1. Strategic report Our business ....................................................... 1 Message from the Chairman .............................. 3 Chief Executive Officer’s review ......................... 6 Our strategy and business model ...................... 9 Our clients ........................................................... 14 Our people ........................................................... 20 Our society ........................................................... 24 Chief Financial Officer’s overview ...................... 30 Risk management ............................................... 38 Governance 2. Board of Directors ........................................... 44 3. Corporate governance statement .................. 48 3.1 Audit Committee report ............................ 59 3.2 Risk and Capital Committee report .......... 66 3.3 Nomination and Governance
The Annual report and accounts 2020 and the Strategic report and financial highlights 2020 are published on the Group’s website at www.standardlifeaberdeen.com/annualreport Access to the website is available outside the UK, where comparable information may be different.
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 APMs are included in Supplementary information.
Our global asset management capability thrives on curiosity and collaboration. It is powered by technology so that the investment decisions we make today enable the outcomes our clients expect tomorrow.
Our clients want solutions that meet complex requirements over multiple durations, including those for retirement planning, healthcare and education.
Our platforms enable our clients to deliver their core services, access high-quality financial planning technology, simplify the services and enable the scale of their businesses.
As our core business, our goal is to leverage our global presence and our meticulous research to consistently deliver superior outcomes for our clients.
£457bn AUM1 Fee based revenue £1,146m £67bn AUMA1 Fee based revenue £137m £13bn AUMA1 Fee based revenue £80m 1 Total AUMA at 31 December 2020 was £534.6bn including Parmenion of £8.1bn less Eliminations of £10.7bn. See page 33 for more information.
It was also a year of further transition in our businesses as we welcomed Stephen Bird as our new Chief Executive Officer and, building on the transformation progress delivered following our merger and the sale of our UK and European insurance business, we tasked him with positioning the company for growth. This has generated a fresh excitement within the company, notwithstanding the difficult external environment.
Responding to the pandemic Before I talk more broadly about progress in our business, I must reflect on the context in which we continue to operate. When I wrote about the outlook in my statement in last year’s annual report, the pandemic was only in its early stages and the extent of the human and economic loss, and the restrictions on our ways of working and living that we have seen over the last year, were then unimaginable.
With market conditions in India favourable, we continued, as previously indicated, to sell down our stake in HDFC Life realising a further £0.6bn in proceeds and generating a profit of £0.5bn from the share sales. This disposal also resulted in a one-off accounting gain of £1,051m due to a change in classification of our investment in HDFC Life. We continue to have valuable stakes in Phoenix, HDFC Life and HDFC Asset Management. Together these stakes are worth £3.7bn as at 5 March 2021. Reflecting the impact on reported and future revenues from projections of global equity markets and a change in mix with a higher proportion of lower margin assets, an impairment of £915m in the asset management goodwill was reported during the year.
The Board remains committed to delivering a dividend that is sustainable over the medium term. Having reflected on current operating profitability and industry trends, together with residual economic and market uncertainties as the global economy deals
During 2020, some of the Board’s stakeholder engagement plans had to be altered to comply with COVID19 restrictions. For example, the Board Employee
Engagement Group, led by non-Executive Director Melanie Gee, continued to engage with employees through online channels – both directly and as part of regular meetings with employee representative groups.
with the aftermath of the pandemic, the Board has concluded it should take this opportunity to rebase the dividend to a level from which it is confident the dividend can be grown in due course. This decision also reflects the Board’s assessment of opportunities to deploy the Group’s current capital strength in growth opportunities as it builds the strategy around the three growth vectors set out in our Strategic report.
The second and major change last year was of course the appointment of Stephen Bird as our new CEO. Early in 2020, Keith Skeoch and I initiated conversations on succession planning. Keith was instrumental in leading the business as the pandemic took hold and as we moved from the initial stage of managing the impacts to looking at the longer term, we both felt the timing was right.
The Board was extremely fortunate to identify and recruit an outstanding successor in Stephen Bird who had enjoyed, until he retired, a long and distinguished career at Citigroup, latterly serving as CEO of its Global Consumer Banking business – I was delighted to welcome him as our new CEO. Stephen officially took over the role in September, after joining the Board in July.
I have known Stephen for many years and have admired his leadership experience and skills. He tackles complexity fearlessly, has an ability to create valuable partnerships and is expert at guiding businesses through periods of major change. He also has a great track record in leading businesses to harness digital technology. Now his task is to prepare our business to do this – to improve both productivity and client and customer experience. The latter is particularly relevant as the trend towards individual savers taking more responsibility for managing their money continues to develop at pace. Stephen’s global experience, building businesses in both Asia and the US, will also be invaluable as we reposition our business for growth in these markets. Furthermore, his experience of managing through many downturns, including the global financial crisis, means he is well placed to lead the business at this critical juncture.
Many of the social issues and inequalities evident today are not new. However, they have been starkly highlighted and are deepening as a result of the pandemic. The negative impact is greater in some groups than others, with younger workers, minority ethnic communities, women and those already disadvantaged, suffering disproportionately.
Environmental, social and governance (ESG) considerations have always been and remain an integral part of our decisionmaking process. Now, more than ever, the impact of COVID-19 underlines the need for this. Tackling climate change must remain a priority. We will pursue this in the businesses in which we invest and in our own operations. Companies like ours have a critical role to play in accelerating the transition to a sustainable, net zero economy. We are committed to achieving net zero and we will be setting out our plans later this year.
Looking ahead Global change brings opportunity for active asset management. Our businesses operate on the world stage, and we see the world in 2021 providing both great challenges and great opportunities. The roll-out of effective vaccine programmes raises hopes for a return to a more ‘normal’ life. However, manufacture, distribution and vaccination of the entire global population is no simple task; it will be a multi-year, sustained effort.
In this context some industries will be winners, while others will shrink or need to rapidly adapt. Investment opportunities in infrastructure, technology, life sciences and the transition to a net zero future will attract great support. As active managers, we play an important role in identifying opportunities for clients in these challenging global markets, providing the capital to help rebuild and reshape the post-pandemic recovery, and ensuring that capital is prioritised to businesses with sustainable futures as part of global commitments to ‘build back better’.
What I quickly came to understand was that we have a great company, with talented people, a proud heritage and real financial strength. We also have deep relationships with our clients, based on providing a great service and a broad range of diversified products and solutions.
On the other side, revenues were declining and our costs were too high, resulting in a squeeze on our profitability. The company is still processing two large transactions – the merger and the sale of the Standard Life long-term insurance business to our largest client Phoenix – and we have been too slow to determine our future growth strategy and therefore invest in some key areas. The strategy I am setting out today will address these challenges so we can return to sustainable growth.
In our Investments vector, we use our research, judgement and experience to deliver outcomes that meet client expectations as they continually evolve. This is not about any individual asset class though each one is a critical part of the solution, rather, it is all about fully understanding client objectives and delivering optimal solutions in a dynamic ecosystem which is asset-agnostic and highly efficient. In doing so, as we do for Phoenix and other key clients, we provide compelling value, and we create longterm, sophisticated growth partnerships.
In our Adviser vector, we understand the importance of time to advisers, their businesses and their clients. Our core strategy is to be the easiest platform to do business with and to use well designed technology to deliver great experience for advisers and their clients.
In our Personal vector, we are driven by delivering positive outcomes for clients at the moments of time that matter most to them. Our technology will support ease of access and transacting in ways that our clients value. We have an organic growth plan and we are executing against it with vigour. We also recognise that scale is important and there may be inorganic or partnership opportunities that will allow us to achieve greater relevance and scale more quickly.
In realigning around these three growth vectors, we are also taking out complexity and inefficiencies. Our integration programme has progressed well in 2020 and we are committed to getting it done in 2021.
In 2020, revenues have declined by 13%, while costs have reduced by 10%, resulting in an adjusted operating profit of £219m (2019: £301m), with an adjusted profit before tax of £487m (2019: £584m). Our cost/income ratio remains too high. In order to address this, we must have a laser focus on increasing revenue through sustainable growth, whilst eliminating duplication, sub scale activities and unnecessary costs. To do this, we will optimise our operating system to power the business, make smarter use of technology, get more from our strategic partnerships with suppliers and simplify the business, giving colleagues at all levels more responsibility for decision making. Doing this will give us the headroom to invest where we have the greatest potential for growth. The IFRS profit before tax is £838m (2019: £243m), reflecting principally increased profit on disposal of interests in associates, offset by impairments.
A single brand to build on We have different groups of clients but our business model is still greatly interconnected. To make the most of this ecosystem, our clients need to have a consistent experience when they interact with us. When I joined the company we had at least five client facing brands plus a different corporate identity. Clients, colleagues and partners told me our branding is confusing and needs to be fixed.
In February, we announced that we had reshaped and refocused our relationship with Phoenix such that we both could be strong independent partners for the next 10 years, focused on growing our own respective businesses and growing our partnership in asset management. To this end, we have agreed to sell the Standard Life brand to Phoenix Group which simplifies and clarifies the original sale of our Standard Life long-term insurance business.
Our new identity is one of the key projects for the year ahead and I am excited about this bold step. Not only does it mean a more consistent experience for our clients, it also ensures we get better value from every pound we spend on our brand. It also means all of our colleagues will work under the same banner, reinforcing our team performance culture.
“ Client led growth is always the highest quality growth. This is because it’s rooted in understanding client outcomes, driven by needs, wants and aspirations – which in turn allows the delivery of intuitive, satisfying client experiences.
We also need to encourage an ethos of acting and thinking as an owner, right across our business. We will treat shareholder capital as if it is our own. Every time we make a decision, we will ask ourselves what we would do if we had a personal stake in the outcome, because we do.
Responsible investment is in our DNA. This is the very essence of being better investors. Our leading ESG framework and investment process must have a real-world impact and drive positive change. This means not only improving long-term returns, but also building a world that is more sustainable, just, inclusive and diverse. Our credentials are already excellent. Now the impact of the pandemic makes achieving our ESG goals all the more urgent.
The combination of our investment and technology capabilities puts us in a strong position to anticipate and deliver against clients’ evolving needs. This is an important area for ongoing investment as simple technology and ease of access becomes expected by clients whenever they engage with us. Our Personal vector will be a key focus for this ongoing investment as we seek to create solutions that are intuitive and deliver, particularly at the moments that matter.
We continue to work hard on our cost base. Finishing integration and completing our operational and technological separation from Phoenix Group will enable us to deliver improved efficiency. This is fundamental to delivering the right returns for our investors through time.
We will make effective use of our capital. Our capital resources at £3.4bn are strong and we have continued to strengthen through actions that we have taken over the last six months. As well as the proposed sale of our Nordics real estate business and Parmenion, the closing of our business in Indonesia adds to the examples of tightening our focus on our core growth opportunities. We have also invested in the business, and the proposed acquisition of Tritax is an example of our willingness to search for and execute upon opportunities that enhance our growth prospects. Our goal is to pursue efficient and sustainable client led growth and to deliver improved shareholder returns.
We are building our capabilities in growing asset classes reflecting changing investment aspirations. This business is powered by data and technology and we will invest in our technology to enable our clients to be better investors now and in the future.
Asset management is converging with wealth management and this trend, together with the empowerment that technology brings, is our opportunity. We are growing in the UK, and through further acquisition and investment in technology, we will maximise synergies across our business model.
Our strategy is to deliver superior investment performance consistently through time, deepening our client relationships.
Our strategy is to power our growth through excellent technology, lead the market and be a natural consolidator as the market changes.
Technology We will complete our integration and yield the full operational and cost benefits of a simplified technology infrastructure. We are committed to continuous improvement knowing that agile technology development, advanced data analytics, machine learning and cloud computing are essential capabilities for an efficient, client driven investor. We will enhance our capabilities, to allow us to better match our solutions to client needs and support our investment teams’ focus on continuously improving performance and a sustainable and efficient pattern of growth.
Solutions Our institutional and wholesale clients are facing an increasing array of complex challenges and are focused on being able to achieve specific outcomes that meet their unique circumstances and objectives. These challenges range from understanding technology and business model disruption, through to the impact of long-term low interest rates and managing the transition to a net zero future. We will build on our existing capabilities to bring comprehensive needs analysis and an integrated risk management approach on a whole of portfolio, asset-agnostic basis, focused on designing and delivering customised solutions.
Client ecosystems Data analytics and connected systems allow us to deliver the right solution, to the right client, at the right time. In well-designed ecosystems it is no longer necessary to own all parts of the value chain. Our technology ecosystem consists of strong, trusted partners and operates as a seamless extension of our own capabilities and is a key source of competitive advantage. It allows us to efficiently access new and growing client segments and provide efficient delivery mechanisms for our clients. We will harness this ecosystem to leverage shared research, data sources and analytics, technology development and infrastructure.
Our business model helps us to deliver strategic success and stakeholder value
Our areas of strength A global asset manager with diverse capabilities: research-led and innovative, with strength in private and public markets
World-class operations We are building an operating model for agility, speed and efficiency. Technology-driven, it will deliver a world-class experience with a focus on low costs, high quality and value.
Control Our strong control environment helps us to manage risk effectively, ensure business security and maintain operational resilience.
Talent Our talent model constantly strives for excellence, has the right people for the right roles, and offers clear pathways for growth and development. It also has diversity and inclusion at its core.
For our clients • Broad range of solutions designed to meet clients’ current and future needs • Long-term investment performance • ESG considerations embedded in our investment processes
Brand clarity Creating a single brand with clear values, optimising marketing investment.
In our rapidly changing world, clients rely on us to provide a service that keeps pace with their needs while delivering strong investment performance. Global investors, UK-based advisers, wealth managers and individuals all need seamless, intuitive solutions.
Growth in Asia Reconfiguring our footprint in Asia for faster growth. We will bring our global capabilities to the world’s fastest growing markets through deep local expertise.
Our Investments vector is a core growth engine for the group. Our client led approach is to use our broad investment expertise to enable our clients to be better investors.
We do this through our global network of investment professionals with products and solutions spanning a broad range of markets, asset classes and investment strategies. In 2020, we continued to provide a breadth of capabilities across key markets of growth and client needs whilst also reconfiguring and simplifying our business.
Our client led strategy is underpinned by three enablers: Innovative products and solutions, a relevant product and solution range is vital for our clients and we continue to evolve our range with innovative solutions that are co-created with our clients. In 2020 we enhanced our strategies further with global risk mitigation, passive hedge fund indices, and a key range of sustainable ESG funds. We are focused on simplifying our range as clients’ needs change and will continue to remove sub-scale funds.
Enhancing our client led innovation Looking to 2021 we will develop our capabilities to support our strategic priorities for our Investments vector: We are entrusted to manage assets on behalf of a broad client base of governments, pension funds, insurers, companies, charities, foundations and individuals across 80 countries
Top 31 position with China A, Euro Corp, Equities Small & Mid Cap and Global Corporate Bond >40% of funds with >£100m AUM
AUM of largest client, Phoenix >2,000 Institutional Clients 1 Source: Broadridge, AUM as at 31 Dec 2020.
We combine our deep knowledge of local markets with the power of coordinated global oversight to drive better investment outcomes and deliver long term sustainable benefits for all stakeholders.
Robust investment performance with 66% of AUM ahead of benchmark over 3 years
Responsible investing assets – Strong foundations 1. Strong in sustainable Fixed income which is a differentiator in the market 2. Expanding our existing franchise across public and private market asset classes to establish a platform for flows 3. Launching 15 sustainability funds in 2021 including four climate funds that build on our research strengths 4. Working with our strategic partner Phoenix Group on transitioning their investments to net zero by 2050 5. Empowering our global institutional client base through portfolio level ESG reporting and net zero solutions
Responsible investing We are continuing to build on our long-term commitment to responsible investing through a number of actions including: • Our bespoke climate change scenario research which allows us to take a view on the impact of climate change on future asset pricing and embed this into our thinking
• Increasing transparency for our clients, empowering them to purposefully place responsible investing at the core of their investment decisions
Expanding on our existing sustainable fund range, we have a strong pipeline of options catering for a range of different client sustainability requirements due for launch throughout 2021.
To support transparency in 2021, we will disclose portfolio-level ESG information to many of our major institutional clients and across a range of our public market funds. This will cover climate, ESG risk, and stewardship data. We will continue to evolve the ability to provide data on outcomes to clients, in line with rapid regulatory change and their fast-evolving needs.
Progressing our investment thinking in 2021 This year, we will increase active targeting of sustainable outcomes across our asset classes and strengthen our active ownership, reviewing and publishing a framework for managing exclusions, watch lists, and engagement escalations. We will be expanding carbon foot printing, climate scenario analysis and engagement tracking tools including to non-public markets asset classes where data has traditionally presented more of a challenge. We will further integrate emerging external and augmented, bespoke ESG data points into the investment process.
Continuing to use our influence As a committed active owner, we continue to constructively use our influence to engage with companies and use our voting rights. For our investments, we publish quarterly engagement reports and we make our voting data available on our website. Additionally, at a corporate level, we publish an annual stewardship report, a Taskforce on Climate-Related Financial Disclosures (TCFD) report and a Corporate ESG Disclosure document.
We believe that integrating sustainability will deliver better longterm outcomes for our clients – and create real world impact, building a world that is more sustainable, just, inclusive, and diverse. You can read about our work during 2020 to promote a positive future for society on pages 24 to 27.
The enhanced partnership has resulted in immediate cost savings. We will also see future cost reductions as AUMA grows within our Adviser and Personal businesses, and as we hit milestones in our new tiered pricing model with FNZ.
Our ambition is to create an effortless experience for advisers. We will maintain our position as a leading provider by continuously improving and offering solutions that empower advisers to work efficiently, and at scale.
More than 50% of UK advice businesses use our platforms 80,000 straight-through transactions per day processed through FNZ
We do this by providing platform solutions based on different client and adviser needs: • Wrap enables advisers to deliver high-quality financial planning to large numbers of clients with complex investment requirements
The programme ensures we keep advisers ahead of their game, so they can deliver high-quality financial advice at scale, and across a broad spectrum of clients.
Building our Personal vector brand In February 2021, we confirmed that we would sell the Standard Life brand to Phoenix Group, having licensed it to Phoenix since 2018. In the UK, Standard Life has strong recognition as a life insurance and workplace pensions brand, which is closely aligned with Phoenix’s strategy and customer base.
From the moment our clients first consider their financial futures, our tailored products and solutions will be available to them in a seamless, technology-powered experience. From the start of their financial journey, all the way through to legacy planning, it will be easy, intuitive and integrated.
To provide this whole financial life cycle service, we offer: • Services directly through digital channels and through 1825, our financial planning business
• Discretionary investment management to high-net-worth individuals through Aberdeen Standard Capital
We have grown our advice business substantially since 2015, through various acquisitions. This has given us a complete UKwide footprint, and improved our ability to deliver advice at scale.
In 2020 we embedded our digital retirement advice service. This automation significantly increases our capacity and effectiveness, and frees us up to focus on the human touchpoints that make a real difference to our clients.
To reach clients who are at the very beginning of their financial journey, we’re launching new direct-to-consumer solutions. Our new mobile app, Choices, helps clients to manage their money more effectively. Its open banking technology gives them a clear overview of all their finances in one place, and makes it easy for them to access and see the relevance of our own products as they plan for the future.
Leveraging technology to enable better investment is something we think of as: • Saving with ambition – highlighting seamless, straightforward paths to building wealth
• Spending with intelligence – taking the onerous work out of preparing for big spending decisions
Choices will integrate with our newly launched, direct-to-customer ISA, and more products and features will be added to it over time.
The UK savings gap affects more than 20 million people. We are opening up ways to save and invest across the whole spectrum, to drive better outcomes in the long term.
Top 10 Ranking for 1825 in FTAdviser’s Top 100 UK Advisers list £13.3bn£12.8bn £5.5bn £5.7bn
Aberdeen Standard Capital £5.7bn £7.8bn £7.1bn £9.7bn £4.0bn 19Standard Life Aberdeen 2020
We are actively creating opportunities for our people to thrive, giving them the environment, tools and support they need to feed their curiosity, achieve their ambitions and take ownership of their ideas.
To engage our people effectively, we are actively listening to what they need, want and aspire to. Through actions such as our employee engagement survey, we are able to better understand how well we are supporting and developing our teams and our culture.
A 17-point increase since 2018, two points higher than the sector norm
Tools for self-development Following successful pilot programmes, we launched our new global Career Development proposition. It gives our colleagues the tools and resources they need to take control of their selfdevelopment. The initial focus was on colleagues at early and mid-career stages, and the pilot was hugely successful. All 260 colleagues who signed up reported that it had a positive impact on them personally and to the business.
• 73% said their manager leads authentically, adapting their style to changing circumstances, and that they actively seek feedback to improve and lead change well
For 2020 our undergraduate programme was rated 2nd in Investment Management and 48th overall. We also had our first ever placing for apprenticeships – we were rated 31st overall.
Family-friendly We are leading the industry in designing an employee proposition that is fully inclusive and helps our people to manage their personal and professional responsibilities flexibly. In January 2020 our new Parent Leave policy came into effect. All UK-based colleagues welcoming a new child into their family are now entitled to 52 weeks’ leave, including 40 weeks of fully-paid leave, regardless of their gender. It includes parents who adopt or who have a child by surrogate. In the first year of the new policy 171 colleagues took parent leave, 55% of whom were men.
Gender diversity1 PLC Board 45% (5 out of 11) 33% 40% male; 40% female; 20% any gender Senior leadership2 37% (56 out of 152) 33% 40% male; 40% female; 20% any gender Subsidiary directors3 50% (10 out of 20) N/A N/A UK workforce 45% (2,156 of 4,817) 50% (+/-3% tolerance) N/A Global workforce 45% (2,777 out of 6,132) 50% (+/-3% tolerance) 50% (+/-3% tolerance) Ethnic diversity4 PLC Board (UK ethnicity categories)
1 Relates to percentage of women in roles within the different groups. 2 Relates to leaders one and two levels below CEO, minus administration roles. 3 Relates to Directors of the Company’s direct subsidiaries as listed in Note 48 (a) of the Group financial statements and not classified above as Board Directors or senior leadership. 4 Relates to percentage of Board members who identify as ethnic minority.
Data measuring progress against gender targets for 31 December 2020 has been independently assured by Bureau Veritas. Bureau Veritas assurance can be found at www.standardlifeaberdeen.com/annualreport
More information about our work on gender equality, including our gender pay gap disclosure, can be found in our Gender Report www.standardlifeaberdeen.com/annualreport
A fully supported and successful shift to remote working Throughout 2020, there was minimal disruption from the pandemic to our clients. We achieved this by empowering our colleagues and giving them the flexibility and support to deliver. In a fast-moving situation, we swiftly: • Made rapid improvements to technology to boost connection and collaboration, particularly for new colleagues
To measure the mood around our business during the pandemic, we conducted several ‘pulse’ surveys. These asked colleagues about work, worries, the support they were receiving and how they were adapting. We also asked about thoughts on a future return to the office.
• Recognising that gender is not limited to male and female identities
Our commitment to ESG gives us a framework to make decisions that create positive outcomes for our people, our investors and the communities in which we operate. This approach runs through all our activities, from our business operations to our investments.
UN Principles for Responsible Investment (PRI) report of companies in our sector in the DJSI World IndexWe became carbon neutral ratings in six investment categories
Being a responsible steward of capital We are a signatory to the Principles for Responsible Investment (PRI), a globally recognised blueprint for responsible investing. In the most recent PRI report, we achieved A+ ratings in six out of the eight investment categories we submitted for. Overall, we improved on our rating from the previous year – achieving the highest-possible ratings for strategy and governance and also for our approach to equities, fixed income and property investing.
Supporting a sustainable economic recovery As the UK Government plans its economic recovery from the pandemic, we are supporting calls to ensure that the recovery is sustainable for people and planet. In 2020 we became a signatory to an open letter, from business leaders to the Prime Minister, outlining the importance of aligning these efforts with the UK’s legislated target by 2050 of net zero emissions. We supported another open letter that asks for the recovery strategy to reflect the UN’s Sustainable Development Goals (SDGs). As a signatory to the UN Global Compact, our business is committed to continue playing its part in achieving these goals.
In the UK, we were one of the first companies to sign up to the C-19 Business Pledge, which sees businesses demonstrate their commitment to tackling the effects of the pandemic. The Pledge addresses immediate challenges, as well as longer-term recovery.
• Supporting the most disadvantaged, for example, by funding food banks and shelters
• Supporting elderly and other vulnerable groups who live alone or are isolated
With help from our offices and teams around the world, we identified projects with both new and existing partners. These included foodbanks in London, Edinburgh and Aberdeen, and local charities supporting vulnerable groups or individuals in Boston, New York, Philadelphia and Hong Kong.
Read our stewardship report at www.standardlifeaberdeen.com/annualreport 26 Standard Life Aberdeen 2020
Our environment The pandemic has highlighted the impact of human activity on our environment, particularly climate change and biodiversity loss.
We believe that aligning our operations and investments to a net zero future is essential for long-term performance, and are fully supportive of the recommendations of TCFD. These encourage companies to disclose material climate-related risks and opportunities and outline how these are governed and managed. We publish a report showing how we align our climate change disclosures to the TCFD framework, while encouraging the companies we invest in to do the same.
Our business has pledged support to the Gola Rainforest in Sierra Leone, a global biodiversity hotspot, as well as a renewable wind and solar power project in India. This helped us to achieve our aim of becoming carbon neutral in 2020.
Climate change in our investment decisions Climate-related risks and opportunities are wide reaching and evolving quickly. We have a responsibility to understand the impact of climate change on asset values to make better investment decisions. As asset managers, the most material climate change risk for us is the potential for climate change to negatively affect the performance of investments we make on our clients’ behalf. We also need to make sure that clients are able to invest in ways that reflect their values and expectations. You can read more on page 16 about our commitment to this in 2021.
For example, as members of the Institutional Investors Group on Climate Change. we contribute to their Paris Aligned Investment Initiative and the Net Zero Investment framework. We are using this as a foundation for developing net zero solutions for our clients. The insights help our industry invest in ways that aim to keep the global average temperature rises to well below 2°C and ideally 1.5°C. We are also a founding signatory of Climate Action 100+, a campaign group that works to improve standards, influence regulation and develop capital allocation strategies. In 2020, we led the group’s engagements with energy companies such as E.On and Fortum.
A fair and inclusive future We support initiatives that allow people to overcome barriers and reach their potential. We drive positive change to support fair and inclusive work, promote equality of opportunity, and connect with those isolated from society.
Through our colleague-led network Unity, we partnered with and funded charities that help young people from disadvantaged and ethnic minority backgrounds. In the USA, we supported Oliver Scholars and EmbraceRace. In the UK, we supported the Amos Bursary, Stephen Lawrence Charitable Trust and Youth Community Support Agency. Through the Standard Life Aberdeen Charitable Foundation, we also supported The Sutton Trust’s Pathways to Banking and Finance programme.
Our operational carbon footprint We have been measuring our operational carbon footprint since 2006, and our data is independently assured. More recently, in 2018, we set targets for 2030, and our 2018 figures act as the baseline against which we report our progress in reducing emissions.
Emissions from travel The nature of our carbon footprint has changed drastically because of the pandemic. Travel, which made up 65% of our footprint in 2019, represented only 14% of emissions in 2020. Globally, our business went from making 4,000 air and rail journeys a month in February 2020, to fewer than 40 in May.
Emissions from premises We have continued to roll out efficiency measures in our largest offices, and we are demanding efficiencies in any new spaces we lease.
However, in 2020, we went from having under 1% of our colleagues working from home, to over 95%. This meant energy use in our offices reduced, but home working became our single largest source of emissions, accounting for 55% of our carbon footprint. While our offices are mostly efficient, people’s homes, generally, are less so.
Making home working more energy efficient We believe that home working is likely to be a lasting feature of working life from now on. We have therefore started to develop a strategy to tackle home-working emissions.
This is important, because our policy has always been to tackle the largest emission sources first so that we can make the greatest impact.
We have calculated our working from home emissions based on accepted, robust and audited models. We have also partnered with eco-tech business, Pawprint, to monitor emissions from home working. A representative sample of 500 colleagues from around the world will be using the Pawprint for Business app to help them measure, understand and reduce their carbon footprint. The data from this will supplement the models we use and help to improve their accuracy. It will also help us to offset home-working emissions.
Global code of conduct Our global code of conduct describes the standards of behaviour we expect in our business. It is reviewed and updated annually, and all our employees are expected to read, agree and adhere to its principles.
The code focuses on doing the right thing and putting our clients at the heart of our business. If employees have any concerns about issues covered, such as bribery and corruption, environmental or human rights issues, we encourage them to speak to their manager first. If they feel they cannot raise their concern this way, or they want to raise it anonymously, there is an independent and confidential hotline for them to use.
We understand the importance of treating our third parties fairly. This includes a commitment to paying them on time, and to react in the right way to environmental and social events, such as the pandemic. As part of our response, we have worked to ensure that our ESG responsibilities and commitments to, and via, our third parties continue to be met.
Financial crime prevention We have a legal and regulatory duty to prevent, detect and deter financial crime including bribery and corruption to protect our business and our clients’ information and assets. We aim to work with the highest levels of integrity, so our approach to managing financial crime risks, within our business and among suppliers and partners, involves: • Systems and controls – to assist in managing the risk • Staff training and awareness – ensuring that everyone understands the risks presented and how to manage them • Client Due Diligence – to ensure we understand our clients • Ongoing monitoring – of both our systems and key processes to ensure these are working as expected • Routine risk assessments – to ensure we understand the risk in each area and can improve processes where required • Robust policies and procedures – to ensure a consistent approach in managing the risks
In 2020 we had no breaches. An independent assessment of our anti-money laundering framework was completed in 2020. We are now following the recommendations that came out of the review, and will have an even stronger control framework as a result.
Managing our capital for the benefit of shareholders Since the merger in 2017, we have returned a total of £3.9bn to shareholders as we focused on integration and transformation. During this same period, reflecting the pressures on the industry and lower performance in key investment strategies, the business has not been growing. In 2020, while we made progress on investment performance and addressing our cost base, the impact of the pandemic on valuations in the mid part of the year, together with a change in mix of flows with a higher proportion of lower yielding assets constrained fee revenues which were lower by 13%. Fee revenue yields overall were 26.9bps (2019: 27.9bps). Adjusted operating profit at £219m was down 27% on the prior year. Conversely, our capital position has been strengthening through the sale of further tranches of our Indian investments, even after committing to a share buyback programme of £400m which has now been completed. Our capital surplus over regulatory requirements grew to £2.3bn at 31 December 2020, adding both to our resilience and strategic options.
Financial aims of our strategy The aim of our new strategy is to drive client led growth through focus on our priorities as Stephen has outlined. Through a combination of organic revenue growth, focus on efficiency and the prudent deployment of our capital, our aim is to return the company to revenue and earnings growth, such that the earnings profile generates value for shareholders, including a sustainable level of dividends. We have previously been clear that over the period of transformation, we would distribute some of our excess capital through the annual dividend as it was not covered by our underlying earnings. This is obviously not sustainable in the longterm and our strategy aims to address this position.
Capital strength In 2020, we continued to strengthen our balance sheet in terms of both capital and liquidity. Our intention is to further strengthen our capital position by monetising the remaining stake in HDFC Life over the next two years. In addition, an improvement in profitability resulting from the successful execution of our strategic plan will drive an increase in adjusted capital generation and strengthen our capital position. However, our surplus regulatory capital dictates the level of capital available for deployment and is expected to reduce with the implementation of the Investment Firm Prudential Regime (IFPR) in early 2022, as other assets are expected to be excluded from regulatory capital. In addition, we will seek to maintain a buffer reflecting our risk appetite for volatility and working capital.
In assessing our priorities for the deployment of our resources, we consider robustly the return profile to ensure delivery of value for shareholders in terms of earnings growth and a sustainable dividend policy. In 2020, our review of our investments against this criteria led to the planned sales of the Nordics real estate activity and Parmenion and the proposed acquisition of Tritax. Our strategy is to deploy our capital both organically and inorganically: organically, in areas such as seeding funds, coinvesting in private market opportunities, and the Platforms Experience Programme in our Adviser vector; and inorganically through acquisition opportunities to augment our capabilities in growth areas such as ETFs and private markets, and to accelerate the scale of the Adviser and Personal vectors to improve our market presence. We will apply rigorous hurdle and return rates to any investment and will only invest in an opportunity if it will deliver revenue and earnings growth and help us achieve relevance and scale.
1 We assess our performance using a variety of performance measures including APMs such as fee based revenue, cost/income ratio, adjusted profit before tax and adjusted capital generation. Further details are included in Supplementary information. All metrics within ‘Financial indicators’ are KPIs except for diluted earnings per share.
• Our cost base reduced by £127m (10%), although the cost income ratio remains too high at 85% due to the reduction in revenue of £209m and the high proportion of fixed costs in our cost base
Fee based revenue 1,425 1,634 Adjusted operating expenses (1,206) (1,333) Adjusted operating profit 219 301 Capital management 21 37 Asset management associates and joint ventures 44 57 Asset management, platforms and wealth 284 395 Insurance associates and joint ventures 203 189 Adjusted profit before tax 487 584 Adjusting items 368 (333) Share of associates’ and joint ventures’ tax expense (17) (8) IFRS profit before tax 838 243 Tax credit/(expense) 15 (28) IFRS profit for the year 853 215 All figures are shown on a continuing operations basis unless otherwise stated.
Adjusted profit before tax of £487m decreased by 17% compared with 2019 largely due to lower revenue. The 13% reduction in revenue mainly reflects 2019 outflows, client preferences changing asset mix and expected LBG tranche withdrawals.
Dividend policy As referenced in the Chairman’s statement, the Board has concluded it should take this opportunity to rebase the dividend to a level from which it is confident the dividend can be grown in due course and is therefore recommending a final dividend for 2020 of 7.3p, bringing the total dividend for the year to 14.6p. It is the Board’s current intention to maintain the total dividend at this level (with the interim and final at the same amount per share), until it is covered at least 1.5 times by adjusted capital generation, at which point the Board will seek to grow the dividend in line with its assessment of the underlying medium term growth in profitability.
The recommended dividend of 7.3p (2019: 14.3p) is subject to shareholder approval and will be paid on 25 May 2021 to shareholders on the register at close of business on 16 April 2021. The dividend payment is expected to be £154m. External dividends are funded from the cumulative dividend income that Standard Life Aberdeen plc receives from its subsidiaries and associates (see page 36 for details of cash and distributable reserves). The need to hold appropriate regulatory capital is the primary restriction on the Group’s ability to pay dividends. Further information on the principal risks and uncertainties that may affect the business and therefore dividends is provided in the Risk management section.
All fee based revenue, AUMA and flows relate to the Asset management, platforms and wealth segment and are discussed below.
Fee based revenue £922m £1,027m Fee revenue yield2 38.8bps 42.8bps AUM £251.7bn £236.7bn Gross inflows £49.8bn £50.9bn Redemptions (£49.5bn) (£68.9bn) Net flows £0.3bn (£18.0bn)
Our pipeline remains strong with mandates awarded but not yet funded across Institutional and Wholesale of £4.6bn as at 31 December 2020. This includes mandates across a broad range of capabilities including Fixed income, Equities and Multi-asset.
Fee based revenue reduced by 10% reflecting the impact of 2019 outflows and changes in client preferences towards lower risk asset classes such as Cash/Liquidity in 2020. The revenue yield decreased to 38.8bps reflecting the lower proportion of higher margin Equity and Multi-asset AUM. In addition, at FY 2019 we reported that we had won a £5.5bn lower margin US advisory mandate in Alternatives which has had a full year impact on the 2020 fee revenue yield. Despite the volatility in financial markets, the average daily MSCI World Index was 7% higher in 2020 compared with 2019, which benefited revenue in the year.
AUM increased in 2020 by 6% to £251.7bn due to significantly lower redemptions and positive market movements, including robust investment performance in 2020.
In 2020, gross inflows remained stable at £49.8bn driven by demand for our Cash/Liquidity funds where gross inflows were 95%, or £7.4bn higher than 2019. 2019 benefited from a one-off £3.5bn inflow from Virgin Money and the £5.5bn advisory mandate mentioned above. There was also continued strong momentum in our ETF fund range with inflows of £1.9bn (2019: £0.6bn). Gross inflows in 2020 also included £1.8bn (2019: £1.8bn) from new fund launches.
Net inflows improved to £0.3bn driven by a marked improvement in redemptions. Redemptions in 2020 were the lowest seen since the merger and represented 21% of opening assets (2019: 29%). Equities and Multi-asset redemptions were 26% and 61% lower than 2019 respectively.
Overall, Insurance AUM decreased due to the LBG tranche withdrawals and net outflows. Gross inflows are dependent on underlying policyholder activity and the £9.3bn reduction is a reflection of the strong new business in 2019 and lower LBG AUM. Redemptions (excluding LBG tranche withdrawals) decreased by £5.8bn and largely reflect maturing insurance business in long-term run-off. The remaining c£3bn of the previously announced tranche withdrawals for LBG are expected to be made by the end of 2021.
Lower revenue from Insurance in 2020 is largely due to the expected LBG tranche withdrawals which accounts for £77m of the decrease.
Fee based revenue £137m £150m Fee revenue yield – gross4 26.7bps 29.6bps Fee revenue yield – net of cost of sales4 22.3bps 25.3bps AUMA £67.0bn £62.6bn Gross inflows £6.3bn £7.0bn Redemptions (£4.4bn) (£4.7bn) Net flows £1.9bn £2.3bn
The lower fee based revenue reflects the impact of the Wrap and Elevate pricing changes, as well as the impact of COVID-19 on average UK market levels and activity. AUMA increased due to positive market movements of £2.5bn and continued net inflows of £1.9bn.
Personal largely comprises our 1825 financial planning and advice business and our Aberdeen Standard Capital discretionary investment management business.
The integration of Grant Thornton’s wealth advisory business and BDO Northern Ireland’s wealth management business, which were acquired in 2019, was a key focus during 2020. This added presence in 14 new UK locations and 34 financial advisers. We also achieved organic growth in terms of new clients for both 1825 and Aberdeen Standard Capital despite the challenging market conditions.
Fee based revenue increased due to these acquisitions. This was partly offset by the impact of lower average UK markets during 2020.
We have also seen an increase in the number of our strategies receiving positive ratings from investment consultants, bringing the total to 52 strategies (2019: 46 strategies).
1 Revenue, AUMA, and flows are now presented on a vector basis. 2019 comparatives restated on this basis. See further details in Supplementary information. 2 Institutional and Wholesale fee revenue yield excludes revenue of £9m (2019: £6m) and Personal fee revenue yield excludes revenue of £7m (2019: £7m), for which there are no attributable assets. 3 Net flows excluding Lloyds Banking Group (LBG) do not include the tranche withdrawals of £25.9bn (2019: £41.0bn) relating to the settlement of arbitration with LBG. 4 Adviser fee revenue yield calculated on both a gross and net of cost of sales basis. See further details in Supplementary information. 5 Eliminations remove the double count reflected in Investments, Adviser and Personal. The Personal vector includes assets that are reflected in both Aberdeen Standard
Investments Institutional and Wholesale 922 1,027 251.7 236.7 0.3 (18.0) Insurance 224 317 205.2 235.8 (6.9) (3.4)
Adviser 137 150 67.0 62.6 1.9 2.3 Personal5 80 70 13.3 12.8 – 0.1 Parmenion 25 21 8.1 6.9 1.0 1.1 SL Asia 7 12 Performance fees 30 37 Eliminations5 (10.7) (10.2) 0.6 0.5 1,425 1,634 534.6 544.6 (3.1) (17.4) LBG tranche withdrawals (25.9) (41.0) Total 1,425 1,634 534.6 544.6 (29.0) (58.4)
Fee based revenue Fee based revenue reduced by 13% to £1,425m (2019: £1,634m). The fall in revenue primarily reflects the full year impact of outflows during 2019 and LBG tranche withdrawals during 2019 and 2020, partly offset by a positive impact from higher average market levels following the recovery of equity markets in the second half of 2020.
Costs incurred to date to deliver these synergies are £515m, of which £79m were incurred in 2020 (2019: £214m). Our estimate for total costs remains at £555m. These costs are included in restructuring expenses within adjusting items, together with the costs of other restructuring programmes, such as platform transformation and separation from Phoenix. Total restructuring costs in 2021 are expected to remain broadly in line with the current level.
Capital management Capital management generated a profit of £21m (2019: £37m) from: • Investment gains of £18m (2019: £26m) including seed capital and co-investment fund holdings
Adjusted profit before tax in our insurance associates and joint ventures increased to £203m. Our share of Phoenix adjusted profit before tax included a benefit from actuarial assumption changes of £52m (2019: £30m). Our holding in the enlarged Phoenix Group reduced to 14.42% following the completion of its acquisition of ReAssure Group plc.
Profit on disposal of interests in associates 1,858 1,542 Restructuring and corporate transaction expenses (355) (407) Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts (1,287) (1,844) (Loss on)/reversal of impairment of associates and joint ventures (45) 243 Change in fair value of significant listed investments 65 – Investment return variances and economic assumption changes 46 (25) Other 86 158 Total adjusting items 368 (333)
See pages 117 and 141 for further details on adjusted profit and reconciliation of adjusted profit to IFRS profit. Further details on adjusting items are included in the Supplementary information section.
The profit on disposal of interests in associates of £1,858m includes a one-off accounting gain of £1,051m following the reclassification of HDFC Life from an investment in associates accounted for using the equity method to equity securities measured at fair value (see Note 16). There was also a £540m profit from the sale of 5.83% of the shares in HDFC Life and £263m from the sale of 5.64% of the shares in HDFC Asset Management.
Restructuring and corporate transaction expenses were £355m primarily reflecting ongoing transformation costs for integration, separation from Phoenix and implementing our simplified operating model. 2019 included £49m relating to the repurchase of subordinated debt. Total Phoenix separation costs accounted for to date amount to £282m and include £112m in 2020. Our estimate of the total of these one-off separation costs we expect to incur remains £310m.
The amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts were £1,287m. This includes impairment of goodwill of £915m (2019: £1,569m) relating to an impairment of asset management goodwill and resulted from the impact on reported revenue and future revenue projections of global equity market falls and a change in mix with a higher proportion of lower margin assets. Both the fall in equity markets and the change in asset mix were global market impacts primarily resulting from COVID19. The asset management goodwill is now fully impaired. The impairment of customer relationship and investment management contract intangibles of £134m resulted from the impact of markets, net outflows and a fall in revenue yield on future earnings expectations. See Note 15 of the Group financial statements for further details.
The change in fair value of significant listed investments of £65m represents the impact of movements in the listed share price on our 8.89% holding in HDFC Life from 3 December 2020 to 31 December 2020.
Investment return variances and economic assumption changes gain of £46m relates to our share of Phoenix adjusting items.
IFRS loss from discontinued operations The IFRS loss from discontinued operations of £15m (2019: profit £56m) reflects a change in the value of contingent consideration relating to the sale of the UK and European insurance business to Phoenix. The 2020 loss includes the impact of the resolution of certain legacy issues with Phoenix.
The tax expense attributable to adjusted profit before tax totalled £76m (2019: £115m), which includes £38m (2019: £46m) representing equity holders’ share of tax which is attributable to our share of the profits of associates and joint ventures. The effective tax rate on adjusted profit is 15.6% (2019: 19.7%). This is lower than the 19% UK rate primarily due to the reversal of planned reductions in the rate of UK corporation tax. This has a beneficial effect in increasing the value of our deferred tax assets. There was also a lower rate of tax on profits from associates and joint ventures.
You can read our tax report on our website www.standardlifeaberdeen.com/annualreport 35Standard Life Aberdeen 2020
Adjusted capital generation Adjusted capital generation of £262m reduced as a result of the lower revenue in 2020 and lower dividends received. Further information on adjusted capital generation is provided in Supplementary information.
Net movement in surplus regulatory capital The key measure of available resources is surplus regulatory capital less an appropriate buffer, rather than cash.
Adjusted capital generation 0.3 0.3 HDFC Life and HDFC Asset Management sale proceeds 0.9 1.7
Uses of capital Restructuring and corporate transaction expenses (net of tax) (0.2) (0.3) Dividends (0.3) (0.5) Share buyback programme (0.4) (0.4)
The Group’s capital resources include c£0.8bn (2019: c£0.3bn) from holdings in insurance entities that it is expected will no longer be eligible following the implementation of the IFPR from 1 January 2022. The IFPR is also expected to introduce constraints on the proportion of the minimum capital requirement that can be met by each tier of capital. As a result, it is estimated that c£0.3bn of existing Tier 2 capital, whilst continuing to be reported within the Group’s capital resources, would not be available to meet the current minimum capital requirement from 1 January 2022.
Cash and liquid resources Cash and liquid resources remained robust at £2.5bn at 31 December 2020 (2019: £2.7bn). These resources are high quality and mainly invested in cash, money market instruments and short-term debt securities. Cash and liquid resources is an APM, see Supplementary information for further details.
Cash inflows from investing activities of £1,014m includes net proceeds of £616m from the sale of shares in HDFC Life and £265m from the sale of shares in HDFC Asset Management.
Cash outflows from financing activities of £1,064m primarily relate to the purchase of shares as part of the buyback programme of £361m and £479m for dividends paid in the year.
The cash inflows and outflows described above resulted in closing cash and cash equivalents of £1,358m (2019: £1,347m) as at 31 December 2020.
IFRS net assets IFRS net assets were stable at £6.8bn (2019: £6.7bn) with profits offset by dividends and the share buyback.
Intangible assets reduced to £0.5bn (2019: £1.7bn) as a result of impairments and amortisation. See Note 15.
Viability statement The assessment set out below is based on information known today.
Longer-term prospects The Directors have determined that three years is an appropriate period over which to assess the Group’s prospects. In addition to aligning with our business planning horizon, this reflects the timescale over which changes to major regulations and the external landscape affecting our business typically take place.
• The substantial holdings of Group cash and liquid resources as set out on page 36
Our analysis performed in 2020 included the consideration of the impact of scenarios based on a severe economic scenario with adverse flows and overlaid with stresses which reflect our principal risks. This included a stress involving a significant spike in operational errors which was considered relevant in the context of heightened operational risk given the revised working practices adopted across the Group due to COVID-19.
The scenarios we modelled assumed net outflows of 13% of AUMA per annum with global equity markets falling on average around 45% from year-end levels and notable falls in commercial property and corporate bond values. Whilst capital was eroded and liquidity fell under all the scenarios we explored, the largest falls occurred in the scenario where the flow and market stress was accompanied by a stress to basis point fees charged to clients.
Reverse stress testing involves exploring the quantitative and/or qualitative impacts of extreme but plausible risk scenarios which could threaten the viability of our business model. In 2020, we explored two scenarios which were: • A cyber-attack manifested by a malware deployed on our systems
• An event such as a pandemic, building incident or travel disaster occurs which impacts on the ability of a significant number of critical staff to execute their responsibilities for a period of at least six weeks
Impact of COVID-19 Further to the above, the Directors have explicitly considered the impact of COVID-19 on the Group’s viability recognising the measures taken in response to the COVID-19 pandemic as set out on page 3. This highlighted that the Group did not require government support and has demonstrated its ability to operate successfully with the vast majority of employees working from home.
Our approach to risk management A strong risk and compliance culture is fundamental to managing our business, and effective, risk-based decision-making is essential for delivering the right outcomes for our clients and other stakeholders. Our Board has ultimate responsibility for risk management, and it oversees the effectiveness of our Enterprise Risk Management (ERM) framework.
Three lines of defence We operate 'three lines of defence' in the management of risk with clearly defined roles and responsibilities: • First line: Day-to-day risk management, including identification and mitigation of risks and maintaining appropriate controls
ERM framework This underpins risk management throughout our business. We continually evolve our framework to meet the changing needs of the group and to make sure it keeps pace with industry best practice and the risk profile of the business. In 2020, improvements to the framework included: • Strengthening our risk appetite framework by introducing new risk tolerances to support governance and risk management
• Extending and refining our risk taxonomy so we can describe risk more accurately
Business risk environment The major impact of COVID-19 on our operating environment will extend well into 2021. We have shown resilience in the way we have dealt with the effects of the pandemic and we continue to manage its market, operational and financial impacts as we deliver our business plan.
The commercial environment remained challenging during 2020, exacerbated by the impact of the pandemic. While investment performance continued to strengthen and the pace of net outflows was materially reduced compared to previous years, revenue margins across the industry remained under pressure and net revenue declined.
We are actively working to retain talent and to promote colleague wellbeing and engagement and you can read more about this in the people section of this report. We have planned resources carefully, with clear executive ownership and accountability for programmes. This has been achieved as we continued with business as usual activities.
Our conduct risk framework is something we strengthen continuously and client interests are at the heart of this work. In 2020, we improved our processes in relation to vulnerable customers.
Emerging risks We are vigilant to emerging risks that could impact our strategy and operations with a particular focus on our three vectors of growth. The nature of these risks could be geopolitical, economic, societal, technological, legal, regulatory or environmental. We distil internal and external research to model how risks could emerge and potentially evolve, and to inform how we address them as a company. Emerging risks to our business include the availability of talent in our future workplace, new cyber threats, disruptive technologies, unprecedented market shifts, climate change, emerging variants of COVID-19 and indirect impacts resulting from the pandemic.
These are risks that could prevent us from achieving our strategic aims and the successful delivery of our business plans. They could include failing to meet client expectations, poor strategic decision-making, poor implementation or failure to adapt. They could have short and long-term financial impact.
The ELT has been reorganised to align with our growth vectors. They are working to establish areas of accountability, milestones, ways of working and specific actions that will deliver against the strategic plan.
We hold capital against our risks and review them on an ongoing basis. We stress-test our resilience to market, operational and business risk. As contingency, we maintain external liquidity as part of our liquidity management framework. We manage our cost base and identify opportunities for further cost reduction.
Drawing on the UK Senior Manager and Certification Regime, we rolled out training to our teams to understand how to apply our conduct rules in their roles.
4 Regulatory and legal risk High volumes of regulatory change can present implementation and interpretation challenges. This can lead to a risk of failing to comply with, or allow for changes in, law and legislation, contractual requirements or regulations, globally. This in turn could lead to sanctions, reputational damage and loss of income.
We monitor the regulatory landscape globally so that we can engage in potential areas of change early. We also invest in compliance and monitoring activity across the business. Our relationships with key regulators are based on trust and transparency while our Legal team supports senior managers across our business.
We monitor underlying causes of error to identify areas for action, promoting a culture of accountability and continuously improving how we address issues. We also continue to update and improve the ERM framework. In addition, we have set up a taskforce to fast track issues that have the potential to impact clients.
During the pandemic, new risks emerged including the potential impacts on people’s physical and emotional wellbeing. We monitored and took steps to mitigate them.
We maintain a state of heightened vigilance for cyber intrusion, with dedicated teams actively monitoring and managing cyber security risks. We carry out regular testing on penetration and crisis management – including a reverse stress test of a cyber-attack in 2020.
8 Business resilience and continuity A wide range of internal and external incidents can impact business resilience and continuity. Environmental issues, terrorism, economic instabilities, cyber attacks and operational incidents could all threaten our business.
The risk of disruption from inside the organisation remains broadly stable. However, tools for exploiting IT vulnerabilities are becoming more widely available externally.
COVID-19 has been a real test of our business resilience. We have had to adapt ways of working to protect client interests while working effectively from home.
As we engage with a wide number of external parties, we have to be vigilant to the risk that these parties are connected with criminal behaviour, or subject to sanctions by national or global authorities. We have maintained very low levels of fraud in 2020 and we adapted successfully to the operational challenges of COVID-19. We have commissioned an independent review to identify any areas for improvement.
Sound processes are in place to identify client activity linked with financial crime, globally. These include controls for anti-money laundering, anti-bribery, fraud and other areas of financial crime. We continue to invest in controls and processes to improve our monitoring of these risks.
In 2020 we also monitored the potential impacts of COVID-19 and Brexit in our supply chain, to minimise the risk of disruption to the business.
Our aim is to maintain strong relationships with suppliers. During 2020, we rolled out a new programme to rationalise our supplier base and strengthen our oversight of our suppliers.
12 Financial management process Sound and reliable financial reporting informs our company’s performance, future planning and disclosures to external stakeholders. Failures in these processes would expose our business and shareholders to the risk of making poorly informed decisions. In 2020, the workforce successfully moved to home working with minimal disruption to financial management processes.
Our financial reporting activities align to external reporting standards and industry best practice. Our Audit Committee reviews, and where necessary challenges, our reporting. Our Chief Risk Officer also provides an independent review of our business plan to support decision-making.
The cover to page 41 constitute the Strategic report which was approved by the Board and signed on its behalf by: Stephen Bird Chief Executive Officer Standard Life Aberdeen plc (SC286832) 9 March 2021 41Standard Life Aberdeen 2020
Our business is overseen by our Board of Directors. Biographical details (and shareholdings) of the Directors as at 8 March 2021 are listed below.
Additionally, he is chairman of the Just Finance Foundation, non-executive director of the Centre for Policy Studies, member of the global advisory council of Motive Partners and board member of the Institute of International Finance. He also chairs the Corporate Board of Cancer Research UK and is a trustee of the Royal Marsden Cancer Charity.
Before joining Standard Life Aberdeen, Stephanie was a partner at PwC, a member of the Assurance Executive and led the financial services assurance practice. Her responsibilities included client services, product development, operations and quality assurance across the UK business.
During her career, she has specialised in the financial services sector, working with organisations across asset management, insurance and banking, with national and international operations.
Jonathan has considerable experience as a non-executive director within the investment management and wealth industry. This brings important insight to his roles as Senior Independent Director and Chair of our Remuneration Committee.
Jonathan is a non-executive director of CiCap Limited and its regulated subsidiary Coller Capital Limited. He is also a nonexecutive director of Northill Capital Services Limited and a number of its subsidiaries – Vantage Infrastructure Holdings, Securis Investment Partners and Capital Four Holding A/S. At the end of 2020 he stepped down as deputy chairman of 3i Group plc after nearly ten years as a board member. Previously, he has been chairman of Citigroup Global Markets Limited, Citibank International Limited, Dexion Capital PLC and AXA Investment Managers. He has also been a director of Tilney, Ashmore Group plc and AXA UK PLC.
In his executive career Jonathan worked at Morgan Grenfell for 18 years, rising to become group finance director of Morgan Grenfell Group, before going on to take the roles of chief financial officer and chief operating officer at Deutsche Morgan Grenfell. From 2002 to 2008 he was a director of Schroders plc, during which time he was chief financial officer and later executive vice chairman.
Melanie brings to the Board significant executive experience in creating successful businesses and leading teams of bankers in various roles. This experience was derived from her career in financial services, where she has specialised in advisory and corporate finance work. She has also had a particular focus on the evolution of cultures and working practices, and is able to draw on these insights as our designated non-executive Director for employee engagement.
Melanie was appointed as a Director of Standard Life plc in November 2015. She is also a non-executive director and chair of the healthcare company Syncona Limited, a FTSE 250 company. She was appointed a managing director of Lazard and Co. Limited in 2008 and became a senior adviser in 2012.
Previously Melanie held various roles with UBS, having been appointed a managing director in 1999 and served as a senior relationship director from 2006 to 2008. She was a non-executive director of The Weir Group PLC between 2011 and 2017 and the Drax Group plc between 2013 and 2016. She was also chair of Ridgeway Partners Holdings Ltd from 2019, and of its wholly-owned subsidiary Ridgeway Partners Limited from 2016, until 2020. She holds an MA in Mathematics from the University of Oxford.
Brian brings a wealth of digital experience and global leadership experience in both executive and non-executive directorship roles. His direct experience of developing digital strategies and solutions in consumer-facing businesses, in rapidly evolving markets, is of great benefit to the Board's discussions.
Brian is currently chair of Trainline PLC, non-executive director of Kinnevik AB, and the lead non-executive director on the board of the UK Ministry of Defence. He is also a senior adviser to Scottish Equity Partners.
He joined R Watson and Sons, consulting actuaries, 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 of insurance and financial services, Watson Wyatt during 2009, and managing director of risk consulting & software for EMEA, Towers Watson from 2010 to 2013.
Cathi has strong experience in the financial technology sector and background in the platforms sector, as well as international board experience. She brings these insights to her role as non-executive chairman of the boards of Elevate Portfolio Services Limited and Standard Life Savings Limited. This role provides a direct link between the Board and the platform businesses that help us connect with clients and their advisers.
Risk and Capital Committee Audit Committee Nomination and Governance Committee Committee Chair * Shares include qualifying awards as described on page 83 of the Directors’ remuneration report 2020.
Before joining the Board, Cecilia was with Zurich Insurance Group Ltd (Zurich) for 17 years where she was most recently its group chief risk officer, leading the global function comprising group risk management and responsible for its enterprise risk management framework.
Prior to that, she was its group chief investment officer, responsible for the execution of the investment management value chain – including analysis, development and global implementation of the investment strategy for the group's investments. In both positions, she was a member of Zurich’s executive committee.
Previously, she was the executive vice president, chief financial officer, of ALK Abelló A/S and was chairman of Det Danske Klasselotteri A/S.
British: 8 American: 1 Danish: 1 Swiss and Philippine: 1 5+ years: 3
1. Board leadership and company purpose Company purpose and Business model The Board supports the Company’s purpose set out on pages 1 and 2 of the Strategic report, and oversees implementation of the Group’s business model, which it has approved and which is set out on page 12. Pages 2 to 41 show how the business model supported the protection and generation of value in 2020, as well as underpinning our strategy for growth. The Board’s consideration of current and future risks to the success of the Group is set out on pages 38 to 40, complemented by the report of the Risk and Capital Committee on pages 66 to 69.
Following on from failure to reach the level of support needed to pass the vote on the proposal to amend the Articles (resolution 16), the Board issued, as required by the Code, an updating regulatory announcement on 12 November 2020. The announcement summarised the engagement the Company had had with institutional investors on the specific matter and reemphasised that it was not the Board’s intention to move to hold a virtual-only AGM. Shareholders will be invited to vote on proposed revisions to the Articles at the 2021 AGM.
Engaging with employees Melanie Gee has continued as the designated NED to support workforce engagement. The Board Employee Engagement (BEE) annual plan is designed to access views from all employees across the business, including those located outside the U.K. During 2020, some of the direct engagement plans were disrupted by the need to comply with COVID-19 restrictions but the Board has continued to engage with employees directly and through regular meetings with relevant employee representatives via interactive video conference calls. The various BEE initiatives are covered below.
As the Viewpoints survey was undertaken in 2020, no additional all-employee BEE related surveys were issued. Follow-up to the 2019 survey on diversity and inclusion is included on page 22, and the outputs from the ESG survey continue to inform ESG initiatives.
At these meetings, there was also general discussion of engagement themes and initiatives which the various representatives had been made aware of.
In further BEE activities, there were three virtual Meet the NEDs sessions covering UK and EMEA, APAC and the Americas. These informal sessions were hosted by Melanie, accompanied by the Chairman and the NEDs, and employees took the opportunity to submit a wide variety of questions to the NEDs in advance of the meeting, and also raise questions during the meeting. While some of the questions were appropriate for the ELT rather than the NEDs, the NEDs committed to having the questions addressed and reported back to the attendees. Feedback from the Meet the NEDs sessions has been positive while recognising the constraints of the virtual process, and they complemented the physical or virtual ‘Town Hall’ sessions held by the CEO and the ELT throughout the year, all across the Group’s operations.
• CHRO produces a regular report for the Board drawing out key factors influencing staff turnover, morale and engagement
• Viewpoints and Pulse surveys collect aggregate, regional, functional and business group trend data which is reported to the Board
• Engagement feedback is a key input to succession planning for key roles and design of reward 50 Standard Life Aberdeen 2020
• The CEO has weekly calls with his opposite number at Phoenix Group, our largest client and reports thereon to the Board
• Engagement supported the development of the key client management process, and our client solutions and ESG approaches
• Engagement feedback recognised in Board discussions on new ways of working
• Audit Committee leads on assessment of external audit performance and service provision
• COO attends each Board meeting and reports on first line key supplier relationships and their role in transition and transformation activities
• Transformation discussions have included a focus on the quality, service provision, availability and costs of relevant suppliers
• FCA presents to the Board • ‘Dear Board/CEO’ letters issued from regulators • Relevant engagement with regulators in overseas territories
• Reports on the results of active participation through industry groups
• Specific updates in CEO report • As appropriate, reports to Board/
Outside appointments and conflicts of interest The Board’s policy encourages executive Directors to take up one external non-executive director role, as the Directors consider this can bring an additional perspective to the Director’s contribution. Given their short tenure, Stephen Bird and Stephanie Bruce do not currently have any NED roles. Keith Skeoch did not have any FTSE 100 non-executive roles but continued as a non-executive director of the Financial Reporting Council and was appointed Chairman of the Investment Association on 1 May 2020. Martin Gilbert was a non-executive director at Glencore plc. He was also appointed chair of Revolut on 1 January 2020, this additional appointment having been approved by the Board and recognising that his full-time role had been reduced by 20%. Proposed additional appointments of the NEDs are firstly discussed with the Chairman and then reported to the Nomination and Governance Committee prior to be being considered for approval. The register of the Board’s collective outside appointments is reviewed annually by the Board. Directors’ outside appointments are included in their biographies on pages 44 to 47.
In February 2021, 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 February 2022. 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.
2. Division of responsibilities The Group operates the following governance framework.
• Capital and management structures including the £400m share buy back programme
• Remuneration policy, recommending a revised policy to shareholders at the May 2020 AGM
• Succession planning, in particular the CEO succession process • Significant corporate and other transactions including sales of shares in our Indian associate businesses, completing the sale of our Hong Kong insurance subsidiary, the agreement to acquire Tritax partners, the agreement to sell our Nordics direct real estate business and announcing the sale of Parmenion
The Board regularly reviews reports from the Chief Executive Officer and from the Chief Financial Officer on progress against approved strategies and the business plan, as well as updates on stock market and global economic conditions. There are also regular presentations from the key business functional leaders.
• Speaks on behalf of the Board and represents the Board to shareholders and other stakeholders
Chief Executive Officer (CEO) The CEO operates within authorities delegated by the Board to: • Develop strategic plans and structures for presentation to the Board • Make and implement operational decisions • Lead the other executive Director and the ELT in the day-to-day running of the Group • Report to the Board with relevant and timely information • Develop appropriate capital, corporate, management and succession structures to support the Group’s objectives
• Together with the Chairman, represent the Group to external stakeholders, including shareholders, customers, suppliers, regulatory and governmental authorities, and the local and wider communities
Senior Independent Director (SID) The SID is available to talk with our shareholders about any concerns that they may not have been able to resolve through the channels of the Chairman, the CEO or Chief Financial Officer, or where a shareholder considered these channels as inappropriate.
The SID leads the annual review of the performance of the Chairman.
Risk and Capital Committee (RCC) • Risk management framework • Compliance reporting • Risk appetites and tolerances • Transactional risk assessments • Capital adequacy
Control Support the CEO in the first line management of risk, working closely with the Chief Risk Officer (CRO).
Board balance and director independence The Directors believe that at least half of the Board should be made up of independent non-executive Directors. As at 9 March 2021, the Board comprises the Chairman, eight independent nonexecutive Directors and two executive Directors. The Board is made up of six men (55%) and five women (45%) (2019: men 55%, women 45%).
The Chairman was independent on his appointment in December 2018. The Board carries out a formal review of the independence of non-executive Directors annually. The review considers relevant issues including the number and nature of their other appointments, any other positions they hold within the Group, any potential conflicts of interest they have identified and their length of service. Their individual circumstances are also assessed against independence criteria, including those in the Code. None of the NEDs has served on the Board for more than nine years since the date of their first appointment. Following this review, the Board has concluded that all the current non-executive Directors are independent and consequently, the Board continues to comprise a majority of independent non-executive Directors.
• Recognises that diversity can bring insights and behaviours that make a valuable contribution to its effectiveness
• Believes that it should be able to demonstrate with conviction that any new appointee can make a meaningful contribution to its deliberations
• Is committed to maintaining its diverse composition • Supports the CEO’s commitment to achieve and maintain a diverse workforce and an inclusive workplace, both throughout the Group, and within the ELT
Diversity activities and progress to meet our targets are covered in the Investing in talent section of the Strategic report on page 22. The ELT’s diversity policy in covered in the Directors’ report on page 100.
Board appointment process, terms of service and role Board appointments are overseen by the Nomination and Governance Committee and you can read more about this on page 71.
Jonathan Asquith served as Senior Independent Director throughout 2020. In this role, he is available to provide a sounding board to the Chairman and serve as an intermediary for the other Directors and the shareholders. He also led the process to review the Chairman’s performance.
The roles of the Chairman and the CEO are separate and are summarised on page 53. Each has clearly defined responsibilities, which are described in the Board Charter.
• Believes that it should have a blend of skills, experience, independence, knowledge, ethnicity and gender amongst its individual members that is appropriate to its needs
Board changes during the period Board changes during the year are covered in the Directors’ report on page 98.
Director election and re-election At the 2021 AGM, all of the current Directors will retire. Stephen Bird, having been appointed since the previous AGM, will retire and stand for election. All the other Directors will stand for reelection.
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.
To carry out the review, the Company Secretary met with each Director individually and gathered their views on the Board’s performance over the period and their recommendations on how its effectiveness could be strengthened. Progress on implementing the agreed actions from the 2019 review was also discussed. Following this, the Company Secretary prepared a draft report for initial review and discussion with the Chairman. The Board then reviewed and discussed the report.
Outcome The Board recognised the relevant internal and external factors which it had needed to take account of during the year. These included living with and planning to move beyond COVID-19, regulatory uncertainty arising from matters such as the possible outcome of Brexit negotiations, regulatory change including transitioning away from LIBOR, increasing external expectations on the quality of external reporting, with a particular focus on enhancing ESG, culture and diversity reporting, and the challenges of managing virtual Board meetings, recognising that the Directors had not been able to gather in person since March 2020. Internally, the main factor was the CEO succession and the work Stephen Bird has been leading since his appointment.
• Finding more time for the Board to discuss matters beyond fulfilling its statutory reporting and governance requirements
• Continuing to strengthen regular Board reporting, with a particular focus on client and customer perception, key supplier relationships and the appropriate number of informative KPIs
Progress to implement the recommendations is monitored by the Company Secretary and the CEO’s office and reported to the Nomination and Governance Committee.
The Company Secretary summarised the feedback into a draft report which was reviewed and agreed by the SID and distributed to all Board members, except Sir Douglas. The Directors, led by Jonathan Asquith and without Sir Douglas being present, met to consider the report. They concluded that in his second year as Chairman, Sir Douglas had performed his role very effectively and shown strong leadership of the Board. He continued to bring his inclusive yet suitably challenging style to the Boardroom, encouraging, and allowing time for, all Board members to participate fully, and he continued to build strong relationships with the EDs while supporting the NEDs in challenging and holding the ELT to account. All the Directors were looking forward to continuing to work with him, individually and collectively, to deliver continued progress in 2021. Jonathan Asquith met with Sir Douglas to pass feedback from the review directly to him.
• Visits to business areas (when permitted by Government restrictions) to meet our people and gain a better insight into the operation of the business and its culture
• Meetings with the external auditors and contact with the FCA supervisory teams 55Standard Life Aberdeen 2020
Enabling ESG programme • Governance and oversight of investment risk • Cyber and operational resilience • External audit reform 4. Audit, risk and internal control The Directors retain the responsibility to state that they consider the Annual report and accounts, taken as a whole, is fair, balanced and understandable and presents an assessment of the Company’s position and prospects. They also recognise their responsibility to establish procedures to manage risk and oversee the internal control framework. You can read their responsibilities statement on page 103. The reports from the Audit Committee and the Risk and Capital Committee Chairmen show how they have supported the Board in meeting these responsibilities.
Directors • How the Company appoints and replaces Directors • Directors’ interests in shares 56 Standard Life Aberdeen 2020
• Meetings with the Company Secretary on the Group’s corporate governance framework and the role of the Board and its Committees, and with the Chief Risk Officer on the risk management framework as well as meetings on their individual responsibilities as holders of a Senior Management Function role
Background information is also provided including: • Key Board materials and information, stakeholder and shareholder communications and financial reports
In line with the requirements of the Code, the Board has reviewed the effectiveness of the system of internal control. The system was in place throughout the year and up to the date of approval of the Annual report and accounts 2020.
A review of SLA’s risk management and internal control systems was carried out drawing on inputs across the three lines of defence. This did not include associates and joint ventures as they do not fall within these systems. The first line conducted Risk Control Self-Assessments (RCSAs) throughout 2020; Risk & Compliance undertook a review of the effectiveness of the Enterprise Risk Management Framework (ERMF) (including RCSAs) and how internal controls were operating within the first line; and, Internal Audit produced a Control Environment Assessment using SLA’s risk taxonomy. Collectively these provided a view of the firm’s control environment from each of the three lines of defence. The impacts of COVID-19 on SLA’s operations (with most staff having worked from home since the start of the pandemic) were reflected in the review.
Following this review, the Board concluded that the system of internal control was effective, and that there had been no significant failings or weaknesses during the period.
The Board’s going concern statement is on page 102 and the Board’s viability statement is on page 37.
Non-executive Directors Jonathan Asquith 12/12 – 5/5 10/10 – Brian McBride1 9/9 – – 5/5 – John Devine2 12/12 6/6 5/5 5/5 9/9 Melanie Gee3 12/12 6/6 5/5 – 4/4 Martin Pike 12/12 6/6 5/5 – 9/9 Cathleen Raffaeli 12/12 – – 9/10 9/9 Cecilia Reyes 12/12 – – 10/10 9/9 Jutta af Rosenborg 12/12 6/6 – 9/10 –
The Board has established Committees that oversee, consider and make recommendations to the Board on important issues of policy and governance. At each Board meeting, the Committee chairmen provide reports of the key issues considered at recent Committee meetings, and minutes of Committee meetings are circulated to the appropriate Board members. This includes reporting from the Chairman of the Audit Committee on any whistleblowing incidents which have been escalated to him. The Committees operate within specific terms of reference approved by the Board and kept under review by each Committee.
These terms of reference are published within the Board Charter on our website at www.standardlifeaberdeen.com/annualreport
The Committee also continued to focus on the quality of financial reporting.
John Devine Chairman, Audit Committee 3.1.1 Governance Membership All members of the Audit Committee are independent nonexecutive Directors. For their names, the number of meetings and committee member attendance during 2020, please see the table on page 57.
The Board believes Committee members have the necessary range of financial, risk, control and commercial expertise required to provide effective challenge to management, and have competence in accounting and auditing as well as recent and relevant financial experience. John Devine is a member of the Chartered Institute of Public Finance and Accounting. Jutta af Rosenborg is also a qualified accountant. Martin Pike is a fellow of the Institute and Faculty of Actuaries. The Committee members are also members of audit committees related to their other NED roles.
• Its view of the ‘fair, balanced and understandable’ reporting obligation
• Internal controls over financial reporting and procedures to prevent money laundering, financial crime, bribery and corruption
• 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
• The skills of the External audit team and their compliance with auditor independence requirements, the approved audit plan, the quality of the firm’s execution of the audit, and the agreed audit and non-audit fees
Committee effectiveness The Committee reviews its remit and effectiveness each year. The 2020 review was conducted internally by the Company Secretary interviewing each of the Committee members. As well as general observations, the key performance areas considered were: • The coverage of the Committee’s duties in the meeting agendas • How effectively agenda items were presented and discussed • The quality and level of detail in the papers • How well the Committee met its objectives in terms of making decisions and reporting to the Board
3.1.2 Report on the year Audit agenda As well as regular reporting, agenda items were aligned to the annual financial cycle as set out below: • Annual report and accounts 2019 • Strategic report and financial highlights 2019 • Financial reporting judgements • Liaison with the Remuneration Committee on targets and measures • External auditors’ review of Full year results • Financial crime and Whistleblowing
• Non-audit services policy • The Internal audit plan and charter • Internal audit findings • Effectiveness of the External auditors and related non-audit services • Financial crime and Whistleblowing • Risk management and internal control system annual review
The indicative proportion of time spent on the business of the Committee is illustrated below: Detail of work The focus of work in respect of 2020 is described below.
Financial reporting Our accounts are prepared in accordance with International Financial Reporting Standards (IFRS). The Committee believes that some Alternative Performance Measures (APMs), which are also called non-GAAP measures, can add insight to the IFRS reporting and help to give shareholders a fuller understanding of the performance of the business. The Committee considered the presentation of APMs and related guidance as discussed further in the ‘Fair, balanced and understandable’ section below.
During 2020, the Committee reviewed the Annual report and accounts 2019 and the Half year results 2020. For both periods it received written and/or oral reports from the Chief Financial Officer, the Company Secretary, the Chief Internal Auditor and the External auditors. The Committee used these reports to aid its understanding of the composition of the financial statements, to confirm that the specific reporting standards and compliance requirements had been met and to support the accounting judgements and estimates. Following its reviews, the Committee was able to recommend the approval of each of the reports to the Board, being satisfied that the full and half year financial statements complied with laws and regulations and had been appropriately compiled.
Intangible assets including goodwill For all intangible assets including goodwill, an assessment is made at each reporting date as to whether there is an indication that the intangible has become impaired.
At half year 2020 we determined that an impairment of goodwill was required. Significant judgement was required to determine the recoverable amount of the asset management cash-generating unit which determined the goodwill impairment.
Impairment triggers are used to assess whether there are indicators of impairment for other intangibles. The intangibles with material judgements are the customer relationship and investment management contract intangibles. At half year 2020 we determined that an impairment of the segregated and similar customer relationship intangible was required. The determination of the recoverable amount for this segregated and similar intangible required assumptions relating to future fee revenue and expenses.
Significant accounting estimates, judgements and assumptions for the year ended 31 December 2020
The Committee also discussed the implications of the announcement on 23 February 2021 relating to the simplification and extension of the strategic partnership with Phoenix. The Committee agreed that following the changes to the commercial agreements, in particular in relation to the licensing of the ‘Standard Life’ brand, Phoenix should no longer be accounted for as an associate with effect from 23 February 2021, and should instead be accounted for as an investment at fair value. Note 47 relating to events after the reporting date provides further details.
As detailed in the 2019 Audit Committee report, HDFC Life was considered to be an associate whilst our shareholding gave us the right to appoint a director to the HDFC Life Board.
In relation to Phoenix, the Committee noted that at year end 2020 the market value was above the carrying value and therefore that there were no indicators of impairment.
• The narrative contained in the Annual report and accounts is honest and accurate
• The key messages in the narrative in the Strategic report and Governance sections of the Annual report and accounts reflect the financial reporting contained in the financial statements
• The Annual report and accounts presents both successes and challenges experienced during the year and, as appropriate, reflects those expected in the future
• The narrative and analysis contained in the Annual report and accounts 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 Annual report and accounts
• We, as an Audit Committee, reviewed the messaging in the Annual report and accounts, taking into account material received and Board discussions during the year
• Our Annual report and accounts goes through an extensive internal verification process of all content to verify accuracy
The Committee also reviewed the use and presentation of APMs which complement the statutory IFRS results. This review considered guidelines issued by the European Securities and Markets Authority in 2016 and the thematic reviews by the Financial Reporting Council (FRC). A Supplementary information section is included in the Annual report and accounts to explain why we use these metrics and to provide reconciliations of these metrics to IFRS measures where relevant. This section also provides increased transparency over the calculation of reported financial ratios.
Prudential reporting In H1 2020 the Group published its Standard Life Aberdeen plc Pillar 3 report under CRD IV. The Committee reviewed the Pillar 3 report and reviewed and discussed papers which set out the control and verification processes followed in the compilation of the report.
Internal controls As noted earlier, the Directors have overall responsibility for the Group’s internal controls and for ensuring their ongoing effectiveness. This does not extend to associates and joint ventures. Together with the Risk and Capital Committee, the Committee provides comfort to the Board of their ongoing effectiveness.
The Finance function sets formal requirements for financial reporting which apply to the Group as a whole, defines the processes and detailed controls for the consolidation process and reviews and challenges reporting submissions. Further, the Finance function runs a Technical Review Committee and is responsible for monitoring external technical developments.
The Senior Statutory Auditor is Jonathan Mills, who, having been appointed since 1 January 2017, is completing his fourth audit as the lead audit partner. Recognising the rotational requirements for the lead audit partner for financial year 2022, the Committee has been meeting with potential candidates to succeed him, and agreeing a plan with KPMG on how to evolve the audit team to ensure a smooth handover.
The Policy permits non-audit services to be purchased, following approval, when they are closely aligned to the External audit service and when the External audit firm’s skills and experience make it the most suitable supplier.
Having considered compliance with our Policy and the fees paid to KPMG, the Committee is satisfied that KPMG has remained independent.
Audit and non-audit fees The Group audit fee payable to KPMG in respect of 2020 was £5.2m (2019: KPMG £4.8m). In addition £2.3m (2019: £2.1m) was incurred on audit related assurance services. Fees for audit related assurance services are primarily in respect of client money reporting and the half year review. 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 nonaudit fees. Non-audit work can only be undertaken if the fees have been approved in advance in accordance with the Policy for non-audit fees. Unless fees are small (which we have defined as less than £75,000), the approval of the whole Committee is required.
Non-audit fees amounted to £0.8m (2019: £1.2m) all of which related to other assurance services. Other assurance services in 2020 primarily related to control assurance reports, 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 11% (2019: 17%). The total of audit related assurance fees (£2.3m) and non-audit fees (£0.8m) is £3.1m, and the ratio of these audit related assurance fees and non-audit fees to audit fees is 59% (2019: 69%). 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.
• The Committee approved a formal engagement with the auditor and agreed its audit fee
• The Committee receives updates on KPMG’s work and its findings and compliance with auditor independence requirements
• Our Conduct Risk Framework and the implementation of the Senior Managers and Certification Regime across the UK business
Furthermore the Committee has closely monitored developments from our regulators across the world as they have responded to the challenges brought about by the COVID-19 pandemic and progressed the regulatory agenda including in the areas of operational resilience, liquidity and third party risk management.
Regular private meetings of the Committee’s members have been held during the year providing an opportunity to raise any issues or concerns with the Chairman of the Committee. The Committee’s members have also held regular private meetings with the Chief Risk Officer and the Chief Internal Auditor and have been given additional access to management and subject matter experts outside of the Committee meetings in order to support them in gaining an in-depth understanding of specific topics.
• Changes to the risk appetite framework and quantitative risk limits
• Risk aspects of major investments, major product developments and other corporate transactions
A key area of focus for the Committee during 2020 was our response to managing the impacts of the global COVID-19 pandemic on our clients, people and business. We successfully established new ways of working to support our customers and the delivery of our business plan and we managed the impacts of the difficult economic environment. In light of the ongoing uncertainty in the political landscape over the year, the Committee monitored developments in relation to the negotiations for the UK’s future relationship with the EU and reviewed Standard Life Aberdeen’s preparations for a disorderly Brexit scenario which ensured that we would continue to be able to provide our clients with continuity of service, whatever the final outcome.
Throughout 2020 the Committee continued to review and challenge key activities undertaken by the business and advise the Board on these, including: • Evolution of the Enterprise Risk Management (ERM) framework • Key components of the Group’s ICAAP and the Group’s capital and liquidity • Management of the risks arising from the firm’s third party relationships • Key risks arising from the transformation activity across the
The Committee meetings are attended by the Chief Risk Officer. Others invited to attend on a regular basis include the Chief Executive Officer, the Chief Financial Officer, the Chief Investment Officer, Chief Operating Officer, Group General Counsel and the Chief Internal Auditor, as well as the External auditors.
• The structure and implementation of the Group’s ERM framework and its suitability to react to forward-looking issues and the changing nature of risks
The Committee’s work in 2020 Overview The Committee operates a dynamic agenda and uses each meeting to consider a range of recurring items as well as other items that are more ad hoc and/or more forward-looking in nature. An indicative breakdown as to how the Committee spent its time is shown below: The key recurring items considered by the Committee are: • The ‘Views on Risk’ report which provides a holistic assessment from the Chief Risk Officer of the key risks and uncertainties faced by the Group’s businesses and the actions being taken to manage these
Through these recurring activities the Committee was able to challenge management’s assessment of risks and to oversee the key actions being taken to manage these risks.
• Findings included in the 2019 Internal controls report issued for Aberdeen Standard Investments
• Cyber risk and cyber security related matters • Standard Life Aberdeen’s preparations for a disorderly
Assessment of Value • Managing and monitoring conflicts of interest • Aberdeen Standard Investments’ product and solutions pipeline and governance • Planning and preparations for the post lockdown return to office • Fund liquidity 2020 regulatory change • LIBOR transition • Review of the remit of the Risk & Compliance function • The liquidity risk framework
• Aberdeen Standard Investments’ disposal of holdings in boohoo as a result of further concerns being raised on the supply chain
• Heng An Standard Life (HASL) product risks • The risk assessment and due diligence in respect to the proposed acquisition of Tritax Partners • Assessment of political and reputational risks • Annual update on operational resilience • Operational disruption risk from a major cloud service provider or a major outsource arrangement • Review of Standard Life Aberdeen wind-down plan and triggers • FNZ global framework agreement • The 2021 combined second and third line assurance plan • Update on the Investment Firm Prudential Regulatory
The Committee receives reporting from the Risk and Compliance function on the results of the quarterly risk management survey of regional and functional executives which is used to support identification of key risks facing the business. The completion of this survey along with subsequent discussion of the results by the Executive Leadership Team helps to drive greater risk awareness and accountability. Furthermore, through reviewing the results of the survey, the Committee has been able to ensure there is appropriate focus on the key risks facing the business.
• Reverse stress testing – considering extreme but plausible events, including as a result of operational, conduct or reputational risks, that have the potential to cause the business to become unviable
As a Committee we have closely monitored global regulatory developments to understand and anticipate potential implications for the Group and the wider financial services sector. In particular the Committee paid close attention to developments in connection to Brexit, COVID-19, Operational Resilience, Environmental Social & Governance Risks, LIBOR transition and the Investment Firm Prudential Regulatory Regime.
Governance arrangements The Committee has continued to rely on the work of those nonexecutive risk committees operating in subsidiary companies to provide oversight and challenge of risks within those subsidiaries. This has included the risk committees in place for Aberdeen Standard Investments Life and Pensions Limited, Standard Life Savings Limited and Elevate Portfolio Services Limited.
Committee effectiveness The Committee reviews its remit and effectiveness annually. The 2020 review was conducted internally by the Company Secretary meeting with each of the Committee members. As well as general observations, the key performance areas considered were: • The coverage of the Committee’s duties in the meeting agendas • How effectively agenda items were presented and discussed • The support the Committee received from the second line of the three lines of defence model • The quality and level of detail in the papers • How well the Committee met its objectives in terms of making decisions and reporting to the Board
3. Corporate governance statement continued 3.3 Nomination and Governance Committee report The Committee’s key governance priorities this year were to support the Board to deliver the CEO succession and to maintain our board governance processes during this time of uncertainty brought about by COVID-19.
Governance Framework We have continued to review our governance framework against the Code principles and provisions. The Committee did not make any fundamental changes to our governance framework in 2020 but we did approve an updated Board Matters Reserved schedule where we have further clarified the relationship between the SLA plc and subsidiary boards.
Board evaluation Having commissioned externally facilitated reviews in 2018 and 2019, we carried out our Board review internally in 2020 and you can read about the process and its outcomes on page 55. Culture Continuing to build on the transformation work across the business, the Committee has received updates on the work to oversee the Group’s culture and considered the ELT’s initiatives to embed it throughout the organisation. CEO succession As I covered in my Chairman’s report, Keith Skeoch retired as the Group’s CEO on 1 September and was succeeded by Stephen Bird. You can read later in this statement about the Committee’s oversight of the succession process.
Sir Douglas Flint Chairman and Chairman of the Nomination and Governance Committee
Membership The members of the Committee are the Chairman and a number of the independent non-executive Directors. For their names, the number of meetings and committee member attendance during 2020, please see the table on page 57.
In this report and other parts of the corporate governance statement you can read about the Committee’s role in relation to its key responsibilities.
Board developments and diversity We have welcomed new Directors and said farewell to longserving Directors over the year. As I have covered already in my Chairman’s statement, I am particularly pleased to have welcomed Stephen Bird and Brian McBride to the Board and to thank Keith Skeoch and Martin Gilbert for their many years of service. The Board continues to emphasise the importance of strong governance and I look forward to updating you on this in future reports.
Keith Skeoch and Stephen Bird, in their CEO role, were invited to Committee meetings to discuss relevant topics, such as the role and membership of the ELT, talent development and management succession.
• Recommended the appointment of Brian McBride • Agreed the NED mentoring programme for the GLG
• Received the full-year update on the Culture, Diversity and Inclusion action plans
In particular, 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 the ELT. 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 Talent and Change agenda is led by the CHRO, with input from the CEO and supported by the Global Head of Talent and Change. The programmes cover effective performance management, early careers, talent acquisition organisation design, core capabilities and behaviours.
During 2020, the Committee established a NED mentoring programme which allows each NED to get to know two or three members of the next generation of talent – the Global Leadership Group – through individual meetings which take place over the course of the year and evolve based on the needs of each individual being mentored.
To allow all the non-executive Directors to be involved directly in the selection process the Committee established an Appointments Committee, chaired by the Chairman and comprising all of the non-executive Directors. The Appointments Committee began by considering both internal and external successors – from the global long-list drawn up by MWM – who fitted the above profile. Stephen Bird was identified as the leading candidate with the relevant skill set and who had delivered high performance and results during his career to date.
• The Remuneration Committee considered the reward package appropriate for the role
Board evaluation The Committee has a key role in supporting the Board evaluation process. You can read about the 2020 review on page 55. During the year, the Committee reviewed the progress to implement the recommendations of the 2019 review.
Culture During the year the Committee also received updates on the initiatives on corporate culture. These included recognising the ongoing work to link the Company’s Blueprint into daily activity. Colleagues across the Group were building the elements of the Blueprint into their individual objectives; it was forming the structure for CEO regular reporting; and its messages were being reinforced through all communications.
• The process to secure regulatory approval for Stephen’s candidacy from the PRA and the FCA was begun
The Committee members did not raise any material issues or concerns regarding the above areas or the overall effectiveness of the Committee during 2020. Looking at the Committee’s work to oversee talent and succession, the Committee was supportive of the framework developments which had been put in place. However, moving forward in 2021 to deliver their duties, they would be keen to see more evidence of the programmes starting to deliver the next generation of talent, a group which the Committee would be keen to help to develop. Also, recognising the pragmatic challenges of measuring and delivering relevant information, the Committee was keen to spend more time discussing the impact of diversity and culture related matters across the Group.
3.4 Directors’ remuneration report Remuneration Committee Chairman’s statement This report sets out what the Directors of Standard Life Aberdeen were paid in 2020 and how we will pay them in 2021, together with an explanation of how the Remuneration Committee reached its recommendations. Where tables and charts in this report have been audited by KPMG LLP we have marked them as ‘audited’ for clarity.
The report is structured in the following sections: • The annual statement from the Chairman of the Remuneration Committee
Dear Shareholder On behalf of the Board I am pleased to present the Directors’ Remuneration Report for the year ended 31 December 2020. This report sets out what the Directors of Standard Life Aberdeen were paid in 2020 and how we will pay them in 2021, together with an explanation of how the Remuneration Committee reached its recommendations.
In this year of challenge and change, the business has experienced a decline in revenues and adjusted profits, while we have continued to drive forward our strategic agenda. Combined with the executive Director changes, this performance has shaped the remuneration agenda for the year. Year-end processes have incorporated a careful consideration of remuneration outcomes in the context of broader stakeholder interests and the complex political, regulatory and social background engendered by the pandemic. Our pay decisions have focused on encouraging and rewarding contributions to the success and sustainability of our business in a uniquely challenging environment. Aside from the measurement of performance in relation to their personal objectives, the annual bonuses of all those serving as executive Directors for any part of the year have been assessed against the performance criteria and targets set for the business scorecard at the start of the year.
• Annual bonus opportunity of up to 250% of salary subject to performance and applicable deferrals (pro-rated in 2020 to reflect his joining the Company part way through the performance year)
• Long-Term Incentive Share Plan (LTIP) award of shares to the value of 350% of salary. Stephen’s first LTIP award for the period 2020 to 2022 was granted on 14 August 2020 as reported on page 84. It was reduced pro-rata to reflect his joining part way through the performance period. The award will vest (subject to meeting applicable performance conditions) at the end of the period and is required to be held for an additional 2 years.
The Remuneration Committee approved the following outcomes based on performance against targets: Executive Director
Martin Gilbert3 47% 96% 344 1 The same measures and scoring for both the financial (75%) and non-financial
(20%) metrics were applied to all executive Directors irrespective of the time period they worked during the year.
Martin Gilbert stepped down from the Board on 12 May 2020 and retired from the Company on 30 September 2020. The terms of his retirement were agreed at the time of announcement of his departure in October 2019. Reflecting his reduction to a four day week from 1 January 2020 he received a base salary of £480,000 per annum and benefits and allowances, which included a pension of 20% of salary, until his departure. His bonus for the 2020 performance year has been pro-rated for time served to 30 September 2020. He was not eligible to receive a 2020 long-term incentive award. He is not eligible for any further bonus or LTIP awards. His unvested deferred bonus will continue to vest in line with the relevant plan rules on the original vesting dates and subject to the applicable performance measures. He will be subject to a post-employment shareholding requirement for one year post cessation of employment of 300% of salary. This is in line with the policy in place at the time of announcement of his departure.
Remuneration Committee assessment In addition to considering the achievement against the targets under our annual bonus scorecard, the Committee reviewed the individual components which contributed to the delivery of this performance. The Committee also considered the alignment of scorecard outcomes with the experience of a range of stakeholders. This review was undertaken by the Committee to assess whether the awards generated by the scorecard were fair in the broader performance and risk context. The Committee considered: • The outcome from the perspective of overall company performance including one-off items. The Committee considered that the categories, targets and measurements embedded in the scorecard appropriately captured performance against the Board’s plan without the need for discretionary adjustment.
• Input from the Risk and Capital Committee and the Audit Committee. There were no items raised by these committees which warranted Remuneration Committee intervention in executive Director outcomes for 2020.
• The context of incentive funding across the workforce which has reduced from the prior year and been awarded in line with our performance driven policy for variable pay
The Remuneration Committee took these and other considerations into account in its review and concluded that it would not be appropriate to exercise its discretion to amend the outcomes of the scorecard or override in any other way the annual bonus process.
2020 LTIP Award The first awards under the LTIP plan to Keith Skeoch and Stephanie Bruce were made following the approval of the remuneration policy at the 2020 AGM in May 2020. An LTIP award was made to Stephen Bird after he joined the Company in August 2020. Details of all awards are set out on page 84. Prior to making the awards in May 2020, the Committee reviewed the award levels in the context of share price performance. The Committee determined that there was no requirement to adjust the award size of the 2020 LTIP from the level disclosed in our 2019 annual report. The Committee retains discretion to review award levels at the end of the period; this is to ensure that outcomes appropriately reflect performance and the experience of stakeholders, and to allow consideration as to whether unjustifiable windfall gains may have accrued to participants.
Coinciding with the publication of these accounts, the Group issued today an RNS announcement dealing with future changes to the reporting of Adjusted Profit and Adjusted Profit per Share. The Committee reviewed the impact of these changes on remuneration measures and targets set for in-flight incentive arrangements and determined that it was appropriate to change both the per Share measure and the associated performance targets of those schemes which currently use Adjusted Diluted Earnings per Share as a performance indicator. The revised measure selected as that most adjacent to the original test was Adjusted Diluted Capital Generation per Share (see definition on page 222 and detail on page 78). In accordance with the rules of the various schemes, the underlying principle applied in setting the revised measures and targets was that they should be neither more nor less difficult to achieve than the original targets. Details of the restated targets can be found on page 84.
The threshold and maximum performance targets for the proposed grants under the 2021 Executive LTIP plan are detailed on page 78. In light of the change announced in future reporting of Adjusted Diluted Profit per Share we have changed the earnings based metric for the 2021 grants from that used in 2020.
To help you navigate the report effectively, I would like to draw your attention to the sections on pages 77 and 78 which summarise both the outcomes for 2020 and also how the remuneration policy will be implemented in 2021. Further detailed information is then set out in the rear section of the report for your reference as required.
Long-term incentive award outcome in 2020 Keith Skeoch was granted an LTIP award in 2018 under the Executive LTIP, with a performance period ending 31 December 2020. Performance did not meet the minimum threshold required to vest and the award lapsed in full. More detail is set out on page 82.
1 The figures for Stephen Bird, Keith Skeoch and Martin Gilbert have been pro-rated to reflect time served as set out in the footnotes to the 2020 bonus outcome chart above. 2 The maximum opportunity for Keith Skeoch includes his 2018 Executive LTIP which was awarded with a maximum value at grant of £2,800,000. The Committee assessed that performance had not met the minimum threshold required to vest. Details can be found on page 82.
The outcome of individual personal performance measures (5% weighting) is set out on page 80.
Salary, pension and benefits Annual Bonus - Cash Annual Bonus - Deferred LTIP
Pension No change proposed. A pension of 18% of base salary applies, in line with the maximum available to the wider UK workforce.
2021 annual bonus At the beginning of each year the Remuneration Committee sets the performance measures for the annual bonus based on strategic priorities. For 2021, 75% of the measures are based on financial performance, with the remainder based on non-financial performance. The Remuneration Committee retains an appropriate level of flexibility to apply discretion to ensure that remuneration outcomes reflect a holistic view of overall performance. The discretionary assessment will incorporate, inter alia, consideration of compliance, conduct and culture.
The Remuneration Committee proposes to grant awards in the form of nil-cost options under the LTIP plan. Targets for the award will be measured for the three-year period ended 31 December 2023 and are set as follows: Performance measure Weighting
The proposed peer group1 to be used for the relative TSR measure consists of the below global asset management peers: Affiliated Managers Jupiter Fund Management
Alliance Bernstein Man Group St James’s Place Ameriprise Financial Schroders M&G Amundi DWS Group Quilter Ashmore Group Franklin Resources T Rowe Price Group SEI Investments Invesco 1 This peer group will be subject to re-evaluation throughout the performance period to adjust for the effects of corporate events such as mergers and acquisitions, with substitutes introduced where necessary to maintain the approximate size and comparability of the group.
Total opportunity under the remuneration policy in 2021 (unchanged from 2020)
2 This figure shows the annual cash bonus paid in respect of the year. In 2020 50% of the annual bonus award will be delivered in cash in line with current policy. In 2019 25% of the total bonus award was paid in cash under the 2019 Directors’ Remuneration Policy.
3 This figure shows the annual deferred bonus awarded in respect of the year. In 2020 50% of the annual bonus award will be deferred into shares in line with current policy. In 2019 75% of the total bonus award was deferred into shares under the 2019 Directors’ Remuneration Policy.
Base salary (audited) Keith Skeoch and Stephanie Bruce received a 2.5% salary increase effective 1 April 2020 in line with the wider workforce. Stephen Bird joined on 1 July 2020 on a salary of £875,000. From 1 January 2020, Martin's working commitment to the Company reduced to 4 days a week and, accordingly, his salary reduced by 20% to £480,000 per annum. This was in line with the terms of his retirement.
Pension (audited) Under the Directors’ Remuneration Policy approved at the 2020 AGM, with effect from 1 June 2020 the executive Directors received a cash allowance in lieu of pension contributions of 18% of base salary. The only exception to this was Martin Gilbert, who continued to receive 20% as agreed under the terms of his retirement.
Fee based revenue (£m) 15% 1,373 1,449 1,601 1,425 6.32% Cost/income ratio excluding JVs/Associates % 15% 84.2% 81.1% 78.7% 84.6% 0.00% Delivering for our shareholders (30%) Value creation measured as IFRS gain on sale (PBT) from strategic shareholdings (£m)1
– Facilitation of a smooth transition from his predecessor. – Strong performance in addressing organisational re-design (including reconfiguration of the firm around growth vectors), brand re-positioning and cost transformation and the pursuit of top line growth. This was achieved against a backdrop of pandemic restrictions, industry and market disruptions.
– Focussed on generating clarity of vision and ambition around the strategic direction of travel, as well as openness on challenges faced in delivery, both internally and externally.
– Enhanced public profile as a trusted industry spokesperson as Chairman of the Investment Association and interim chair of the FRC.
– Facilitation of a smooth transition to his successor. – Took a leading role in developing an inclusive and diverse senior executive group. The success of this was evidenced through the resilient response to the pandemic restrictions. – Successful transformation to remote working which facilitated good progress on completion of the Group’s integrated operating model. – Enhancement of the value derived from the Group’s strategic and non-strategic associated company stakes through positive engagement with Phoenix and HDFC to facilitate further market transactions and realisation of value.
– Support for the new CEO and development of the three year strategic plan and a stretch plan for 2021 which demonstrates a significant inflection to growth in revenues and earnings.
– Effective management of the finance transformation program to support strategic changes in Company structure and focus on cost and efficiency targets.
– Brand ambassador for SLA/ASI representing the organisation publicly until his date of departure.
As Keith is retiring from the Company, he will be treated as a good leaver for the purpose of outstanding incentive awards. In line with the respective plan rules, the following treatment will apply: • Legacy awards under the Standard Life Executive LTIP: The 2018 LTIP award has not met the required performance thresholds and the award lapsed in full as set out on page 82. There are no other unvested awards under this plan.
• Award under the 2020 LTIP: the 2020 LTIP award will be pro-rated for time in service to 30 June 2021, and therefore a maximum of 429,045 shares will be capable of vesting subject to performance at the end of the performance period. The maximum number of shares does not include shares to be awarded in lieu of dividend equivalents. Vested awards will be subject to a two-year holding period at the end of the performance period and will accrue dividend equivalents.
Martin Gilbert retired from the Company on 30 September 2020, having stepped down from the Board on 12 May 2020. Other than the payments made to Martin until the point he left the Company (as detailed on page 79), no other payments were made.
Executive Directors’ external appointments Subject to the Board’s approval, executive Directors are able to accept a limited number of external appointments to the boards of other organisations and can retain any fees paid for these services. Significant executive Director appointments held during the year are: Executive Director Role and organisation 2020 Fees
The Award is considered for vesting in three tranches on the first, second and third anniversary of the grant of the Award. The vesting level for the first anniversary and second anniversary tranches is based on an assessment made by the Remuneration Committee of the progress made towards the achievement of the efficiency targets, including whether or not the baseline target will be met. The vesting level of the third anniversary tranche will be adjusted by the Remuneration Committee to ensure that the overall vesting of the award is commensurate with the final achievement against the efficiency targets.
The Remuneration Committee reviewed progress made towards the £175m (baseline target) and £230m (maximum target) in June 2020, prior to approving the vesting level of the first tranche of the award. At 31 December 2019, actions had been taken which benefited operating expenses by £234m (2018: £120m) (as published in our 2019 ARA). Progress towards the baseline target therefore represented £114m at 31 December 2019, with further benefits expected in 2020. When the Remuneration Committee undertook its assessment of whether the first tranche of the award should vest in June 2020, this level of efficiency achievement was reported and agreed by the Remuneration Committee to be ‘on track’ for the purposes of assessing vesting of the first tranche of the award. At the same time, the Remuneration Committee noted the likelihood that the baseline target would be surpassed and the target of £230m (for full vesting) would be achieved by 3 June 2022. Performance was assessed by the Committee with input from the Chief Internal Auditor.
Stephen Bird1 – 500,000 500,000 – Keith Skeoch2 2,435,226 122,143 2,557,369 Not applicable Stephanie Bruce – 133,741 133,741 – Martin Gilbert3 431,161 – 431,161 Not applicable 1 Reflects position from start date of 1 July 2020 until 31 December 2020. 2 Reflects position until stepping down from the Board on 1 September 2020. 3 Reflects position until stepping down from the Board on 12 May 2020.
Vesting of the 2018 Executive LTIP Keith Skeoch participated in the 2018 Executive LTIP, the outcome of which was dependent on the achievement of stretching performance conditions by reference to adjusted profit and net flows targets over the three-year period ending 31 December 2020. On assessment of performance against these conditions, it was determined that the award did not meet the required thresholds against either of these measures and the award lapsed in full.
Directors’ interests in shares (audited) Our shareholding requirements for executive Directors are detailed on page 93. The Directors’ Remuneration Policy requires executive Directors to accumulate and maintain a material long-term investment in Standard Life Aberdeen plc shares. The Remuneration Committee reviews progress against the requirements annually. Personal investment strategies (such as hedging arrangements) are not permitted for the purposes of reducing the economic exposure arising from the shareholding requirement.
The following table shows the number of qualifying awards included in assessing achievement towards the shareholding requirement, as at 31 December 2020. Qualifying awards include 50% of the value of awards held by the executive Directors that have vested but not been exercised (as a proxy for the economic exposure after payment of tax due on the exercise of the awards).
Executive Directors who have not yet satisfied the shareholding requirement are expected to accumulate shares until they have fully met their shareholding requirement. They are required to hold 100% of vested shares (post-tax) granted under the Company’s share plans (including any dividend equivalents) until they have met their shareholding requirement. All other shares acquired and held by the executive Director or owned indirectly by a partner or family trust also count towards the shareholding requirement.
Stephen Bird2 – – 500,000 £1,406,500 350% £875,000 161% No Keith Skeoch3 – – 2,557,369 £7,193,879 500% £615,000 1,170% Yes Stephanie Bruce – – 133,741 £376,213 300% £538,125 70% No
As set out on page 93, under the Directors’ Remuneration Policy an executive Director is required to hold shares up to the value of their shareholding requirement for 24 months post departure from the Board. Accordingly, Keith Skeoch is required to hold 500% of his final basic salary in shares until 31 August 2022.
This table shows the total number of share options, with and without performance conditions, held at 31 December 2020: Unvested options with performance measures1
2 This comprises deferred bonus awards (including unvested awards under the Aberdeen Variable Pay plans). It does not include shares to be awarded in lieu of dividend equivalents. Also included are options granted under the Standard Life Sharesave Plan.
Martin Gilbert Nil-cost option £373,656 181,483 1 The share price used for the LTIP award was 270.04p. The award was reduced pro-rata to reflect the fact Stephen Bird joined part way through the performance period. 2 The share price used for the LTIP awards was 214.62p. 3 The share price used for the deferred bonus awards was 205.89p.
Details of the 2020 awards made to Directors can be found on page 84 of the Annual report and accounts 2019. The table below shows the original performance targets for the 2020 LTIP award and the amended performance targets. The higher target range in this section compared to that set for the 2021 LTIP reflects, inter alia, the substantial completion of the company’s share buyback plan in 2020.
• The Sharesave Plan which was offered in 2020 to eligible employees in the UK. This plan allows UK tax resident employees to save towards the exercise of options over Standard Life Aberdeen plc shares with the option price set at the beginning of the savings period at a discount of up to 20% of the market price. At 31 December 2020, 2,298 individuals were saving towards one or more of the Sharesave offers.
Awards are subject to performance against targets measured over three years as set out on page 84 of the Annual report and accounts 2019 and subject to the restatement below
Share dilution limits All share plans operated by the Company which permit awards to be satisfied by issuing new shares contain dilution limits that comply with the guidelines produced by The Investment Association (IA). On 31 December 2020, the Company’s standing against these dilution limits was: 1.07% where the guideline is no more than 5% in any 10 years under all discretionary share plans in which the executive Directors participate and 1.55% where the guideline is no more than 10% in any 10 years under all share plans. As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP, Standard Life Investments LTIP, the Restricted Stock Plan, the deferred elements of the Standard Life annual bonus plan and the Aberdeen Asset Management deferred plans. On 31 December 2020 the trusts held 67,735,805 shares acquired to satisfy these awards. Of these shares, 9,309,281 are committed to satisfying vested but unexercised awards. The percentage of share capital held by the employee trusts is 3.09% of the issued share capital of the Company – within the 5% best practice limit endorsed by the IA.
Promoting all-employee share ownership The Company promotes employee share ownership with a range of initiatives, including: • The Standard Life (Employee) Share Plan which allows eligible employees to buy Standard Life Aberdeen plc shares directly from earnings. A similar tax-approved plan is used in Ireland. At 31 December 2020, 1,949 individuals in the UK and Ireland were actively making monthly contributions averaging £69. At 31 December 2020, 2,424 individuals were Standard Life Aberdeen plc shareholders through participation in the Plan.
Pay compared to performance The graph shows the difference in the total shareholder return at 31 December 2020 if, on 1 January 2010, £100 had been invested in Standard Life Aberdeen plc and in the FTSE 100 respectively. It is assumed dividends are reinvested in both. The FTSE 100 has been chosen as Standard Life Aberdeen plc is a member of this FTSE grouping.
The following table shows the single figure of total remuneration for the Director in the role of Chief Executive Officer for the same 10 financial years as shown in the graph above. Also shown are the annual incentive awards and LTIP awards which vested based on performance in those years.
Relative importance of spend on pay The following table compares what the Company spent on employee remuneration to what is paid in the form of dividends to the Company’s shareholders. Also shown is the Company’s adjusted profit before tax which is provided for context as it is one of our key performance measures: Remuneration payable to all Group employees (£m)1 625 -3.25% 646 Dividends paid in respect of financial year (£m) 313 -36.5% 493 Share buybacks and return of capital (£m)2 359 -30.29% 515 Adjusted profit before tax (£m) 487 -16.61% 584 1 In addition staff costs and other employee-related costs of £91m (2019: £131m) are included in restructuring and corporate transaction expenses. See Note 7 of the Group financial statements for further information. 2 Excludes unsettled purchases of shares, expenses and the irrevocable contractual obligation with a third party to purchase the Company’s own shares. See Note 26 of the
Sir Douglas Flint6 0% – 2,600% Jonathan Asquith 202% – – John Devine -2% – -100% Melanie Gee -3% – -100% Brian McBride – – – Martin Pike -3% – -100% Cathleen Raffaeli 0% – -100% Jutta af Rosenborg 0% – – Cecilia Reyes 292% – –
UK-based employees 2.5% -52.5% 17% 1 The data in the table has been calculated in accordance with reporting requirements and reflects the percentage change in base salary, bonus outcome and benefits on an earned basis for executive Directors and non-executive Directors. This is compared to the average UK-based Group employee. 2 Stephen Bird was appointed 1 July 2020; Keith Skeoch stepped down from the Board on 1 September 2020; Stephanie Bruce was appointed to the Board on 1 June 2019; Martin Gilbert stepped down from the Board on 12 May 2020 and retired from the company on 30 September 2020. Details of any changes in base salary for executive Directors calculated on a full time year-on-year basis can be found on page 79.
Percentage change in remuneration between 2019 and 2020 % Base salary/fee1
3 The change in benefits figures for employees (including executive Directors) are based on the change in medical premium paid by the Group on their behalf. Benefits do not include pension contributions for these purposes.
The remuneration paid to each of the individuals identified under methodology B was reviewed against other individuals within the quartile both above and below. The individuals in the 25th and 75th percentile were considered representative of the quartiles and the trends seen across the Company on remuneration in respect of both the salary and bonus. The individual in the 50th percentile was replaced by the next identified in that quartile as bonus was considered to be higher than representative for the quartile. Benefits figures were based on the medical premium paid by the Company on behalf of employees. All individuals identified were full time employees so no adjustment to annualise total compensation was required.
Stephen Bird/Keith Skeoch 2020 Option B 49 30 18 Keith Skeoch 2019 Option B 34 23 13 Keith Skeoch 2018 Option B 30 19 12
CEO remuneration1 741 1,847 25th percentile employee 32 38 50th percentile employee 51 61 75th percentile employee 85 102 1 Values shown include Stephen Bird‘s pay from the date of his appointment on 1 July 2020 plus Keith Skeoch’s pro-rata pay up to 30 June 2020.
How pay was set across the wider workforce in 2020 Our principles for setting pay across the wider workforce are consistent with those for our executive Directors, in that the proportion of the remuneration package which is linked to performance increases for more senior roles within the Company as responsibility and accountability increases. Base salaries are targeted at an appropriate level in the relevant markets in which the Group competes for talent. The Remuneration 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. A Company-wide decision was made not to carry out a salary review at the end of 2020 and the same approach was applied to executive Directors. In 2020, all employees were eligible to be considered for performance related variable remuneration but not all employees received a bonus. Entitlement to be considered for performance related variable remuneration is designed to reward delivery of results over appropriate time horizons and includes deferred variable compensation at a suitable level for the employee’s role. Variable remuneration for employees, including executive Directors, is determined as a total pool. As part of transformation of our performance culture, in 2020 variable remuneration has been directed to those who have made an outstanding contribution in the key areas of driving improved fund performance and client service, managing through the global pandemic and delivering on our transformation objectives. This has created the required momentum in these areas in 2020 to position our business to deliver against our plan in 2021. The Group engaged with its employees in 2020 through the annual Viewpoints full company survey. The survey included an opportunity for employees to provide feedback to the Board on pay and benefit matters. The CEO has engaged directly with employees in relation to the 2020 remuneration cycle. The areas discussed in these communications include: economic factors, employee expectations, congruence of pay across the workforce and market data. The Group operates a Compensation Committee comprising the Chief HR Officer (Chair), Chief Financial Officer and Chief Risk Officer, the role of which is to consider the implementation of the remuneration policy across the Group. The terms of reference of the Compensation Committee are set by the Remuneration Committee and the Chair of the Compensation Committee formally reports to the Remuneration Committee on all matters which fall within the Compensation Committee’s remit.
Chairman Sir Douglas Flint 1 November 2018 AGM 2019 Senior Independent Director Jonathan Asquith 1 September 2019 AGM 2020 Non-executive Directors John Devine 4 July 2016 AGM 2017 Melanie Gee 1 November 2015 AGM 2016 Brian McBride 1 May 2020 AGM 2020 Martin Pike 27 September 2013 AGM 2014 Cathleen Raffaeli 1 August 2018 AGM 2019 Jutta af Rosenborg 14 August 2017 AGM 2018 Cecilia Reyes 1 October 2019 AGM 2020 88 Standard Life Aberdeen 2020
Sir Douglas Flint2 2020 475 27 502 2019 475 1 476 Jonathan Asquith 2020 139 – 139 2019 46 – 46 John Devine 2020 128 – 128 2019 131 3 134 Melanie Gee 2020 113 – 113 2019 117 4 121 Brian McBride3,4 2020 76 – 76 2019 – – – Martin Pike 2020 124 – 124 2019 128 3 131 Cathleen Raffaeli5 2020 149 – 149 2019 149 3 152 Jutta af Rosenborg 2020 94 – 94 2019 94 – 94 Cecilia Reyes 2020 94 – 94 2019 24 – 24 1 We have reviewed the approach to disclosure of taxable benefits for non-executive Directors in 2020. This has resulted in removal of certain expenses, in line with reporting requirements. 2 Sir Douglas Flint is eligible for life assurance of 4x his annual fee. For 2020 this figure relates to the full year. 3 Appointed to the Board with effect from 1 May 2020. 4 Total fees include subsidiary Board fees of £30,000 per annum as a member of the Standard Life Savings Limited and Elevate Portfolio Services Limited Boards. 5 Total fees include subsidiary Board fees of £55,000 per annum as Chair of the Standard Life Savings Limited and Elevate Portfolio Services Limited Boards.
The service agreements/letters of appointment for Directors are available to shareholders to view on request from the Company Secretary at the Company’s registered address (details of which can be found on page 238) and at the 2020 AGM. Details of the date of appointment to the Board and date of election by shareholders are set out below: Chairman/ non-executive Director Initial appointment to the Board Initial election by shareholders
Implementation of policy for non-executive Directors in 2021 The following table sets out Standard Life Aberdeen plc non-executive Director fees to be paid in 2021. No increases were made to the level of fees from 2020. Role 2021 fees1 2020 fees
Chairman’s fees2 £475,000 £475,000 Non-executive Director fee3 £73,500 £73,500 Additional fees: Senior Independent Director £25,000 £25,000 Chairman of the Audit Committee £30,000 £30,000 Chairman of the Risk and Capital Committee £30,000 £30,000 Chairman of the Remuneration Committee £30,000 £30,000 Committee membership (Audit, Risk and Capital, Remuneration and Nomination Committees) £10,000 £10,000 Employee engagement4 £15,000 £15,000 1 The core fee of £73,500 paid to each non-executive Director (including the Chairman) is expected to total £662k for 2021 (2020: £662k). This is within the maximum £1,000,000 permitted under Article 87 of Standard Life Aberdeen plc’s articles of association. Total fees including additional duties are expected to amount to £1,407k for 2021 (2020: £1,408k).
2 The Chairman’s fees are inclusive of the non-executive Directors’ core fees and no additional fees are paid to the Chairman where he chairs, or is a member of, other committees/boards. The Chairman is eligible to receive life insurance benefits with effect from December 2019.
3 For non-executive Directors, individual fees are constructed by taking the core fee and adding extra fees for being the Senior Independent Director, chairman or member of committees and/or subsidiary boards where a greater responsibility and time commitment is required.
Total number of shares owned at 31 December 2020 or date of cessation if earlier2
Sir Douglas Flint 89,024 345 89,369 Jonathan Asquith 20,000 50,000 70,000 John Devine 28,399 – 28,399 Melanie Gee 67,500 – 67,500 Brian McBride1 – – – Martin Pike 69,476 – 69,476 Cathleen Raffaeli 9,315 – 9,315 Jutta af Rosenborg 8,750 – 8,750 Cecilia Reyes – – – 1 Appointed 1 May 2020. 2 There were no changes to the number of shares held by Directors between 31 December 2020 and 8 March 2021.
The Remuneration Committee Membership During 2020 the Remuneration Committee was made up of independent non-executive Directors. For their names, the number of meetings and committee member attendance during 2020, please see the table on page 57.
The role of the Remuneration Committee To consider and make recommendations to the Board in respect of the total remuneration policy across the Company, including: • Rewards for the executive Directors, senior employees and the Chairman • The design and targets for any employee share plan • The design and targets for annual cash bonus plans throughout the Company • Changes to employee benefit structures (including pensions) throughout the Company
Committee’s remit • Review of Stephen Bird appointment and Keith Skeoch departure
A representative from Deloitte LLP attends, by invitation, all Remuneration Committee meetings to provide information and updates on external developments affecting remuneration as well as specific matters raised by the Remuneration Committee. Outside of the meetings, the Remuneration Committee’s Chairman seeks advice on remuneration matters on an ongoing basis. As well as advising the Remuneration Committee, Deloitte LLP also provided tax, accounting support, risk management and consultancy services to the Company during the year. Deloitte Total Rewards and Benefits is an investment adviser to the trustees of the Standard Life Staff Pension Scheme.
• Review of COVID-19 impact on remuneration • Update on the external environment and feedback from AGM • Remuneration decisions for the Executive Leadership Team and other senior employees within Remuneration
• Consider anticipated impact of regulatory changes on remuneration • Mid-year review of performance against target for annual bonus and LTIP awards
External advisers During the year, the Remuneration Committee took advice from Deloitte LLP (a member of the Remuneration Consultants Group) who were appointed by the Remuneration Committee in 2017. The Remuneration Committee is satisfied that the advice given is objective and independent.
Remuneration Committee effectiveness The Committee reviews its remit and effectiveness each year. The 2020 review was conducted internally by the Company Secretary, who interviewed each of the Committee members. As well as general observations, the four key performance areas considered were: • The coverage of the Committee’s duties in the meeting agendas • How effectively agenda items were presented and discussed • The quality and level of detail in the papers • How well the Committee met its objectives in terms of making decisions and reporting to the Board
The Committee members did not raise any material issues or concerns regarding the above areas or the overall effectiveness of the Committee during 2020. They were very supportive of the Chair’s effective role in leading the Committee through its sometimes challenging discussions. The main area where the Committee wanted to see continued improvement in 2021 was in relation to the clarity of the presentation of some of the more technical and regulatory-related remuneration matters. In addition to overseeing the annual remuneration cycle, Committee members would like to spend more time in their meetings considering the structure and elements of the future remuneration principles and strategy across the Group, and how they might support the executive team in their implementation.
Summary of the Directors’ Remuneration Policy This section sets out the remuneration policy which was approved by shareholders at the 2020 AGM and how it will be implemented in 2021. Given the changes to the Board during the year, summaries of the relevant extracts from the remuneration policy for new appointments and for service contracts and loss of office have also been provided.
To reward the delivery of the Company’s business plan in a range of financial and non-financial areas and to align executives’ interests to those of shareholders and our clients.
Remuneration policy summary – executive Directors Purpose and link to strategy Operation Implementation in 2021 Base salary To provide a core reward for undertaking the role, commensurate with the individual’s role, responsibilities and experience.
Normally reviewed annually, taking into account a range of factors including: (i) the individual's skills, performance and experience; (ii) increases for the broader employee population; (iii) external market data and other relevant external factors; (iv) the size and responsibility of the role; and (v) the complexity of the business and geographical scope.
At least 50% of any award will be deferred into shares vesting in equal tranches over a three-year period. A retention period may be applied. Deferred awards accrue dividend equivalents.
The maximum award opportunity is up to 500% of salary. Combined incentive opportunity capped at 700% of salary.
Details on performance metrics for 2021 LTIP awards are set out on page 78.
Share ownership To ensure appropriate longterm alignment with the interest of our shareholders.
Malus and clawback Malus and clawback provisions apply to annual bonus and LTIP awards.
The circumstances in which malus or clawback would apply, include but are not limited to: – A material misstatement of the Company‘s audited financial statements – Any failure of risk management, fraud or other material financial irregularity – Material corporate failure – An error in the information or assumptions on which the relevant award was paid/granted or vests, as a result of erroneous or misleading data or otherwise – Serious misconduct by a participant or otherwise
The Remuneration Committee believes that the Remuneration Policy takes into account the factors under Provision 40 of the Corporate Governance Code (details of which can be found in the 2019 Directors’ Remuneration Report).
Scenario charts The following chart illustrates how much the current executive Directors could receive under a range of different scenarios along with a comparison to our current policy: Salary, benefits and pension
Remuneration policy extract – Remuneration policy for new executive Director appointments
Executive Directors may be required to work during the notice period or take a period of ‘garden leave’ or may be provided with pay in lieu of notice if not required to work the full notice period.
– Remuneration arrangements for new appointments will typically align with the remuneration policy
In the case of internal promotions, the Committee will honour existing commitments entered into before promotion
Buyouts To facilitate recruitment, the Committee may make an award to buy out remuneration terms forfeited on leaving a previous employer. Awards will be made in accordance with regulatory guidance.
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.
The buyout award will reflect the foregone award in amount and terms (including any deferral or retention period) as closely as possible.
Leavers during the deferral period For approved leavers, outstanding deferred awards under the annual bonus will typically vest and be released at the scheduled vesting date. The Committee retains the discretion to apply time pro-rating (over the deferral period) for approved leavers and to accelerate the vesting and/or release of awards if it considers it appropriate. For other leavers, rights to deferred awards will be forfeited.
Awards under the Long-Term Incentive Plan Leavers during the performance period For approved leavers, outstanding awards under the LTIP will typically be pro-rated for time in service to termination as a proportion of the performance period and will be released at the scheduled vesting date subject to performance. Subsequent holding periods will also apply. The Committee retains the discretion to dis-apply time pro-rating for approved leavers. For other leavers, rights to outstanding awards will be forfeited.
Leavers during the holding period Vested awards subject only to a holding period will be retained and released at the scheduled date.
Legacy awards under the Aberdeen Deferred Share Plans A good leaver is defined as someone whose employment comes to an end because of death, ill-health, injury, disability, redundancy or retirement, sale of the employing company or business or any other reason at the discretion of the Committee. Unvested awards granted to good leavers will typically vest in full at the normal vesting date, unless the Committee decides that they should vest on termination. For other leavers, rights to deferred awards will be forfeited.
The total payment is estimated at £154m for the final dividend and together with the interim dividend of 7.30p per share totalling £159m paid on 29 September 2020, the total dividend for 2020 will be 14.60p per share (2019: 21.60p) totalling £313m (2019: £493m).
You can obtain a copy of the Articles 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.
In his overview section of the Strategic report, Stephen Bird our Chief Executive Officer outlines the main trends and factors likely to affect the future development, performance and position of the Group. Reviews of the operating and financial performance of the Group for the year ended 31 December 2020 are also given in the Strategic report.
The Chairman’s statement, the Directors’ responsibility statement and the Corporate governance statement form part of this Directors’ report. The Corporate governance statement on pages 48 to 95 is submitted by the Board.
Similarly, in accordance with the terms of The Aberdeen Asset Management Employee Benefit Trust 2003 and The Standard Life Aberdeen Employee Benefit Trust 2019, the trustees waived all entitlements to current or future dividend payments for shares they hold other than dividends payable on any shares held by the trustee as nominee for any other person. The trustees of the Standard Life Aberdeen (Employee) Share Plan voted the appropriate shares in accordance with any instructions received from participants in the plan.
• A certificated share by a person with a 0.25 per cent interest (as defined in the Articles) in the Company, if that person has been served with a restriction notice under the Articles, after failing to provide the Company with information about interests in those shares as set out in the Companies Act 2006 (unless the transfer is shown to the Board to be pursuant to an arm’s length sale under the Articles)
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 of members for joint shareholders.
The Company may, by ordinary resolution, declare dividends up to the amount recommended by the Board. Subject to the Companies Act 2006, the Board may also pay an interim dividend, and any fixed rate dividend, whenever the financial position of the Company, in the opinion of the Board, justifies its payment. If the Board acts in good faith, it is not liable to holders of shares with preferred or pari passu rights for losses that arise from paying interim or fixed dividends on other shares.
• Disapply, up to a maximum total nominal amount of £16,212,824 of its issued ordinary share capital, shareholders’ pre-emption rights in respect of new ordinary shares issued for cash
During 2020, under the authorities granted at the 2019 and 2020 AGMs, the Company purchased 144,610,296 of its ordinary shares of 13 61/63 pence each, paying an aggregate amount of £359,028,587. As at 31 December 2020, the percentage of share capital represented by these purchased shares was approximately 6.6%.
Credit Facility – under a £400m revolving credit facility between the Company and the banks and financial institutions named therein as lenders (Lender) dated 22 May 2015 and refinanced on 12 February 2021 (the Facility), in the event that (i) any persons or group of persons acting in concert, gain control of the Company, then any Lender may elect within a prescribed time frame to cancel its outstanding commitment under the Facility and declare its participation in all outstanding loans, together with accrued interest and all amounts accrued immediately due and payable, whereupon the commitment of that Lender under the Facility will be cancelled and all such outstanding amounts will become immediately due and payable.
The Directors are not aware of any agreements with any employee that would provide compensation for loss of office or employment resulting from a takeover. The Company also has no agreement with any Director to provide compensation for loss of office or employment resulting from a takeover.
Incentive Plan • The rules of the Standard Life Aberdeen plc Deferred Share
Brian McBride was appointed as a non-executive Director on 1 May 2020 and Martin Gilbert resigned from the Board following the conclusion of the AGM on 12 May 2020. Stephen Bird joined the Board on 1 July 2020 as Director and CEO Designate and succeeded Keith Skeoch as CEO following Keith’s resignation from the Board on 1 September 2020.
Having been appointed since the 2020 AGM, Stephen Bird will retire and stand for election at the 2021 AGM.
Biographies of the current Directors can be found on pages 44 to 47
Ordinarily, copies of the following documents can be viewed at the Company’s registered office (details of which can be found in the Contact us section) during normal business hours (9am to 5pm Monday to Friday) and are available for inspection at the Company’s AGM: • The Directors’ service contracts or letters of appointment • The Directors’ deeds of indemnity, entered into in connection with the indemnification of Directors provisions in the Articles • The rules of the Standard Life plc Executive Long-Term
Our people Our people have always been central to delivering our strategy, and we remain focused on helping them thrive.
All employees can benefit from the courses in the Learning Academy and in 2020 over 1,200 people attended courses involving technology skills, industry-specific training, and personal effectiveness solutions.
This year we have also launched two new career development programmes, Ambition and Accelerate. Ambition is primarily aimed at colleagues in the early stages of their career (first three to five years) and focuses on core skills that are fundamental to future career success, including confidence, future fit and personal brand. Accelerate is aimed at colleagues at mid-career stage, likely to be in management or more senior specialist roles, and aims to enhance existing skills, including decision making, confidence and maximising personal brand. In total, 260 colleagues signed up for the courses.
In 2020, we enhanced our succession processes by supporting named successors through an independent external assessment to provide additional insight into the strengths and gaps in pipelines, and to provide the individuals involved with tailored development plans. All external candidates for executive roles are assessed in the same way, ensuring we have a consistent means of identifying the best candidates for senior roles.
Colleague wellbeing 2020 was a year when we needed to support colleagues flexibly and empathetically in dealing with the global pandemic. There is no single way of doing this so managers were empowered to work with their teams to come up with flexible solutions which balanced issues arising from personal circumstances, with the needs of our clients. We have been proud of the way colleagues supported each other during this time. We maintained a strong focus on wellbeing during this period of personal disruption and partnered with external experts to provide a broad range of professional advice and support to colleagues and their families.
In order to ensure the guidance and support made available was meeting the needs of our colleagues, we ran a series of very short surveys to understand whether colleagues were feeling well supported by the Company. Responses were consistently positive and this view was reinforced in our Insights survey, where we asked how people were feeling about work and their personal lives in the light of the pandemic. We also gathered views on a future return to the office in order to help with our ongoing planning.
As evidence of our commitment to ethnic diversity, we published an ethnicity target for the first time this year, following the recommendations of the Sir John Parker review. We already meet the Parker recommendation to have at least one qualifying Board member and have set our target to have one additional qualifying Board member by 2025. The Board Charter mandates appointments to be based on merit, with due consideration given to the Board’s gender and ethnicity balance.
As one of the inaugural signatories to the Race at Work Charter, and CEO signatory to an open letter on black and ethnic minority actions, we are committed to tackling barriers that people who identify as ethnic minority face. We continue to deliver against the ethnicity action plan published in 2018, developed with the ethnicity and multicultural network, Unity, and the executive sponsor for ethnicity.
Inclusion and diversity To complement the Board’s formal diversity statement, the Executive leadership team put in place an internal Global Diversity and Inclusion policy in 2019. It affirms that diversity and inclusion remain as fundamental pillars supporting all our decisions. We have always considered diversity in the broadest sense – in backgrounds, experience, strengths and thinking – with the aim that everyone can be themselves as they perform and progress, regardless of their background. By valuing diverse talent and enabling people to reach their potential in an inclusive culture, we provide global clients with the diversity of thought and creativity required to bring long-term value.
We all have a role to play in creating an inclusive environment and we empower people to take individual and collective action. The employee network groups and regional inclusion forums support members and allies of the diverse groups they represent, raising awareness of issues that affect them. This was used to good effect in understanding the impact of COVID-19 on working lives. With around 2,000 members, the networks continue to expand globally. They focus on gender, LGBT+, ethnicity, mental health, young people and the armed forces.
As we contemplate a return to work in more normal conditions, we continue to look for ways to innovate employee benefits and look for new offerings that fit with changes to the way people live and work and our business purpose. As an example, from early 2021, colleagues will be able to lease an electric car as part of their flexible benefits package, which would offer them potential savings on tax, running costs and fuel, as well as being a greener, more sustainable choice. In 2020, we introduced a new service which offers access to mental and physical wellbeing support – such as counselling, nutritionists and a pin prick health check – and supplements our existing wellbeing resources which include financial wellbeing. This comprises regular educational seminars on a range of personal finance topics as well as the opportunity for a free consultation with an in-house adviser.
We believe that when employees own shares in the company, it increases their understanding of the interests of our shareholders. We invited UK and Ireland-based employees to participate in the Standard Life Aberdeen Sharesave plan in 2020 and 1,243 (26%) employees accepted the invitation. They have the opportunity to acquire Standard Life Aberdeen plc shares for £1.888 (UK) and €2.113 (Ireland) with their accumulated savings when their savings contracts end in three or five years’ time. At 31 December 2020, 2,298 employees in UK and Ireland were saving towards the purchase of Standard Life Aberdeen plc shares through the current Sharesave plans, and 2,424 individuals were shareholders through participation in the Standard Life Aberdeen (Employee) Share Plan. Participation allows employees to buy ordinary shares in the Company directly from their earnings up to a market value of £150 per month (UK) or €175 (Ireland) per month. We match the shares purchased by employees, matching up to £50 per month in the UK and €70 per month in Ireland.
Political donations The Company has a long-standing policy of not making political donations. The Company has limited authorisation from shareholders to make political donations and incur political expenditure (Resolution 9, 2020 AGM). This is requested 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 2021 AGM.
Disclosure of information to the auditors The Directors who held office at the date of the approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
Annual General Meeting The 2021 AGM is scheduled to take place on 18 May 2021. At present, we do not expect the COVID-19 restrictions to have eased sufficiently to allow shareholders to be able to attend this year’s AGM in person. Instead shareholders will be able to view the AGM live by webcast. Questions can be submitted in advance or during the meeting and Directors will respond to as many questions as possible during the meeting. Please visit www.standardlifeaberdeen.com for more information.
Post balance sheet events (a) Acquisition of Tritax Management LLP On 9 December 2020, the Group announced the proposed acquisition of 60% of the equity of Tritax Management LLP, a specialist logistics real estate fund manager. The initial cash consideration payable at completion for the acquisition is £64m. Subject to the satisfaction of certain conditions, an additional contingent deferred earn-out is expected to be payable to acquire the remaining 40% of equity in Tritax Management LLP via three exercisable put options in each of years ended 31 March 2024, 2025 and 2026. The Group will also have the right to purchase any outstanding equity interests at the end of the five-year period through exercising a call option. The amount payable under the contingent deferred earn-out is dependent on the growth in future profitability of the business and is a maximum of £140m. Completion is subject to certain conditions including relevant regulatory approvals. The assets under management of Tritax Management LLP at 31 December 2020 were approximately £5.5bn.
(b) Simplification and extension of the strategic partnership between the Group and Phoenix
On 23 February 2021, the Group announced the purchase of certain products in the Phoenix Group’s savings business offered through the Standard Life Aberdeen Wrap platform, comprising a self-invested pension plan (SIPP) and an onshore bond product; together with the Phoenix Group’s trustee investment plan (TIP) business for UK pension scheme clients. The assets relating to these Phoenix Group-administered businesses at 31 December 2020 are £38bn and are currently included in Group AUMA. The transaction will be effected through a Part VII transfer which is targeted to complete in late 2022. The upfront consideration paid by the Group in February 2021 was £62.5m, which will be offset in part by expected payments from Phoenix to the Group relating to profits of the business prior to completion of the legal transfer. The transaction will result in the Group earning adjusted profit in relation to the acquired businesses post completion.
After making enquiries and having assessed the principal risks, the Directors are satisfied that the Group and Company have and will maintain sufficient resources to enable them to continue operating for at least 12 months from the date of approval of the financial statements and therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements. There are no material uncertainties relating to this going concern conclusion. In addition, the Directors have assessed the Group’s viability over a period of three years.
Kenneth A Gilmour Company Secretary 5. Statement of Directors’ responsibilities in respect of the Annual report and the financial statements
Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law and have elected to prepare the Company financial statements in accordance with UK accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework. In addition the Group financial statements are required under the UK Disclosure Guidance and Transparency Rules to be prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (‘IFRSs as adopted by the EU’).
• Make judgements and estimates that are reasonable, relevant, reliable and prudent
• For the Group financial statements, state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (‘IFRSs as adopted by the EU’)
• For the Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Company financial statements
• Use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so
Responsibility statement of the Directors in respect of the annual financial report We confirm that to the best of our knowledge: • The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole
6. Independent auditors’ report to the members of Standard Life Aberdeen plc 1. Our opinion is unmodified We have audited the financial statements of Standard Life Aberdeen plc (the Company) for the year ended 31 December 2020 which comprise the Consolidated income statement, Consolidated statement of comprehensive income, Consolidated statement of financial position, Consolidated statement of changes in equity, Consolidated statement of cash flows, Company statement of financial position, Company statement of changes in equity, Reconciliation of consolidated adjusted profit before tax to IFRS profit for the year, and the related notes, including the accounting policies in the Basis of preparation.
In our opinion:  The financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2020 and of the Group’s profit for the year then ended
We were first appointed as auditor by the shareholders on 16 May 2017. The period of total uninterrupted engagement is for the four financial years ended 31 December 2020. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.
Overview Materiality: Group financial statements as a whole £25m (2019: £31m)
Recoverability of goodwill and of certain of the parent’s investment in subsidiaries
2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and our findings from those procedures in order that the Company's members, as a body, may better understand the process by which we arrived at our audit opinion. These matters were addressed, and our findings are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The risk Our response Recoverability of goodwill and of certain of the parent’s investments in subsidiaries: (Goodwill: £85m (2019: £1000m); goodwill impairment losses recognised: £915m (2019: £1,569m))
(Parent Company: certain investments in subsidiaries: included within the total investments in subsidiaries balance of £4,013m (2019: £6,027m); Impairment of investment in subsidiaries: £1,873m (2019: £795m))
Refer to page 59 (Audit Committee Report), page 143 (goodwill accounting policy and financial disclosures), page 214 (investment in subsidiaries accounting policy) and page 215 (investment in subsidiaries financial disclosures).
Subjective estimate: The goodwill recognised at the Group and the carrying amount of certain of the parent Company’s investments in subsidiaries are significant and at risk of irrecoverability due to reductions in assets under management or a change in the mix of the assets under management which would impact revenues. The estimated recoverable amount of these balances is subjective due to the inherent uncertainty involved in forecasting and discounting projected adjusted profits and determining the applicable price to earnings multiples (including appropriate premiums for control and discounts for lack of liquidity) and expected costs of disposals which are the key assumptions of the fair value less costs of disposal (FVLCOD).
Our sector expertise: We also used our sector experience to evaluate the appropriateness of assumptions applied in key inputs such as deriving maintainable earnings, assessing the comparability of companies used by management for the purpose of deriving an appropriate price to earnings multiple along with adjustments made to that market data in deriving an asset management specific multiple.
Refer to page 59 (Audit Committee Report), and page 147 (accounting policy and financial disclosures).
In addition, and consistent with previous years, the calculation of Phoenix’s profit, (with a resulting impact on the carrying value of the investment), is dependent on a number of Phoenix management’s estimates, in particular the actuarial assumptions underpinning the movements in insurance contract liabilities. In this regard, the assumptions that have the most significant impact over the profit of the enlarged Phoenix group are the base and trend longevity and persistency assumptions.
Our procedures in respect of the accounting treatment and application included: Assessing principles: We assessed the nature of the relationship with Phoenix following the ReAssure transaction and subsequent SLA plc shareholding dilution and evaluated this against the indicators of significant influence in the accounting standards.
Our procedures in respect of the share of Phoenix profit, and its corresponding impact on the carrying value of Phoenix: Control design and operation: Our component auditor tested the design and operating effectiveness of key controls including over Phoenix management’s process for modelling insurance contract liabilities and for setting and updating actuarial assumptions.
The work performed by the component auditor was under the direction, oversight and review of the Group team, as described in section 3.
(Customer relationships and investment management contracts: £314m (2019: £534m); Impairment of customer relationships and investment management contracts intangibles: £134m (2019: £0m))
Management need to make subjective judgements when assessing whether there are any indicators of impairment to these intangible assets.
Where there is an indicator of impairment, the estimated recoverable amount of these intangible assets is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows.
The financial statements (Note 15) disclose the sensitivity estimated by the Group.
Our procedures included: Our valuation expertise: We evaluated whether for all of the Group’s customer relationships and management contract intangible assets there were indicators of impairment that would trigger an impairment review. This included a critical assessment of the business performance, such as outflows of assets under management and / or reduction of revenue relating to each intangible asset.
Sensitivity analysis: Where there was an indicator of impairment we performed our own sensitivity analysis which included assessing the effect of reasonably possible changes in forecast cash flows and discount rates to evaluate the impact on the carrying value of the intangible assets.
Assessing transparency: We considered whether the Group’s disclosures in relation to the assumptions used in the value in use of customer relationships and investment management contracts intangible assets appropriately represent the sensitivities of the asset’s value in use to the use of alternative assumptions.
Our findings: We found the carrying value of intangible assets and the related impairment charge to be balanced (2019: balanced) with proportionate (2019: proportionate) disclosures of the related assumptions and sensitivities.
Refer to page 59 (Audit Committee Report), page 170 (accounting policy) and page 171 (financial disclosures).
Subjective valuation: The present value of the Group’s funded obligation for the UK defined benefit (DB) pension scheme is an area that involves significant judgement over the uncertain future settlement value. The Group is required to use judgment in the selection of key assumptions covering both operating assumptions and economic assumptions. The key operating assumptions are base mortality and mortality improvement. The key economic assumptions are the discount rate and inflation. The risk is that inappropriate assumptions are used in determining the present value of the funded obligation.
The effect of these matters is that, as part of our risk assessment, we determine that the valuation of the pension scheme obligation has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole and possibly many times that amount.
Assessing transparency: In conjunction with internal actuarial specialists, we considered whether the Group’s disclosures in relation to the assumptions used in the calculation of present value of the funded obligation appropriately represent the sensitivities of the obligation to the use of alternative assumptions.
Our findings: We found the estimated valuation of the UK defined benefit pension scheme obligation to be balanced (2019: balanced) with proportionate (2019: proportionate) disclosures of the related assumptions and sensitivities.
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The Group team had planned to visit component locations in the United States, Luxembourg and the UK. However, all but one of these visits were prevented by movement restrictions relating to the COVID-19 pandemic. Instead video conferences were held to discuss the audit risk and strategy and the component audit findings reported to the Group team. The Group team visited 1 (2019: 6) component location in the UK (2019: UK and Singapore), to assess the audit risk and strategy and the findings reported to the Group team were discussed in more detail. Video and telephone conference meetings were also held with this component auditor. Any further work required by the Group team was then performed by the component auditor.
We used our knowledge of the Group, its industry and operating model, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group’s financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to adversely affect the Group’s available financial resources over this period was market volatility, including any associated with COVID-19. We considered whether these risks could plausibly affect the liquidity in the going concern period by assessing the degree of downside assumptions that, individually and collectively, could result in a liquidity issue, taking into account the Group’s current and projected cash and facilities (a reverse stress test).
 We have nothing material to add or draw attention to in relation to the directors’ statement in Note (a) (v) to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of that basis for the going concern period, and we found the going concern disclosure in Note (a) (v) to be acceptable
 Reading Board minutes and attending Group Audit Committee and Risk and Compliance Committee meetings
 Considering the findings of Group Internal Audit’s reviews in the period
On this audit we do not believe there is a fraud risk related to revenue recognition, given the relative simplicity of the most significant revenue streams and the separation of duties between management and third party service providers.
We performed procedures including:  Identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation. These included those posted by senior finance management and those posted to unusual accounts, as well as those which comprised unexpected posting combinations.
We communicated identified laws and regulations throughout our team and remained alert to any indications of noncompliance throughout the audit. This included communication from the Group to component audit teams of relevant laws and regulations identified at the Group level, and a request for component auditors to report to the Group team any instances of non-compliance with laws and regulations that could give rise to a material misstatement at Group.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: specific areas of regulatory capital and liquidity, conduct including Client Assets, money laundering, market abuse regulations and certain aspects of company legislation recognising the financial and regulated nature of the Group’s activities and its legal form.
6. We have nothing to report on the other information in the Annual report and Accounts The directors are responsible for the other information presented in the Annual report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Strategic report and Directors’ report Based solely on our work on the other information:  We have not identified material misstatements in the Strategic report and the Directors’ report
 The Principal Risks disclosures describing these risks and how emerging risks are identified, and explaining how they are being managed and mitigated
We are also required to review the Viability Statement, set out on page 37 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.
We are required to review the part of Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.
7. We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion:  Adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us
 The parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns
 Certain disclosures of directors’ remuneration specified by law are not made
 We have not received all the information and explanations we require for our audit
Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Jonathan Mills (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Saltire Court 20 Castle Terrace Edinburgh EH1 2EG 9 March 2021 114 Standard Life Aberdeen 2020
Income Investment return 3 163 464 Revenue from contracts with customers 4 1,527 1,743 Insurance contract premium income 31 31 66 Profit on disposal of interests in associates 1 1,858 1,542 Other income 5 30 178 Total income from continuing operations 3,609 3,993 Expenses Insurance contract claims and change in liabilities 31 17 156 Change in non-participating investment contract liabilities 25 56 265 Administrative expenses
Total administrative expenses 2,820 3,594 Change in liability for third party interest in consolidated funds (3) 21 Finance costs 30 36 Total expenses from continuing operations 2,920 4,072 Share of profit from associates and joint ventures 16 194 79 (Loss on)/reversal of impairment of interests in associates and joint ventures 16 (45) 243 Profit before tax from continuing operations 838 243 Tax (credit)/expense attributable to continuing operations 10 (15) 28 Profit for the year from continuing operations 853 215 (Loss)/profit for the year from discontinued operations 11 (15) 56 Profit for the year 838 271 Attributable to: Equity shareholders of Standard Life Aberdeen plc
From continuing operations – preference shares 30 5 5 838 271 Earnings per share from continuing operations Basic (pence per share) 12 38.5 8.9 Diluted (pence per share) 12 37.9 8.8 Earnings per share Basic (pence per share) 12 37.8 11.2 Diluted (pence per share) 12 37.2 11.1
Fair value losses on cash flow hedges 20 13 22 Realised foreign exchange losses 1 6 –
(Loss)/profit from discontinued operations 11 (15) 56 Other comprehensive income from discontinued operations 11 – – Total comprehensive income for the year from discontinued operations (15) 56 Total comprehensive income for the year 1,126 202
Items that may be reclassified subsequently to profit or loss: Fair value losses on cash flow hedges 20 (3) (10) Exchange differences on translating foreign operations (8) (46) Share of other comprehensive income of associates and joint ventures 16 13 7 Items transferred to the consolidated income statement
Equity holder tax effect of items that may be reclassified subsequently to profit or loss 10 (2) (2) Total items that may be reclassified subsequently to profit or loss 19 (29) Other comprehensive income for the year from continuing operations 288 (69) Total comprehensive income for the year from continuing operations 1,141 146