Remuneration Policy

Dear Shareholder letter 16.02.2020

This Policy has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended in 2013. The Policy has been developed taking into account a number of regulatory and governance principles, including:

  • The 2018 UK Corporate Governance Code
  • The regulatory framework applying to the Financial Services Sector (including the Dual-regulated firms Remuneration Code and provisions of CRD IV)
  • The executive remuneration guidelines of the main institutional investors and their representative bodies

Objectives of the Remuneration Policy

The overarching principles of the Remuneration Policy are to:

  • Promote the long-term success of the Company.
  • Attract, motivate and retain high-performing employees.
  • Adhere to and respond to the regulatory framework for the financial services sector and UK listed companies more generally.
  • Strike an appropriate balance between risk-taking and reward.
  • Encourage and support a strong sales and service culture to meet the needs of our customers.
  • Reward the achievement of the overall business objectives of the Group.
  • Align employees’ interests with those of shareholders and customers.
  • Be consistent with the Group’s risk policies and systems to guard against inappropriate risk-taking.

Approach to designing the Remuneration Policy

The Committee is responsible for the development, implementation and review of the Directors’ Remuneration Policy. In addressing this responsibility the Committee works with management and external advisers to develop proposals and recommendations. The Committee considers the source of information presented to it, takes care to understand the detail and ensures that independent judgement is exercised when making decisions. The Group Risk Committee considers whether the Remuneration Policy and practices are in line with the risk appetite and the Group Audit Committee confirms incentive plan performance results, where appropriate.

How the views of employees and shareholders are taken into account

The Committee does not formally consult directly with employees on Executive pay but receives updates in relation to the remuneration structure throughout the Group and salary and bonus reviews each year. As set out in the policy table, in setting remuneration for the Executive Directors, the Committee takes note of the overall approach to reward for employees in the Company and salary increases will ordinarily be in line (in percentage of salary terms) with those of the wider workforce. Thus, the Committee is satisfied that the decisions made in relation to Executive Directors’ pay are made with an appropriate understanding of the wider workforce.

The Committee undertook extensive engagement with shareholders during the review of the Policy. The Committee will seek to engage with major shareholders and the main shareholder representative bodies and proxy advisory firms when it is proposed that any material changes are to be made to the Remuneration Policy or its implementation. In addition, we will consider any shareholder feedback received in relation to the AGM.

The Remuneration Policy for Executive Directors

The table below and accompanying notes describe the Policy for Executive Directors.

Element Purpose and link to strategy Operation and performance conditions Maximum

To reward Executives for the role and duties required.

Recognises individual’s experience, responsibility and performance.

Paid monthly.
Base salaries are usually reviewed annually, with any changes usually effective from 1 January.

No performance conditions apply to the payment of salary. However, when setting salaries, account is taken of an individual’s specific role, duties, experience and contribution to the organisation.

As part of the salary review process, the Committee takes account of individual and corporate performance, increases provided to the wider workforce and the external market for UK listed companies both in the financial services sector and across all sectors.

Increases will generally be broadly in line with the average of the workforce. Higher increases may be awarded in exceptional circumstances such as a material increase in the scope of the role, following the appointment of a new Executive (which could also include internal promotions) to bring an initially below-market package in line with market over time or in response to market factors.


To provide market competitive benefits to ensure the well-being of employees.

The Company currently provides:

  • car allowance
  • life assurance
  • income protection
  • private medical insurance, and
  • may pay other benefits as appropriate for the role.

There is no maximum cap on benefits, as the cost of benefits may vary according to the external market.


To provide a contribution to retirement planning.

Directors may participate in a defined contribution plan, or, if they are in excess of the HM Revenue & Customs (‘HMRC’) annual or lifetime allowances for contributions, may elect to receive cash in lieu of all or some of such benefit.

In line with the rate receivable by the majority of the workforce, which is currently 8% of salary.

Annual bonus

To incentivise and reward individuals for the achievement of pre-defined, Committee-approved, annual financial, operational and individual objectives which are closely linked to the corporate strategy.

The annual bonus targets will have a 90% weighting based on performance under an agreed balanced scorecard which includes an element of risk appraisal. Within the scorecard at least 50% of the bonus will be based on financial performance. 10% of bonus will be based on personal performance targets.

The objectives in the scorecard, and the weightings on each element will be set annually, and may be flexed according to role. Each element will be assessed independently, but with Committee discretion to flex the payout (including to zero) to ensure there is a strong link between payout and performance. On top of this, there is a general discretion to adjust the outturn to reflect other exceptional factors at the discretion of the Committee.

50% of any bonus earned will be delivered in shares, subject to a three year holding period. In exceptional circumstances of high bonus payments there may be a requirement to defer a proportion of bonus with vesting staggered over three to seven years, in line with the deferral arrangements for the PSP described below.

Updated clawback/malus provisions apply, as described in note 1 overleaf.

The maximum bonus opportunity is 110% of salary per annum.

The threshold level for payment is up to 25% of maximum for any measure.

Performance Share Plan

To incentivise and recognise execution of the business strategy over the longer term.

Rewards strong financial performance over a sustained period.

PSP awards will typically be made annually at the discretion of the Committee, usually following the announcement of full year results.

Usually, awards will be based on a mixture of internal financial performance targets, riskbased measures and relative TSR. At least 50% of the PSP award will ordinarily be based on financial and relative TSR metrics.

The performance targets will usually be measured over three years.

Any vesting will be subject to an underpin, whereby the Committee must be satisfied; (i) that the vesting reflects the underlying performance of the Company; (ii) that the business has operated within the Board’s risk appetite framework; and (iii) that individual conduct has been satisfactory. On top of this, there is a general discretion to adjust the outturn to reflect other exceptional factors at the discretion of the Committee.

Awards granted after 1 January 2020 will vest in five equal tranches of 20%, following the Committee’s determination of performance and annually thereafter. At the time each tranche vests, a one year holding period will apply. (Awards granted before this date will vest in accordance with the terms of the previous Policy).

Clawback and malus provisions apply as described in note 1 below.

The maximum PSP grant limit is 110% of salary in respect of grants in any financial year.

The threshold level for payment is 25% for any measure.

All-employee share plan (Sharesave Plan)

All employees including Executive Directors, are encouraged to become shareholders through the operation of an all-employee share plan.

Tax-favoured plan under which regular monthly savings may be made over a three or five year period and can be used to fund the exercise of an option, where the exercise price is discounted by up to 20%.

Maximum permitted savings based on HMRC limits.

Share ownership guidelines To increase alignment between Executives and shareholders.

Executive Directors are expected to build and maintain a minimum holding of shares.

Executive Directors must retain at least 50% of the shares acquired on vesting of any share awards (net of tax) until the required holding is attained.

On cessation of employment, Executive Directors must retain the lower of the in-service shareholding requirement, or the Executive Directors’ actual shareholding, for two years.

At least 250% of salary for the CEO and at least 200% of salary for the CFO or such higher level as the Committee may determine from time to time.
The net of tax value of any unvested deferred awards (which are not subject to any future performance condition) may count towards the definition of a shareholding for this purpose.


1 Clawback and malus provisions apply to both the annual bonus, including amounts deferred into shares, and PSP awards. These provide for the recovery of incentive payments within seven years in the event of; (i) a material misstatement of results, (ii) an error, (iii) a significant failure of risk management, (iv) regulatory censure, (v) in instances of individual gross misconduct, (vi) corporate failure, (vii) reputational damage or (viii) any other exceptional circumstance as determined by the Board. A further three years may be applied following such a discovery, in order to allow for the investigation of any such event. In order to effect any such clawback, the Committee may use a variety of methods: withhold deferred bonus shares, future PSP awards or cash bonuses, or seek to recoup cash or shares already paid.

Choice of performance measures for Executive Directors’ awards

The use of a balanced scorecard for the annual bonus reflects the balance of financial and non-financial business drivers across the Company. The combination of performance measures ties the bonus plan to both the delivery of corporate targets, risk measures and strategic/personal objectives. This ensures there is an appropriate focus on the balance between financial and non-financial targets and risk, with the scorecard composition being set by the Committee from year to year depending on the corporate plan.

The PSP is based on a mixture of financial and risk measures and relative TSR, in line with our key objectives of sustained growth in earnings leading to the creation of shareholder value over the long term within an appropriate risk framework. TSR provides a close alignment between the relative returns experienced by our shareholders and the rewards to executives.

There is an underpin in place on the PSP to ensure that the payouts are aligned with underlying performance, financial and non-financial risk and individual conduct.

Annual bonus and PSP targets are set taking into account the business plans, shareholder expectations, the external market and regulatory requirements.

In line with HMRC regulations for such schemes, the Sharesave Plan does not operate performance conditions.

How the Group Remuneration Committee operates the variable pay policy

The Committee operates the share plans in accordance with their respective rules, the Listing Rules and HMRC requirements where relevant. The Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and administration of certain plans, including:

  • Who participates in the plans
  • The form of the award (for example, conditional share award or nil cost option).
  • When to make awards and payments; how to determine the size of an award; a payment; and when and how much of an award should vest.
  • Whether share awards will be eligible to receive dividend equivalents and the method of calculation.
  • The testing of a performance condition over a shortened performance period.
  • How to deal with a change of control or restructuring of the Group.
  • Whether a participant is a good/bad leaver for incentive plan purposes; what proportion of an award vests at the original vesting date or whether and what proportion of an award may vest at the time of leaving.
  • How and whether an award may be adjusted in certain circumstances (e.g. for a rights issue, a corporate restructuring or for special dividends).
  • What the weighting, measures and targets should be for the annual bonus plan and PSP from year to year.

The Committee also retains the discretion within the Policy to adjust existing targets and/or set different measures for the annual bonus. For the PSP, if events happen that cause it to determine that the targets are no longer appropriate, an amendment could be made so they can achieve their original intended purpose and ensure the new targets are not materially less difficult to satisfy.

Any use of the above discretions would, where relevant, be explained in the Annual Report on Remuneration and may, as appropriate, be the subject of consultation with the Company’s major shareholders.

OSB operates in a heavily regulated sector, the rules of which are subject to frequent evolution. The Committee therefore also retains the discretion to make adjustments to payments under this Policy as required by financial services regulations.

Conflicts of interest

The Committee ensures that no Director is present when their remuneration is being discussed and considers any potential conflicts prior to meeting materials being distributed and at the beginning at each meeting.

Awards granted prior to the effective date

Any commitments entered into with Directors prior to the effective date of this Policy will be honoured. Details of any such payments will be set out in the Annual Report on Remuneration as they arise.

Remuneration Policy for other employees

The Committee has regard to pay structures across the wider Group when setting the Remuneration Policy for Executive Directors and ensures that policies at and below the executive level are coherent. There are no significant differences in the overall remuneration philosophy, although pay is generally more variable and linked more to the long term for those at more senior levels. The Committee’s primary reference point for the salary reviews for the Executive Directors is the average salary increase for the broader workforce.

A highly collegiate approach is followed in the assessment of the annual bonus, with our corporate scorecard being used to assess bonus outcomes throughout the Group, with measures weighted according to role, where relevant.

Overall, the Remuneration Policy for the Executive Directors is more heavily weighted towards performance-related pay than for other employees. In particular, performance-related long-term incentives are not provided outside of the most senior executive population as they are reserved for those considered to have the greatest potential to influence overall levels of performance.

Although PSPs are awarded only to the most senior managers in the Group, the Company is committed to widespread equity ownership and a Sharesave Plan is available to all employees. Executive Directors are eligible to participate in this plan on the same basis as other employees.