within the Group and the need for external recruitment. The programmes are led by the Chief People Officer, with input from the Co-Chief Executives and supported by the Group Talent and Organisation Development team.
During the year, the Nomination and Governance Committee also received updates on how the ‘early careers’ programmes were being amended to reflect the opportunities arising from the merged Group.
During 2017, the Board received regular updates on the results of the Committee’s discussions related to the Merger. Also during 2017, the non-executive Directors held specific discussions on Board and executive succession, the results of which fed into the overall plan.
The Committee recognised that Simon Troughton’s term of service as a Director will reach nine years in July 2018 and after consideration, agreed that given his knowledge and experience, it would be appropriate for him to remain in position beyond this time to co-chair the Chairman’s succession process.
Annual review of internal control The Directors have overall responsibility for the System of Governance (SoG), stemming from the Solvency II Directive, which includes the Enterprise Risk Management (ERM) framework and System of Internal Control, and for the ongoing review of their compliance. The SoG is designed to manage, rather than eliminate, risk and can only provide reasonable, not absolute, assurance against material misstatement or loss. The SoG covers all of the risks as set out in the risk management section in the Strategic report. Internal audit regularly audits the effectiveness of internal controls, which will include elements of the SoG. Internal audit reports its findings to the Audit Committee and the Risk and Capital Committee.
With regard to regular financial reporting and preparing consolidated accounts, the Group Finance function participates in the control selfassessment and policy compliance elements of the ERM framework. The Group Finance function sets formal requirements for financial reporting, defines the process and detailed controls for the IFRS consolidation, reviews and challenges business unit submissions and receives formal sign-off on financial reporting from business unit finance directors. In addition, the Group Finance function runs the technical review committee and the financial reporting executive review group which review external technical developments and detailed reporting disclosure and accounting policy issues.
In 2017, there were separate processes in place to review the SoG for Aberdeen Asset Management Life and Pensions and Standard Life Pensions and Savings.
(ORSA)  Compliance function  Prudent person principle  Own fund requirements  Internal controls (covering strategic, financial, operational and compliance)  Internal audit function  Actuarial function plus opinion on technical provisions  Valuation of assets and liabilities other than technical provisions  Outsourcing  Group governance specific requirements  Solvency needs  Premiums for new business  Restriction of business
Following completion of the above, the Risk function performed a review and check on the quality of the commentary provided and challenged business owners where the evidence provided required further investigation. Results of the self-certification were verified against relevant Risk reports and Compliance Assurance or Internal audit findings.
The Risk function then prepared a report combining the output from the business units. The results, which concluded that there had been no significant failings or weaknesses, were presented to the Audit Committee which subsequently reported this conclusion to the Board.
The Board is equally committed to the interests of the Company’s 1.2 million individual shareholders who hold approximately one third of the Company’s issued shares. Given this large shareholder base, it is impractical to communicate with all shareholders using the same direct engagement model we follow for our institutional investors. The Company has continued to gather and respond to shareholders’ views on the services and means of communication available to them, mainly via the Shareholder Questions mailbox and surveys conducted with shareholders contacting the shareholder helpline. Around 430,000 shareholders receive all communications electronically helping to reduce our environmental impact. We encourage shareholders to use our share portal to access information relating to their personal shareholding and dividend history and around 400,000 have signed up to this service. Share portal participants can also change their details and dividend mandates online and receive tax information electronically. We also encourage our individual shareholders to hold their shares in the Standard Life Aberdeen Share Account where shares are held electronically in a secure environment and 90% of individual shareholders hold their shares in this way.
To give all shareholders access to the Company’s announcements, all material information reported via the London Stock Exchange’s
G o ver n an c e 79Standard Life Aberdeen 2017
4. Corporate governance statement continued regulatory news service is published on the Company’s website. We have continued to host formal presentations to support the release of both the full year and half year financial results. These results-related events are also made available live on the Group’s website and have a permanent replay facility. We also undertook a comprehensive programme of investor engagement following the announcement of the Merger including investor presentations and meetings.
The 2017 AGM was held at the Edinburgh International Conference Centre on 16 May 2017 when Directors were available to answer shareholders’ questions. In accordance with best practice, all resolutions were considered on a poll which was conducted by our registrars and monitored by independent scrutineers. The results, including proxy votes lodged prior to the meeting, were made available on our website the same day. 40% of the shares in issue were voted and all resolutions were passed.
Our 2018 AGM will be held in London in line with our plan to hold the AGM in Edinburgh and London in alternate years in order to give more shareholders the opportunity to attend.
Our role as an institutional investor Standard Life Investments and Aberdeen Asset Management were signatories to and supporters of 23 stewardship codes around the globe including the UK Stewardship Code and the United Nations Principles for Responsible Investment. Both companies promoted the importance of good governance and stewardship including the management of broader aspects of risk relating to the environment, society and governance (ESG). The Merger of Standard Life Group and Aberdeen Asset Management and the creation of Aberdeen Standard Investments benefits from the heritage of both companies. The progress of integrating the operations of the companies is well underway and the result will be an approach which will embed the consideration of ESG risks into our investment decisions, building on the global reach and expertise available to the newly merged entity.
The Chairman is not a member of the Audit, Risk and Capital, Remuneration or Investment Performance Committees. He does, however, attend meetings of all Committees, by invitation, in order to keep abreast of their discussions. The table below reflects the composition of the Board during 2017 and the members’ attendance both pre and post the Merger. The Board met nine times during the year.
Former members Colin Clark 6/6 Pierre Danon 6/6 Noel Harwerth 6/6 Paul Matthews 2/2 Barry O’Dwyer 4/4 Luke Savage 6/6
G o ver n an c e 81Standard Life Aberdeen 2017
Dear Shareholder I’m delighted to have been asked to take on the role as Chair of the Audit Committee in August and would like to thank Kevin Parry for his excellent work as Chair before me.
A major role of the Audit Committee in 2017 was related to the Merger with Aberdeen Asset Management PLC. In advance of this, the Audit Committee’s specific focus was on the work to support the relevant financial disclosures in the Merger Circular and Prospectus and in particular the Working Capital Report, the Financial Position and Prospects report and the Quantified Financial Benefits Statement. Post-Merger, this focus switched to the impact on the group financial reporting of the Merger, along with the integration costs and synergies. During the year the Committee also:  Oversaw the external audit transition from PricewaterhouseCoopers LLP (PwC) to KPMG LLP, who were appointed at the 2017 AGM
 Assessed the provision relating to the FCA’s enhanced annuity thematic review
 Reviewed the Solvency and Financial Condition Report as part of the Company’s first annual Solvency II reporting
 Received reports on compliance with the Financial Conduct Authority Client Assets Sourcebook (CASS) rules in the Company’s CASS permissioned regulated legal entities
Our report to you is structured in four parts:  Governance  Report on the year  Internal audit  External audit
Former member Noel Harwerth 5/5 Kevin Parry 5/5 Lynne Peacock 5/5
The Board believes members have the necessary range of financial, risk, control and commercial expertise required to provide effective challenge to management. John Devine is a member of the Chartered Institute of Public Finance and Accounting. For the business of the Committee, he is considered by the Board to have competence in accounting and auditing as well as recent and relevant financial experience.
 The findings of its reviews of the financial information in the Group’s annual and half year financial reports
 Outcomes of investigations resulting from whistleblowing  The appointment or dismissal of the Chief Internal Auditor, the approved internal audit work programme, key audit findings and the quality of internal audit work 82 Standard Life Aberdeen 2017
Committee effectiveness The Committee reviews its remit and effectiveness annually. The 2017 review was carried out using an internal self-assessment questionnaire. The review concluded that the Committee had:  Performed effectively during the year and overseen a robust process to deliver Solvency II reporting
 Fulfilled its duties under its terms of reference, and kept its terms of reference up-to-date
 Received sufficient, reliable and timely information from management and the Internal and External auditors to enable it to fulfil its responsibilities
Report on the year Audit agenda The Audit Committee has a rolling agenda comprising recurring business, seasonal business and other business.
 Reports from the chairmen of the subsidiary audit committees  Updates on work completed by the External auditors  Details of non-audit services requested of the External auditors by business units  Other agenda items
Other agenda items were aligned to the annual financial cycle as set out below.
 Annual report and accounts 2016  Strategic report and financial highlights 2016  Solvency II reporting  Provision for the FCA’s enhanced annuity thematic review  External audit transition
 2016 external audit fee and the proposed 2017 fee for all audited entities
The indicative proportion of time spent on the business of the Committee is illustrated below: G o ver n an c e 83Standard Life Aberdeen 2017
The Committee also considered future changes to accounting standards (in particular, IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments) and ensured that the impact of these future changes was appropriately disclosed in the financial statements. The Committee also spent time discussing the new insurance contracts standard (IFRS 17) which was issued in 2017 and will be effective in 2021.
Accounting estimates and judgements The Audit Committee considered all estimates and judgements that Directors understood could be material to the financial statements. The Committee also focused on disclosure of these key accounting estimates and judgements.
Annuitant mortality assumptions were considered in the context of our experience over the short and medium term against base assumptions and future assessed improvements. We compared our actuaries’ views with estimates made by other companies drawing on available benchmark data and looked at the changes in outcomes attributable to a change in estimates (see Note 31 of the Group financial statements for more detail).
We considered key assumptions determining the pension fund surplus: inflation (including the gap between the retail price index and the consumer price index), mortality and the discount rate. The assumptions were compared with market data and expert opinions. As with last year we also noted possible new accounting guidance on recognising a pension surplus on the consolidated statement of financial position. Interpretation remains uncertain and so the Committee supported continuing with additional disclosures. Further details are set out in Note 35 of the Group financial statements.
Fair, balanced and understandable The Committee supported the financial reporting team’s continued review of the Annual report and accounts. A focus in 2017 was ensuring that the Strategic report appropriately explained the rationale and implications of the Merger.
Standard Life Aberdeen’s principles To create clarity around what Standard Life Aberdeen means when it talks of being fair, balanced and understandable, a set of principles were developed, which can also act as an organisational definition for each aspect: Fair "We are being open and honest in the way we present our discussions and analysis, and are providing what we believe to be an accurate assessment of business and economic realities"
 The narrative and analysis contained in the report effectively balances the information needs and interests of each of our key stakeholder groups
 There is a clear and easy to understand framework to the report which is effective in addressing Standard Life Aberdeen’s objectives, vision, mission and values
Prepare, Review and Challenge The above principles and supporting statements are considered in each stage of the Annual report and accounts production process.
 We provided fair, balanced and understandable training and guidance to all key stakeholders involved in the Annual report and accounts production process
 Three drafts of the Annual report and accounts 2016 were reviewed by the Audit Committee at three meetings. The Committee complemented its knowledge with that of executive management and the Internal and External auditors. An interactive process allowed each draft to embrace contributions.
Adjusted profit before tax is a key profit APM. The Standard Life Group key profit APM was ‘operating profit before tax’, but this was renamed to ‘Adjusted profit before tax’ following the Merger. The Committee agreed with management that ‘operating profit’ could be a confusing name and that ‘adjusted profit’ was therefore more appropriate. The Committee also spent time considering the definition of ‘adjusted profit’ taking into account the previous Standard Life Group ‘operating profit’ metric and Aberdeen ‘underlying profit’ metric. Details of changes relative to these previous definitions are included in the Supplementary Information section. The Committee also considered whether the allocation of items to adjusted profit were in
G o ver n an c e 85Standard Life Aberdeen 2017
We agreed to recommend to the Board that the Annual report and accounts 2017, taken as a whole, is fair, balanced and can be understood by someone with a reasonably informed knowledge of financial statements and our industry.
The Committee oversees the findings of investigations and required follow-up action. If there is any allegation against the Risk or Internal audit functions, the Committee directs the investigation. The Committee is satisfied that the Group’s procedures are currently operating effectively.
Internal audit operates in accordance with a global charter which is reviewed by the Committee every year. Their work plan covers all businesses in the Group after holding risk based discussions with management, regulators, the External auditors and the Committee. Identified areas of focus are mapped to the key risks within the Own Risk and Solvency Assessment (ORSA), which is a dynamic forward looking tool for decision making and strategic analysis at the heart of the Solvency II prudential regime and Internal Capital Adequacy Assessment Process (ICAAP) for the asset management business. Consistent with that methodology, our regulators request specific reviews as part of the Risk Mitigation Plan. The Committee approves the scope and content of the annual internal audit plan, which is updated on a rolling basis to allow Internal audit to address any emerging issues and reflect changes in the Group’s organisation.
 The status of management’s implementation of agreed improvement actions, where dates have been rescheduled
 The assessment of the internal control environment at each business unit
During 2017, approximately 100 internal audits were completed. The Committee considered the reports below to be particularly insightful and contributed to the strengthening of the control environment:  Conduct risk  IT security  Key regulatory change projects such as the Markets in Financial
During the year, regular dialogue takes place, at least monthly, between the Committee Chairman and the Chief Internal Auditor. The newly appointed Committee Chairman also engaged with the combined function at their post-Merger conference in October.
The Chief Internal Auditor was an external appointment to broaden the experience of the senior team and commenced his role in May 2016. The Chief Internal Auditor is now focused on aligning his team to meet the requirements of the merged Group.
As discussed in the 2016 Audit Committee report, the Committee tendered the audit for the year ended 31 December 2017 and recommended to the Board that KPMG should be recommended to shareholders as the auditors for 2017. The shareholders voted in favour of the appointment at the 2017 AGM.
The Committee complies with the UK Corporate Governance Code, the FRC Guidance on Audit Committees with regard to the external audit tendering timetable and the provisions of the EU Regulation on Audit Reform and the Competition and Markets Authority Statutory Audit Services Order with regard to mandatory auditor rotation and tendering. The Committee will continue to follow the annual appointment process but does not currently anticipate re-tendering the audit before 2026.
The services prohibited by the Policy are in line with the Ethical Standards and include:  Tax services, other than in exceptional circumstances and subject to specific audit committee approval in line with ethical standards
 The majority of legal services  Services related to the audited entity's internal audit function  Services linked to the financing, capital structure and allocation and investment strategy of the audited entity, except providing assurance services in relation to the financial statements, such as the issuing of comfort letters in connection with prospectuses
G o ver n an c e 87Standard Life Aberdeen 2017
Audit and non-audit fees The Group audit fee payable to KPMG in respect of 2017 was £5.7m (2016: PwC £4.1m). In addition £1.9m (2016: £0.8m) was incurred on audit related assurance services. Fees for audit related assurance services are primarily in respect of Solvency II regulatory reporting, client money reporting and the half year review. The increase in both audit and audit related assurance fees primarily reflects the larger scale of the Group following the merger. The Committee is satisfied that the audit fee is commensurate with permitting KPMG to provide a quality audit and monitors regularly the level of audit and non-audit fees. Non-audit work can only be undertaken if the fees have been approved in advance in accordance with the Board’s policy for nonaudit fees. Unless fees are clearly trivial (which we have defined as less than £75,000), the approval of the whole Committee is now required.
Non-audit fees amounted to £0.4m (2016: £1.4m) of which £0.3m (2016: £0.5m) related to other assurance services. Other assurance services in 2017 primarily relate to control assurance reports, in particular those provided to Aberdeen Standard Investments’ clients, which are closely associated with audit work. The External auditors were considered the most suitable supplier for these services taking into account the alignment of these services to the work undertaken by external audit and the firm’s skill sets. The Committee also monitors audit and non-audit services provided to non-consolidated funds and were satisfied fees for those services did not impact auditor independence.
The ratio of non-audit fees to audit and audit related assurance fees is 5% (2016: 29%). The total of audit related assurance fees (£1.9m) and non-audit fees (£0.4m) is £2.3m, and the ratio of these audit related assurance fees and non-audit fees to audit fees is 40% (2016: 54%). As noted above the audit related assurance fees are primarily fees in relation to required regulatory reporting, where it is normal practice for the work to be performed by the external auditor.
Audit quality and materiality The Committee places great importance on the quality and effectiveness of the External audit. The Senior Statutory Auditor is Jonathan Mills. The Committee looks to the audit team’s objectivity, professional scepticism, continuing professional education and its relationship with management, all in the context of regulatory requirements and professional standards. Specifically:  The Committee discussed the scope of the audit prior to its commencement
 The Committee Chairman had at least monthly meetings with the lead audit partner to discuss Group developments
 The Committee received at nearly every meeting an update of KPMG’s work, compliance with independence and its findings
 There was a detailed interview by the Committee Chairman with the audit partners on the subject of the work undertaken to support their opinion on the financial statements and the consistency of the remainder of the Annual report and accounts with their work
 The Committee reviewed and discussed the audit findings including audit differences prior to the approval of the financial statements. See the discussion on materiality in the paragraph below for more detail
We have discussed the accuracy of financial reporting (known as materiality) with KPMG both as regards accounting errors that will be brought to the Committee’s attention and as regards amounts that would need to be adjusted so that the financial statements give a true and fair view. Differences can arise for many reasons ranging from deliberate errors (fraud etc.) to good estimates that were made at a point in time that, with the benefit of more time, could have been more accurately measured. Overall audit materiality has been set at £38m (2016: £34m). This equates to approximately 4.5% of normalised profit before tax. This is within the range in which audit opinions are conventionally thought to be reliable. To manage the risk that aggregate uncorrected differences become material, we supported that audit testing would be performed to a lower materiality threshold for individual reporting units. Further, KPMG agreed to draw the Committee’s attention to all identified uncorrected misstatements greater than £2 million (2016: £2m). The aggregated net difference between the reported pre-tax profit and the auditor’s judgment of pretax profit was less than £21m which was significantly less than audit materiality. The gross differences were attributable to various individual components of the consolidated income statement and balance sheet. No audit difference was material to any line item in either the income statement or the balance sheet. Accordingly, the Committee did not require any adjustment to be made to the financial statements as a result of the audit differences reported by the External auditors. Work that KPMG perform on Solvency II reporting uses a higher level of materiality.
In performing these tasks the Committee is supported by the activity of risk and capital committees in subsidiary companies where these exist. This has included receiving support from the Standard Life Assurance Limited Risk and Capital Committee which was established in 2017.
 The anticipated structure of the Risk and Compliance function and operation of risk processes on Day One
Since the Merger the Committee has monitored the evolution of risk management across the merged Group and received progress updates from the integration programme.
The Committee meetings are attended by the Chief Risk Officer, the Aberdeen Standard Investments (ASI) Chief Risk Officer and the Standard Life Pensions and Savings Chief Risk Officer. Others invited to attend on a regular basis include the Chairman, the Co-Chief Executives, the Chief Financial Officer, the Chief Executive Standard Life Pensions and Savings, the Chief Investment Officer and the Chief Internal Auditor as well as the External auditors.
 The structure and implementation of the Group’s Enterprise Risk Management (ERM) framework and its suitability to react to forward-looking issues and the changing nature of risks
G o ver n an c e 89Standard Life Aberdeen 2017
The Committee’s work in 2017 An indicative breakdown as to how the Committee spent its time is shown below: The Committee operates a rolling agenda which comprises both recurring items and items that are more ad hoc in nature.
 Matters arising at the Standard Life Assurance Limited Risk and Capital Committee
 Standard Life Investment’s Conflicts of Interest Register  Plans for testing, assurance reviews, business risk reviews and validation activity to be performed in 2017
 The proposed structure of the Risk and Compliance function following the merger
 Initial assessment of the risks and risk management approach within the integration programme
 Plans for developing investment risk oversight capability within the Risk and Compliance function
 Update on the management of risks relating to the delivery of IT change
 Update on progress towards delivering compliance with the EU General Data Protection Regulation
 Findings from an independent review of the conduct risk framework
 Update on the assessment of risk culture within the organisation
Risk appetites, exposures and capital As previously noted, prior to the merger the Committee was actively engaged in assessing the likely changes to the risk and capital profile of the merged business. In particular this included considering the extent to which the business combination would result in risk exposures that were not simply the sum of the risks of the underlying businesses. In this context the Committee noted that the increased diversity of funds and talent were expected to result in relative reductions in risks such as investment performance, customer and client preferences and market risk. By contrast, the increased scale 90 Standard Life Aberdeen 2017
Since the merger a single risk appetite framework has been developed drawing on the best aspects of the two existing frameworks and reflecting the shape of the merged business and the risks it faces. This revised risk appetite framework now provides a common framework to enable stakeholders to communicate, understand and control the risks that Standard Life Aberdeen is willing to accept in pursuing its business plan objectives and the associated capital required. The Committee reviewed this revised risk appetite framework at its December meeting and agreed to recommend to the Board that it be implemented across the Group.
 The balance between the focus on risks related to the integration process and BAU activities
As highlighted in the table on page 90, we received a number of oneoff reports during the year which directly supported the Committee in our oversight of risk appetites, exposures and capital.
One example of this was the report on work performed in assessing the nature of cyber insurance available in the market and the extent to which this could help mitigate the impact of any successful cyber attack. In particular the Committee noted the protection provided through existing insurance policies and management plans to further assess options as part of the annual insurance policy renewal exercise.
 Reverse stress testing – considering circumstances or severe events, including as a result of operational, conduct and reputational risks, that have the potential to cause the business plan to become unviable
 Tail risk analysis – exploring the possible sequential development of a low likelihood but high impact scenario
G o ver n an c e 91Standard Life Aberdeen 2017
Enterprise Risk Management (ERM) framework The ERM framework is used to identify, assess, control and model the Group’s risks and consists of five elements:  Risk control processes  Strategic risk management  Risk and capital models  Emerging risks  Risk culture
The Committee also receives semi-annual reporting from the Chief Internal Auditor providing an independent assessment of the internal control environment relating to the management of risk and capital. This also supports the Committee in performing its oversight and challenge.
The Committee specifically monitors risk control processes through reviewing the results of quarterly policy compliance reporting and updates regarding action plans raised in response to risk events which is included within the Views on Risk report. Following the completion of the merger, Aberdeen Asset Management PLC and its subsidiaries adopted the policies previously operated by Standard Life plc and group-wide policy compliance reporting was completed for Q3 2017 with no significant issues noted.
A Risk Modelling policy has been rolled out across the Group in 2017 aimed at providing a consistent benchmark for the development and use of risk and capital models. The policy covers a range of models and includes the Group Internal Model introduced in response to the requirements of Solvency II. The extent of compliance with the Risk
Modelling policy is reported to the Committee within the Views on Risk report alongside other policy compliance reporting. During 2017 the Committee has continued to keep under review the methodology of the Solvency II Group Internal Model which, in line with the Committee’s terms of reference, has included reviewing the key elements of design, the use of significant assumptions and expert judgements, key sensitivities, significant limitations and uncertainty in the model.
In 2017 risk and capital committees were established within Standard Life Assurance Limited, Standard Life Savings Limited and Elevate Portfolio Services Limited. These actions recognise the importance of risk culture and good risk governance within the ERM framework. During the year the Committee received a report setting out the results of a risk culture awareness questionnaire carried out across key individuals in the merged business. Based on the responses to the questionnaire, the Committee concluded that the business was generally well-placed relative to its peers and noted that activity was planned to drive best-in-class risk culture awareness.
Prior to the merger, the Committee carried out its duties through reviewing the key assumptions and bases underlying the calculation of the Group Solvency II Internal Model results for Standard Life plc and the ICAAP for Standard Life Investments (Holdings) Limited.
In reviewing the Group Solvency II Internal Model results the Committee paid particular attention to the assumptions relating to the longevity stress and the treatment of the provision to address the finding that a portion of non-advised annuity sales in previous years did not adequately explain to customers that they may have been eligible for an enhanced annuity. The Committee noted the validation work that had been performed by the Risk and Compliance function in respect of the Internal Model and satisfied itself that it was appropriate to recommend that the Standard Life plc Board approve the proposed methodology and judgements for use in the calculation of the December 2016 Solvency Capital Requirements.
As a Committee we have closely monitored regulatory developments to understand and seek to anticipate potential implications for the Group and the wider financial services sector. In this context the Committee has noted the proactive engagement with the Prudential Regulation Authority and the FCA during the year,as well as responding to particular requests including the submission of details of our Brexit contingency plans.
The presentation of Business Risk Reviews reports to the Committee in 2017 has supported the Committee in allowing informed discussion regarding the progress of key business activities. Having considered the material presented, the Committee endorsed the recommendations contained in the Business Risk Reviews reports.
Governance arrangements have been put in place to ensure that the Committee retains appropriate oversight of material risk and capital matters following the introduction of these new committees. This includes the Committee being responsible for approving the terms of reference for the risk and capital committee of Standard Life Assurance Limited (being a direct subsidiary of the Company) and any subsequent material changes to those terms of reference.
The Committee receives and reviews minutes from the Standard Life Assurance Limited risk and capital committee and any other reports escalated by the Chairman of that committee. Arrangements also exist for the Committee Chairman to attend the Standard Life Assurance Limited risk and capital committee. Corresponding arrangements have been put in place between the Standard Life Assurance Limited risk and capital committee and equivalent committees in place in its subsidiaries.
The report is structured in the following sections:  The annual statement from the Chairman of the Remuneration Committee
 Summary of the proposed remuneration policy, key remuneration decisions, and performance and remuneration for 2017 on pages 98 to105.
Dear Shareholder 2017 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 2017.
Standard Life plc amended its Directors’ Remuneration Policy on 19 June 2017 at the General Meeting for the period from completion of the merger to 31 December 2017 on the underlying principle that minimal changes would be made to the policy as we were already part way through a performance year. Due to the different remuneration structures in place at Standard Life Group and Aberdeen some changes were made to the transitional policy to accommodate the existing remuneration arrangements of the Aberdeen executive directors, who were joining the Standard Life Aberdeen plc Board, and the remuneration structure for the Chief Investment Officer who joined the Board on the effective date of the merger. Given the transformation of the Company, as a result of the merger, during the period from August 2017 the Committee has undertaken a holistic review of our approach to executive remuneration to align this to our strategy and business plan. This has also included careful consideration of the complex regulatory, political and social landscape for executive remuneration, which we continue to follow closely. The outcome is the new Remuneration Policy which I now present for your approval.
Our approach to executive remuneration going forward In considering the approach to remuneration for executive Directors going forward, the Committee considered the following principal factors:  Alignment to our business model  Alignment with the strategy of the Group  Consideration of the industry within which the Group operates  Harmonisation of approach across the leadership team
The corporate aim and rationale behind the merger was to create a world-class investment company. With the merger of the two companies, as set out elsewhere in the Annual report and accounts 2017 in more detail, this journey has been significantly accelerated.
In developing our new policy, we considered the policies of Aberdeen and Standard Life Group and adopted elements of these policies where these were well aligned to the strategic direction of the merged Company and introduced new elements where these would strengthen the link between reward and the delivery of our strategy. Given the Group’s business model going forward, the Committee also took into consideration the structure of remuneration within global asset management peers, whilst being cognisant of the approach to remuneration at FTSE listed peers of a similar size.
The objective for our proposed remuneration structure is to reward focus on sustainable value creation over the long term for our clients and shareholders through a simple and transparent design.
To deliver our strategy, a priority was ensuring the right Board composition. To support this priority a key driver of our design has been the harmonisation of the pay structure and maximum opportunity for the Co-CEOs to incentivise the delivery of the challenging integration plan and delivery of the strategic and financial objectives for the merger.
 Both backward and forward looking performance measures to ensure that reward is linked to the delivery of sustainable long-term value for shareholders, through (i) a scorecard for the initial determination of awards which measures performance over a backward looking period of one to three years; and (ii) the introduction of forward looking three-year underpin performance conditions for all deferred awards.
 Alignment with shareholders through a shareholding requirement that is at the top end of the market (500% of salary for the Co-CEOs and 300% of salary for other executive Directors) and which must be maintained for 12 months post departure from the Company.
(Salary - £600k; pension 20 %; variable pay award - 600%)
Bill Rattray Set at £2,115k to reflect increased scale of role
(Salary - £450k; pension 20 %; variable pay award - 350%)
(Fixed pay - £367k; pension - 20%; variable pay award - 300%)
Further details on how the remuneration structure is directly aligned to the Group’s strategic priorities, as well as our culture and values, and how the structure will be implemented in 2018 are set out in the ‘Appoach to remuneration going forward’ section on page 98.
Alignment of remuneration across our workforce The Committee views alignment of our approach to determination of pay for executive Directors with wider Company policy on remuneration as critical to the successful delivery of strategy and development of future talent. A core principle of the reward structure for employees around the Group is to ensure success is shared appropriately and there is a fair approach to the determination of remuneration outcomes. As part of this the aggregate variable pay pool in any year is typically expected to be no higher than 25% of adjusted profit before variable pay and this will include the variable pay of executive Directors and all employees.
Shareholder engagement Since completion of the merger the Committee have consulted extensively with our largest shareholders (representing c.40% of our shareholder base) and with the Investment Association, Institutional Shareholder Services and Glass Lewis. The Committee found the
Shareholders consulted with were generally supportive of the proposed approach going forward, and in particular:  Our approach to simplification and improved transparency  The increased focus on long-term performance measures and targets through introduction of backward and forward looking performance measures extending the time period that performance is measured from the previous policies for both CEOs
In light of shareholder feedback, the Committee extended the proportion of deferred awards subject to the underpin performance conditions to 100% of the award for the duration of this policy (the original proposal was for the underpin performance conditions to apply to 50% of the deferred award), in recognition of the fact that the Company is undergoing a period of extensive change and both the strategy and the proposed approach for alignment of executive Director remuneration are new to our shareholders.
In addition, in response to shareholder feedback the Committee has taken the decision to disclose the targets that will be used to determine the annual variable pay award, where not considered commercially sensitive, for the 2018 performance year on a prospective basis. Where for reasons of commercial sensitivity the actual target is not disclosed an explanation of the process for target setting has been provided. The disclosures are provided in the ‘Approach to remuneration going forward’ section on page 102.
I would like to thank our shareholders and the Investment Association, Institutional Shareholder Services and Glass Lewis, for their time and constructive feedback.
In-flight performance targets As a result of the scale of the merger the Committee has carefully considered the impact of this on the performance targets for existing incentive plans. In line with the principle set out in the Circular to the merger that there should be minimal changes for 2017, no changes are proposed to the performance targets for incentive plans in place in Standard Life Group and Aberdeen based on performance to the end of December 2017. Details on the out-turns for these plans are provided below.
awards and the 2016 and 2017 Standard Life Investments Long-Term Incentive Plan (Standard Life Investments LTIP) awards to account for the changes in the structure of the Group. This is because it is no longer possible to consider the performance metrics of Standard Life Group separately from Standard Life Aberdeen beyond the end of 2017. Vesting for these awards is based in part on performance during 2018 for the 2016 awards, and 2018 and 2019 for the 2017 awards.
We have also updated the profit related measures for the 2018 grants under the Executive LTIP and Standard Life Investments LTIP to align with the financial measures to be used for the new remuneration plan for executive Directors and the updated core Key Performance Indicators (KPIs) for the Company.
Keith Skeoch and Rod Paris Having considered the financial performance, the non-financial performance in 2017 and performance against personal objectives, the Committee approved a bonus award of 143% of salary for Keith Skeoch and 310% of salary for Rod Paris (which is the sum of his bonus awards under the Standard Life Group and Standard Life Investments bonus arrangements based on his salary pro-rated for the period in the year for which he was a Director). The Committee also approved the vesting level of the 2015 Executive LTIP as 70% of maximum and awards granted under the 2015 Standard Life Investments LTIP will vest at 42.3% of maximum. Keith Skeoch and Rod Paris will also be granted a final award under the Executive LTIP in 2018 in relation to performance in 2017. The award levels will be 400% of their respective salaries as at 31 December 2017.
Martin Gilbert and Bill Rattray Having considered financial and non-financial performance in the period from the merger to 31 December 2017 and personal performance against objectives, the Committee approved a bonus award of 569% of salary for Martin Gilbert and 168% of salary for Bill Rattray (based on salary pro-rated for the period in the year for which they were a Director).
Approach to remuneration going forward – explained The following section sets out an overview of the Group’s remuneration principles which underpin the new remuneration framework, how our new remuneration policy will be operated going forward, how it aligns with our business strategy and the way in which it will be implemented in 2018.
What principles were used to develop the new 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
 Our remuneration framework and the basis for awards is simple, transparent and fair for both participants and shareholders alike
 The remuneration framework rewards the achievement of long-term sustained business results which support our strategy, cultures 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
 We focus on putting customers and clients first with the aim of operating to the highest standards. If we don’t meet our own high standards, we look to put it right
 Investment capability is central to attraction of future customers and clients that require propositions and fund choices to deliver value over the long term
 Investment performance will be measured over three and five years and flows over three years
 This will also form part of underpin measures postaward for a further three years
 Cost/income ratio will be included in performance measures for reward outcomes and will also form part of underpin measures post-award for a further three years
 Growth and diversification is a critical part of our strategy for delivering sustainable value to shareholders
 Simplified remuneration structure to improve transparency between performance and reward and reduce unexpected outcomes
Performance measures Time period for measurement Weightings Rationale for inclusion/additional details
 Aggregate performance data of mandates and funds against the relevant client-specific benchmarks, calculating the average, weighted by AUM. Blend of three-year and five-year performance, in equal proportions.
New business flows Building up to three years over duration of policy
 The metric will be split into two parts: (i) 50% weighting to gross new business flows (all channels) (ii) 50% weighting to net new business flows (growth channels only)
 Excludes flows arising from investment in cash and liquidity funds  Measures a key driver of AUMA in terms of new business and its retention
Annual 20%  Aligned to the Group’s strategy of building an efficient and effective business
Focuses management on the delivery of the business’ strategic priorities to drive improved performance in future years.
Focuses management on growing customer and client volumes through winning new customers and clients and growing revenue from our existing customers and clients which will ultimately lead, through growth in assets under management and quality revenue flows, to increasing profitability and increased shareholder value.
People measures Annual Focuses management on developing organisational capability by building the resources for the future, supporting the diversity agenda and encouraging the desired behaviours.
How are the performance metrics set? Long-term financial targets Long-term financial targets (excluding Investment performance) are three-year cumulative targets based on adding the discrete oneyear figures from the relevant budget and operating plan approved by the Board each year. This ensures that meaningful and challenging targets can be set by reference to, amongst other things, the trend of prior year results and the prevailing market and economic conditions. To avoid reliance on historic results for periods before completion of the merger, the three-year targets will be introduced on a transitional basis, under which the targets in the first year will be set for 2018 only based on the 2018 budget and operating plan, in the second year they will be set on a cumulative basis for the two years 2018 and 2019, with the full three-year cumulative measure applying in the third year, covering the years 2018, 2019 and 2020.
 This metric compares actual adjusted profit before tax excluding spread/risk margin, on a cumulative basis over a rolling three-year period, against the targets set as detailed above
 This metric compares actual total gross new business flows on a cumulative basis over a rolling three-year period, covering both growth and mature channels (but excluding cash and liquidity funds), against the targets set as detailed above
return over the relevant period, which is midway between the benchmark and target performance
 This metric compares the actual cost/income ratio (excluding the effects of spread/risk margin, consistent with the profit measure), measured over a single year, against targets set by the Committee at the beginning of each period
Actual Threshold (0% of maximum) Target (50% of maximum) Stretch (100% of maximum) Long-term financial Adjusted profit before tax (excluding spread/risk margin) 20% Due to commercial sensitivity this measure will only be disclosed at the end of the performance period.
Gross new business flows (all channels) 10% £73.4bn £76.8bn £85.3bn £93.8bn Net new business flows (growth channels only) 10% (£13.5bn) £1.0bn £3.3bn £6.0bn
Short-term financial Cost/income ratio (excluding spread/risk margin) 20% 69.7% 68.0% 66.0% 64.0% Total Annual non-financial measures 10% Remuneration Committee assessment Annual personal performance 10% Remuneration Committee assessment
Underpin performance conditions applied to deferred variable pay awards All of the deferred awards made to executive Directors for the duration of the policy will be subject to underpin performance conditions measured over a three-year period. Taken together with the long-term financial measures used for the financial scorecard, this extends the performance measurement period for awards to up to six years.
 Aggregate performance data of mandates and funds against the relevant client-specific benchmarks, calculating the average, weighted by AUM. Blend of three-year and five-year performance in equal proportions, over the three-year period following the EIP performance period.
 Excludes flows arising from investment in cash and liquidity funds  50% weighting to gross new business flows, to include both growth and mature channels  50% weighting to net new business flows, which considers net flows within growth channels only to limit potential for ongoing run-off of mature business to unduly influence the aggregate net new business figures as management’s ability to influence the quantum and timing of these run-off flows is limited
 Aligned to the Group’s strategy of building an efficient and effective business
Underpins to be applied for deferred variable pay awards to be granted in 2019 in respect of 2018 performance The following table sets out the underpin measures that will be used for the deferred awards to be granted in 2019 (which will be made in respect of 2018 performance).
 Gross flows underpin will be set by aggregating the gross new business flows budgets from the 2019 approved budget/plan for the three-year period 2019-2021
 The underpin will require return on adjusted equity, calculated as the average rate over the three-year underpin period (2019-2021), to be 17% or higher
Cost/income ratio1 25%  The underpin will be set by averaging the annual cost/income ratios for each of the three years in the underpin period (2019-2021) from the 2019 budget and operating plan 1 Actual underpin target to be published at time of grant of the award in quarter one 2019.
Performance against the annual performance scorecard and the underpin performance conditions will be assessed against the above measures. Prior to making any award and prior to an award vesting the Risk and Capital Committee and Audit Committee formally advise the Committee on matters including, but not limited to operational performance, conduct and compliance. The Committee has the discretion to amend awards if it does not consider that these reflect the performance of the Group.
How will the policy be implemented in 2018? Element Implementation in 2018
 Benefits to be provided in line with benefit policy  The pension allowance for each of the executive Directors has been set at 20% of salary (reduced from 25% of salary for Keith Skeoch and the CIO)
 Subject to performance, 75% of awards will be delivered in the form of deferred shares subject to underpin performance conditions measured over a three-year period. The remainder of the award (25%) will be delivered in the form of cash.
 For grants made in 2018 at least 80% of the performance metrics will be based on financial performance  The performance conditions used to determine awards and subsequent performance conditions to be applied to the deferred awards are set out above in the section ‘How will performance be measured’
– Strategic/delivery/process 5/5 – Customer and external leadership 4.5/5 – People 4.75/5
The 2015 Executive LTIP targets measure Group performance over a three-year period against a range of financial measures. The Standard Life Investments 2015 LTIP target measures Standard Life Investments’ consolidated cumulative three-year third party earnings before interest, tax, depreciation and amortisation (EBITDA) performance.
Executive LTIP 2015 performance measure Threshold Actual performance Weighted vesting level1
Cumulative Group operating profit before tax £1,670m £2,122m 70% Cumulative Group net flows £16.6bn (£8.4bn) 0% Final vesting 70% Standard Life Investments LTIP 2015 performance measure Consolidated cumulative three-year third party (EBITDA) 60% of target 93.84% of target 42.3% 1 Executive LTIP 2015 weighted 70% cumulative Group operating profit before tax, and 30% cumulative Group net flows.
Following completion of the merger the Group have changed the calculation of adjusted profit before tax (named operating profit before tax when the target for the 2015 award was set). This is explained further on page 176.The actual operating profit before tax for the purpose of the 2015 Executive LTIP has been calculated based on the calculation methodology when the target was set and also excludes the impact of the merger. Operating profit/adjusted profit is not defined under IFRS and is therefore deemed an alternative performance measure.
A definition of adjusted profit can be found in the Glossary. Further information including reconciliations to relevant IFRS metrics are provided in Supplementary information in Section 10.
Keith Skeoch In this table maximum remuneration includes the value of dividend equivalents added to LTIP awards and share price movement from the value when the awards were granted. The LTIPs are valued on the same basis as in the single figure table.
Martin Gilbert Martin was appointed as Co-Chief Executive Officer on 14 August 2017 and both this and the single figure table report his remuneration in the period from 14 August 2017 to 31 December 2017.
G o ver n an c e 105Standard Life Aberdeen 2017
Whilst no maximum is set, when considering increases, the Remuneration Committee is guided by the general increase for the broader employee population.
There is no maximum value of the core benefit package. The costs associated with benefits provision are monitored and controlled by the Remuneration Committee.
Executive Directors are provided with a package of core benefits, which include (i) health screening; (ii) private healthcare; (iii) death in service protection; (iv) disability income protection benefit; and (v) reimbursement of membership fees of professional bodies.
Group contribution of up to 20% of base salary, or equivalent cash allowance in lieu.
Employee contributions are made to the Group's defined contribution pension arrangement, or equivalent cash allowances are paid.
To permit participation in all employee share plans on the same basis as other employees.
Maximum contributions under all employee share plans will be set in line with other employees and within the limits set by the relevant tax authority.
To reward the delivery of the Group’s business plan in a range of financial and non-financial areas and to align executives’ interests to those of shareholders and our customers and clients.
The maximum award opportunity in respect of a financial year under the plan is 700% of salary.
The Remuneration Committee exercises its judgement to determine awards at the end of the performance period, which in normal circumstances, will be a period of 12 months, to ensure that the outcome is fair in the context of overall Group performance. The Risk
G o ver n an c e 107Standard Life Aberdeen 2017
5. Directors’ remuneration report continued and Capital Committee and the Audit Committee will formally advise the Committee as part of this process and the Committee has the discretion to amend awards if it does not consider that these reflect the performance of the Group.
Once the award has been determined:  25% will normally be paid in the form of cash; and
Deferred awards will normally vest in equal tranches on the third, fourth and fifth anniversary of the grant date.
The Remuneration Committee exercises its judgement to determine the extent to which the underpin performance conditions have been met to ensure that the outcome is fair in the context of overall Group performance.
Deferred awards will accrue the value of dividends (payable in cash or shares or such equivalent form) over the deferral / holding period (or, if later, the exercise of the award during a retention period), to the extent the awards vest.
period increasing to three years over the duration of the policy and will form at least 50% of an award.
At least 70% will be based on financial performance measures and no more than 10% will be based on personal performance measures.
Notes to the policy table Remuneration Committee discretion in relation to existing commitments The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office, notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed: (i) before the policy set out above, or (ii) at a time when a previous policy, approved by shareholders (be it Standard Life Aberdeen plc, Standard Life plc, or Aberdeen Asset Management PLC shareholders), was in place provided the payment is in line with the terms of that policy, or (iii) at a time when the relevant individual was not a Director of the Company and the payment was not in consideration for the individual becoming a Director of the Company.
In the interests of transparency the key terms of the executive Directors ‘awards’ under legacy plans are set out below.
 Awards granted in 2014, 2015, 2016, 2017 and 2018.  Awards (in the form of nil-cost options) granted to executive Directors under the Executive LTIP prior to the approval of this policy are subject to the achievement of cumulative Group operating profit before tax and cumulative Group net flows performance over the three-year performance periods. Awards are subject to a twoyear holding period after the end of the performance period.
 Awards granted in 2016 and 2017.  Awards (in the form of nil-cost options) granted to executive Directors under the Standard Life Investments LTIP
prior to the approval of this policy are subject to the achievement of Standard Life Investments’ consolidated cumulative three-year third party earnings before interest, tax, depreciation and amortisation (EBITDA) in the final financial year of the three-year performance periods.
 The vesting of awards is also subject to an investment performance gateway which requires Standard Life Investments’ performance to be above the lower quartile of the money-weighted average of all assets under management compared to other asset managers.
 Adjustments have been made to update the profit measure to total adjusted profit before tax (including both third party and mature business) in the 2016 and 2017 LTIP measures and to reflect the enlarged Company in the targets which relate to the 2018 performance year onwards.
 How to deal with changes in regulatory requirements (e.g. the inclusion of retention periods post vesting, the form of any deferred award)
The Committee also retains the discretion within the policy to adjust targets and/or set different measures and weightings if events happen that cause it to determine that the original targets or conditions are no longer appropriate and that amendment is required so that the targets or conditions achieve their original purpose. Revised targets/measures will be, in the opinion of the Committee, no less difficult to satisfy than the original conditions.
Share awards, under the Company’s share plans, may be granted as conditional share awards, nil cost options or forfeitable shares at the discretion of the Committee. Awards may at the Committee’s discretion be settled in cash.
 Measures chosen to support the delivery of financial performance as set out in the Group’s business plan  Measures chosen may include, but are not limited to: – Investment performance – New business flows – Adjusted profit before tax – Cost/income ratio – Return on adjusted equity
Scenario charts The chart below illustrates how much the current executive Directors could earn under different scenarios for 2018. This is based on the following assumptions:  Threshold performance is based on fixed pay only, which includes salary, pension allowance and benefits  Target includes the potential value of the Executive Incentive Plan which would be payable for target performance (being 50% of maximum)  Maximum includes the potential value of the Executive Incentive Plan which would be payable for maximum performance (100%)  Share price movements and dividend equivalents have been ignored
The remuneration package offered to new appointments may include any element of remuneration included in the remuneration policy set out in this report, or any other element which the Committee considers is appropriate given the particular circumstances but not exceeding the maximum level of variable pay set out below.
Buyouts To facilitate recruitment, the Committee may make an award to buy out remuneration terms forfeited on leaving a previous employer. In doing so, the Committee will adhere to regulatory guidance in relation to the practice of buyout awards to new recruits.
Where appropriate, the Committee retains the discretion to utilise Listing Rule 9.4.2 for the purpose of making an award to ‘buy out’ remuneration terms forfeited on leaving a previous employer or to utilise any other incentive plan operated by the Group.
Notice period Our standard notice policy is:  Six months by the executive Director  Up to 12 months by the employer to the executive Director
Any payment in lieu of notice will be made up of up to 12 months’ salary, pension contributions and the value of other contractual benefits. The payment may be made in phased instalments and the policy is to do this for notice periods of over six months. A duty to mitigate applies.
Applies during the contract and for up to six months after leaving at the Company’s choice.
Awards under the EIP Within the EIP, good leavers are defined as those whose office or employment comes to an end because of death, illhealth, injury or disability, redundancy, or retirement with the agreement of the employing company; the sale of the individual’s employing company or business out of the Group or any other reasons at the discretion of the Committee.
Leavers during the award year Typically, for good leavers, rights to awards under the EIP will be pro-rated for time in service to termination as a proportion of the performance period, and will, subject to performance be paid at the normal time in the normal manner (i.e. in cash / deferred awards as appropriate). Typically for other leavers, rights to awards under the EIP will be forfeit.
Leavers during the deferral period Outstanding deferred awards under the EIP will be paid at the normal time, subject to performance against the underpin performance conditions. The Committee retains the discretion to apply time pro-rating (over the deferral period) for good leavers and to accelerate the vesting and/or release of awards if it considers it appropriate. Typically for other leavers, rights to deferred awards will be forfeit.
Typically for good leavers, outstanding deferred share awards granted in respect of Group annual bonus or Standard Life Investments’ company and personal bonus plan will vest in full at the normal vesting date, unless the Committee determines to accelerate payment.
Legacy awards under the Standard Life Executive LTIP and the Standard Life Investments’ LTIP A good leaver is defined as someone whose employment comes to an end because of death, ill health, injury, disability, redundancy or retirement as determined by their employing company, the sale of the individual’s employing company or business out of the Group or any other reason at the discretion of the Remuneration Committee. For the purposes of the Standard Life Investments LTIP, a good leaver may also include an individual who is transferred out of Standard Life Investments to another company in the Group.
 Fees are set at a market rate with reference to the level of fees paid to other non-executive directors of FTSE100 financial services companies
 The Board retains discretion to remunerate the non-executive Directors in shares rather than cash where appropriate
 The Chairman and non-executive Directors are not eligible to participate in any incentive arrangements  Additional fees or benefits may be provided at the discretion of the Committee in the case of the Chairman, and the
Remuneration arrangements throughout the Group When setting the policy for executive Directors’ remuneration, the Committee takes into account the pay and employment conditions elsewhere in the Group, recognising international variance and jurisdictional differences, where appropriate. The Committee is informed about the approach to salary increases, Group-wide benefits offerings including pensions, the structure of incentive arrangements and distribution of outcomes throughout the wider organisation, as well as the take-up of all-employee share plans, employee engagement survey results and staff morale although it does not directly consult employees in the Group on the remuneration policy for executive Directors.
The Group applies a consistent remuneration philosophy for staff at all levels. Base salaries are targeted at an appropriate level in the relevant markets in which the Group competes for talent. The Committee considers the base salary percentage increases for the Group's broader UK and international employee populations when determining any annual salary increases for the executive Directors.
All employees are eligible to be considered for performance related variable pay, which will reward delivery of results over appropriate time horizons and includes deferred variable compensation at an appropriate level for the employee’s role. Variable pay for all employees, including executive Directors is determined as a total pool, capped as a percentage of adjusted profit before variable pay.
G o ver n an c e 113Standard Life Aberdeen 2017
Consideration of shareholder views The Committee values the opportunity to listen to the Company’s shareholders. As detailed in the Committee Chairman’s statement, a detailed shareholder consultation exercise was undertaken on the proposed remuneration policy for the Group going forward, and the proposed policy incorporates the feedback received in this regard.
Total remuneration for the year £000s 2016 – – – – – – –
4 Keith Skeoch, Martin Gilbert, Rod Paris, Barry O’Dwyer and Luke Savage participate in the Standard Life Sharesave Plan. Keith Skeoch, Rod Paris, Paul Matthews and Luke Savage participate in the Standard Life (Employee) Share Plan – the maximum annual award of matching shares in 2017 was £600.
5 Martin Gilbert, Rod Paris and Bill Rattray were appointed to the Board on 14 August 2017. The annual bonus reported is in respect of the period 14 August 2017 to 31 December 2017. The LTIP reported for Rod Paris represents the value of the proportion of the award which relates to the period 14 August 2017 to 31 December 2017.
6 Paul Matthews stepped down from the Board with effect from 1 March 2017 and Colin Clark stepped down from the Board with effect from 14 August 2017. Barry O’Dwyer was appointed to the Board from 1 March 2017 and stepped down with effect from 14 August 2017. Luke Savage stepped down from the Board with effect from 14 August 2017. The figures reported for their LTIP awards in both 2016 and 2017 represent the value of the proportion of the award which relates to the period of time in the performance period for which they were executive Directors.
Base salary (audited) The table below shows the annual base salary payable and the actual base salary paid to executive Directors in 2017.
At 1 Jan 2017 or date of appointment if later At 31 Dec 2017 or date of cessation if earlier Total base salary paid in 2017
Keith Skeoch £175,000 Martin Gilbert – Rod Paris £42,572 Bill Rattray £24,522 Colin Clark £92,742 Paul Matthews £26,250 Barry O’Dwyer £59,451 Luke Savage £95,060
Annual bonus and variable pay plans Standard Life Group annual bonus plan The Directors in appointment during the year who participated in this plan were Keith Skeoch, Rod Paris, Colin Clark, Paul Matthews, Barry O’Dwyer and Luke Savage.