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Remuneration Committee's Terms of Reference

Authority

The Board has established a committee to be known as the Remuneration Committee to assist it in fulfilling its oversight and governance responsibilities in connection with remuneration activity undertaken by the Society. 

The Remuneration Committee is authorised by the Board to:

  • investigate any activity within its Terms of Reference;
  • seek any information it requires from any employee. All employees are directed to co-operate with any reasonable request made by the Committee;
  • to appoint remuneration consultants and to commission, obtain or purchase any professional advice, reports, surveys or information which it reasonably deems necessary to discharge its responsibilities.

Purpose

The Remuneration Committee will:

  • determine matters relating to the Society’s overall remuneration framework and the level of remuneration of members of executive management, including Executive Directors, who participate in the Executive Variable Pay Plan, and review the Chair’s fee annually;
  • in determining the above matters, have regard to the Society’s risk appetite, long-term strategic objectives, culture, values and Members First principles and applicable law and regulation, in particular the PRA Remuneration Code, EBA Guidelines on Sound Remuneration Practices, UK Corporate Governance Code and associated guidance;
  • oversee remuneration arrangements required by the PRA Remuneration Code, including remuneration for employees in control functions such as Internal Audit, Risk, Compliance, HR and Legal, even if they are covered by the ‘de minimis’ exemption; and
  • review and recommend to the Board for approval the Society’s Remuneration Policy. The objective of the Remuneration Policy shall be to attract, retain and motivate individuals of the quality required to run the Society successfully without paying more than is necessary, having regard to the views of members and other stakeholders.

The review and recommendation to the Board of the remuneration of Non-Executive Directors (other than the Chair) shall be undertaken by the Non-Executive Remuneration Committee.

No person shall be involved in any decisions as to their own remuneration.

Meetings and membership

Chair         
The Committee will be chaired by a Non-Executive Director (other than the Board Chair) as appointed from time to time by the Board. 

Membership     
The Committee will comprise at least three Non-Executive Directors. The Committee may operate with a vacancy. The Chair of the Board may serve on the Committee if considered independent on appointment as Chair but will not be present at any discussion by the Committee relating to the Chair’s fees. 

Attendance      
Only members of the Committee have the right to attend Committee meetings. However, other individuals such as the Chief Executive, the Human Resources Director and external advisers may be invited to attend meetings as required.

Frequency       
The Committee will meet twice annually as a minimum.

Quorum           
Meetings of the Committee will be quorate if there are present at least three members. If the Chair is absent, the remaining members shall elect one of their number other than the Chair of the Board to chair the meeting.

Secretary        
The General Counsel & Secretary or their nominee shall be Secretary of the Committee.

Meeting preparation            
The Committee Secretary shall draft the agenda for each meeting and provide this to the Chair of the Committee for approval in advance of the meeting. The Committee Secretary shall collate and circulate the papers to members and attendees at least seven calendar days prior to the meeting.

Reporting responsibilities        
Formal minutes of the meetings of the Committee will be taken and circulated to members and other regular attendees for the relevant meeting. A summary of each meeting will be made available to the Board of Directors in the month following the meeting. The Committee Chair will be available at the Society’s AGM to answer questions from members falling within the Committee’s remit.

Duties

The Committee shall have the following responsibilities:

  1. review of the Society’s Remuneration Policy ahead of approval by the Board;

  2. determine the overall Pay Review Approach for the Society as a whole;

  3. review and approve the PRA Remuneration Policy Statement and list of Material Risk Takers; 

  4. obtain reliable, up to date information about remuneration in other businesses of comparable scale, complexity and location to inform decisions;

  5. recommend to the Board for approval the introduction of new variable pay plans for executive directors and executive managers or significant changes to such plans;   

  6. determine targets for  variable pay plans operated by the Society ensuring such arrangements are compliant with the requirements of the PRA Remuneration Code and applicable law and regulation;

  7. in assessing the targets for the variable pay plans, ensure that risk adjustments for current and future risks are built into the scope of all decisions relating to variable remuneration;

  8. in respect to any variable pay plans determine each year whether awards will be made, and if so, the overall amount of such awards and the individual awards to be made to participants under any such plan ensuring such arrangements are compliant with the requirements of the PRA Remuneration Code and applicable law and regulation;

  9. determine the policy for, and scope of, pension arrangements for executive directors and executive managers;

  10. determine the remuneration of executives and executive managers, in consultation with the Chief Executive in respect of his direct reports including any decisions on clawback, deferral and malus assessments required under the Remuneration Code;

  11. receive updates from the HR Director on the remuneration of Material Risk Takers who are not executive directors or executive managers including any decisions on clawback, deferral and malus assessments required under the Remuneration Code for such employees;

  12. oversee any major changes in employee benefits structures throughout the Society;

  13. ensure that contractual terms on the appointment and termination of employment of executive directors and executive managers, and any payments made, are fair to the individual and the Society, that failure is not rewarded and that the duty to mitigate loss is fully recognised;

  14. receive from the Chief Risk Officer annually an assessment of whether the Society’s Remuneration Policy is compliant with the PRA Remuneration Code including whether it encourages excessive risk-taking and act on its findings, as appropriate; 

  15. have regard to any relevant advice from the Board Risk Committee to satisfy itself that performance objectives do not drive excessive risk taking and that reward takes account of risk management performance;

  16. be exclusively responsible for establishing the selection criteria for selecting, appointing and setting the terms of reference for, and monitor the performance of, any remuneration consultant or other external professional adviser who may advise the Committee;

  17. ensure that the disclosure of remuneration, including pensions, in the Society’s Report & Annual Accounts and the Directors’ Remuneration Report is accurate and meets required standards;

  18. ensure that the disclosure of remuneration, both internally, and externally within the Society’s Pillar 3 Disclosures follows the Prudential Regulation Authority’s rules regarding remuneration disclosure in compliance with the Capital Requirements Directive (CRD IV) and including the guidelines published by the European Banking Authority on remuneration rules for high earners as required under Article 75 of CRD IV; 

  19. if the Committee has appointed remuneration consultants, the annual report of the Society’s remuneration policy should identify such consultants and state whether they have any other connection with the Society;

  20. determine the policy for the approval of the expenses of the Chief Executive;

  21. approve or decline the retention by executive directors and executive managers of any financial rewards from external directorships or similar appointments;

  22. receive a report at least annually from the Society’s Reward Committee;

  23. review the Board Chair’s fees at least annually and make recommendations to and seek approval from the Board for any changes;

  24. the Committee shall produce a report of the Society’s remuneration policy and practices to be included in the Society’s annual report and ensure each year that it is put to members for approval at the AGM; and

  25. the Committee shall undertake appropriate and timely training, in the form of an induction programme for new members and on a continuing basis for all members.