ANNUAL REPORT AND ACCOUNTS
What we do
1
£264.7m
£8.2bn
£262.0m
Chief Executive’s Report .................................... 4
COVID-19 Update ............................................... 10
................................................ 12
How we do Business ........................................ 14
Our Business Model .......................................... 16
Our Strategy ........................................................ 18
Delivering Positive
Outcomes to Clients ...................................... 20
Growing and Developing
the Partnership .............................................. 22
Enhancing our Investment Proposition ... 24
Achieving Sustainable Growth in Profits ... 26
Attracting, Retaining
and Developing Talent .................................. 28
Our Responsible Business ............................. 30
Chief Financial Officer’s Report .................... 50
Financial Review ................................................ 54
Risk and Risk Management ........................... 73
Approval of the Strategic Report .................. 81
............................................. 84
Chair’s Report .................................................... 86
Corporate Governance Report
(including section 172(1) Statement) ........... 88
Report of the Audit Committee ................... 104
Report of the Risk Committee ..................... 112
Report of the Nomination Committee ...... 117
Report of the Remuneration
Committee ....................................................... 121
Directors’ Report ............................................. 140
Statement of Directors’
Responsibilities ............................................... 143
Independent Auditors’ Report to the
............ 146
Consolidated Financial Statements
under International Financial
Reporting Standards ..................................... 153
Parent Company Financial
Statements under Financial
Reporting Standard 101 ............................... 214
Supplementary Information:
Consolidated Financial Statements
on a Cash Result Basis (Unaudited) .......... 221
Shareholder Information .............................. 230
How to Contact us and Advisers ................ 231
Glossary of Alternative
Performance Measures ................................. 232
.......................................... 235
£129.3bn
2016 2017 2018 2019 2020
75.3
90.7
95.6
117.0
129.3
+11%
£14.3bn
38.49
p
1
£919.0m
1 The Underlying cash result and EEV operating profit
are alternative performance measures (APMs). The
Glossary of Alternative Performance Measures on
pages 232 to 234 defines these APMs and explains
why they are useful. The Underlying cash result is
reconciled to International Financial Reporting
Standards (IFRS) on pages 59 and 60.
2 The dividend per share disclosed in 2019 was
in April 2020 to withhold 11.22 pence per share until
such a time as the financial and economic impacts
of COVID-19 became clearer. The withheld amount
of 11.22 pence per share has now been reinstated
conditions in 2020, reporting substantial gross and net inflows throughout the year.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
1
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2020
STRATEGIC REPORT
2
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Chief Executive’s Report .................................... 4
COVID-19 Update ............................................... 10
................................................ 12
How we do Business ........................................ 14
Our Business Model .......................................... 16
Our Strategy ........................................................ 18
Delivering Positive
Outcomes to Clients ...................................... 20
Growing and Developing
the Partnership .............................................. 22
Enhancing our Investment Proposition ... 24
Achieving Sustainable Growth in Profits ... 26
Attracting, Retaining
and Developing Talent .................................. 28
Our Responsible Business ............................. 30
Chief Financial Officer’s Report .................... 50
Financial Review ................................................ 54
Risk and Risk Management ........................... 73
Approval of the Strategic Report .................. 81
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
3
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2020
STRATEGIC REPORT
£129.3bn
38.49
£14.3bn
4
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
2020 was an extraordinary year for
individuals, families, businesses and
broader societies across the globe, with
events shaped by the COVID-19 pandemic
that began early in the year. Our lives have
been disrupted and we have all had to
protect the physical, mental and financial
health of ourselves, our friends and loved
ones, our colleagues, and the vulnerable.
rapidly changing environment. Some detail
through 2020 is provided on pages 10
Our operations and performance during
2020 were inevitably disrupted by the
lockdowns and social distancing.
years, I am very pleased to report that our
business has demonstrated real resilience
and made further progress, supported by
our engagement with our clients, our recent
major investment in technology platforms,
and the agility of our advisers and employees.
Our people, together with the broader
commendably in the most trying of
circumstances. They have demonstrated
once again the core values and behaviours
that we hold dear so I would like to thank
them all for their hard work, dedication
After a strong start to 2020 with 12%
restrictions in the second and third
Encouragingly, fourth quarter gross inflows
underscored the resilience of our business
with a modest improvement on 2019,
providing for full year gross inflows of
The position for net investments followed
and retain investments in 2020 is a great
demonstration of the strength of
relationships our advisers enjoy with
These strong net flows, together with
management by 11% to a record
Whilst the growth in funds under
management bodes well for future income,
our income in 2020 was impacted by the
more challenging new business and
investment markets. Despite a more
difficult external environment we continued
modest pace.
Once again, the outcome for the year was
significantly impacted by the Financial
Services Compensation Scheme (FSCS)
levy we incurred. Our contribution to the
levy in 2020 was £36.7 million some 33%
higher than a year ago. Whilst we continue
to support an industry safety net for
consumers, the increasing size of the levy
Good companies are having to continue to
fund a significant cost over which they have
no control or influence.
Taking all this together, the underlying
versus £273.1 million in 2019. Given the
unprecedented and challenging conditions
during the year, we see this as a very
As we look forward, we must ensure we are
an agile and dynamic business, one that is
able to flex to the changing needs of both
the Partnership and clients. To ensure we
have our investment, our resources, and
business forward, in early 2020 we began
against our strategic priorities.
During 2021 we are therefore simplifying
our operations where we can, removing
duplication of work and stopping those
tasks that are now no longer needed.
Unfortunately, this streamlining of the
business means a loss of around 200
business. We hope, however, that a
combination of filling vacant roles across
the business and a voluntary redundancy
programme in appropriate areas, will
mitigate the number of individuals
At the outset of the pandemic the Board
made the decision to withhold 11.22 pence
of the 2019 final dividend, until such time
when the financial and economic impact
decision provided the funds to ensure we
had the ability and flexibility to continue to
provide clients with the quality of service
they would need through the Partnership in
scenarios that had the potential to become
significantly more challenging.
I am pleased to report that those potential
scenarios did not come to pass and
therefore we have not needed to utilise
those funds. Whilst the pandemic is still
on-going, we now have greater visibility
to-date and a vaccination programme is
being rolled out across the UK. These
developments, together with the proven
financial resilience of the business, gives
amount as a further 2019 interim dividend
to shareholders on the register at the close
of business on 5 March 2021.
The dividend for 2020 has been determined
under our existing dividend policy which is
to pay out circa 80% of the underlying
was declared and the Board is therefore
proposing a final dividend of 38.49 pence
per share to be paid, subject to approval of
to shareholders on the register at the close
of business on 16 April 2021. A Dividend
Reinvestment Plan continues to be available
for shareholders.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
We seek to give clients the confidence
trusted relationships between our advisers
and their clients is critical to achieving
challenging of years when market volatility
was heightened, economic uncertainty
reigned, and concerns over personal health
and wealth will have been front of mind for
many. In these circumstances, the careful,
guiding hand of our advisers will have
brought reassurance, comfort and
confidence for clients and helped to
The nature of client engagement did of
course change from the physical to the
virtual, so it has been important that we
service proposition accordingly. We know,
for example, that advisers increased the
frequency of their client interactions,
making use of virtual meeting platforms
needed time. We naturally supported this
technological capability to support their
client engagement, including the launch
DocuSign, an electronic signature tool.
While we look to client and adviser
satisfaction as being key yardsticks for
recognition in the shape of industry awards.
The highlight was once again being voted by
clients as the ‘Wealth Manager of the Year’
in the City of London Awards for the sixth
successive year, recognition of
client proposition.
We have long recognised that financial
advice provides not only financial benefits
for clients, but non-financial benefits too,
International Longevity Centre (ILC) in
preparing their report that was published in
2020. This report explored the non-financial
benefits of financial advice and it found that
‘people who take advice are more confident
about their financial future and better
prepared for retirement’ and that ‘advice
improves financial literacy, confidence, and
delivers greater control, reassurance and
peace of mind’.
The Partnership performed tremendously
well during a very difficult operating
environment in 2020. Our advisers adapted
quickly to rapidly changing circumstances,
demonstrating real agility and flexibility in
order to maintain their support for their
clients and keep their businesses healthy.
Their efforts have been aided by the
investments we have made over time
proposition for them, not least in
In 2020 we safely decommissioned our
legacy back-office administration systems
following completion of migration to our
new Bluedoor platform in 2019. The
investment we have made into building this
new, modern IT platform has already served
the business well, providing us with a much
greater degree of operational resilience
through the pandemic. It has also been
complementary technologies to better
service the Partnership and clients
Our collaboration with Salesforce gathered
pace through the year and together with
Bluedoor we now have a leading, scalable
technology infrastructure that will benefit
continue to build additional functionality
technology infrastructure, ensuring that
Supporting and developing the Partnership
has been critical to our success over time
and we are pleased to have made further
progress in 2020. In addition to the core
programmes noted above, we have sought
to invest in other ways to make it easier for
our advisers to engage with clients and
manage their businesses. We believe there
is considerable potential for further growth
in Partner productivity in the coming years
and ‘making it easier to do business’ will be
a key foundation to this outcome.
We retain a strong commitment to growing
the Partnership so that we can provide
value-added financial advice and services
to more clients over time. However, during
the COVID-19 crisis we took the deliberate
step of slowing experienced recruitment
activity. We were mindful that in the face
financial advisers across the UK will have
rightly been focused on supporting
businesses secure and we therefore did
important work.
6
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
We also made changes to our Academy
programmes, pausing new intakes during
the early period of the pandemic and moved
all existing cohorts of ‘students’ to virtual
learning environments.
These deliberate actions naturally resulted
in lower growth in the Partnership than
normal and we ended the year with a total
end of 2019.
Our proposition for advisers and clients is
stronger than ever, so we remain confident
in our ability to attract advisers of the
highest calibre to our business. With both
the recruitment of experienced advisers and
new Academy intakes having now restarted,
2021 will see us getting back to building the
Partnership with a recovery in growth to
some 3-5% for the year.
Looking further ahead the external market
of experienced advisers has not been
growing materially and, taking account
expect the size of the adviser market to
reduce in coming years. Consequently, the
importance and success of the Academy
will be critical to our success in future years.
It is therefore pleasing that we start 2021
with 244 ‘students’ in the Academy and
financial advice join the Academy this year
in one form or another.
2020 was an extraordinary period for
investment markets, with the first half of the
year in particular characterised by extreme
volatility and the second half seeing strong
recovery across many investment markets.
Against this backdrop the returns of our
portfolios proved resilient helping to keep
our clients on track towards their long-term
financial goals.
We made a number of changes to our
appointment of Somerset Capital
Management as the new manager of our
Global Emerging Markets fund and the
appointment of Pzena Investment
Management, Sanders Capital and Artisan
Partners to manage our Global Value fund.
Later in the year, we strengthened our global
equity offering through the redesign of our
Growth fund, these multi-manager
strategies are a key pillar of global strategic
asset allocation within our Growth and
Income portfolios and seek to drive client
returns by utilising complementary
investment styles.
In December, we also evolved our fixed
income range with the addition of BlueBay
Asset Management to our Global High
diversification within the fund through
increased exposure to emerging
We were also very pleased to launch an
innovative range of funds designed to
provide investment solutions around the
challenge of decumulation. Our three
InRetirement funds are market leading
offerings that allow clients, with the
to map out their objectives and find a
suitable investment solution that is able
according to their specific needs.
support positive client outcomes through
our IMA but also the need to do so in a way
that has a positive impact on the world we
live in. We are therefore pleased to have
delivered on our commitment to have all 39
of our external fund management houses
as signatories to the United Nations
Principles for Responsible Investment
(UNPRI). We have also progressed our client
disclosures around responsible investing,
Portfolio Carbon Emissions Reports. This
level of transparency helps us, advisers and
clients consider how the carbon footprint
benchmarks. In line with our goal of greater
first Value Assessment Statements, a
detailed review of the value offered by our
We strongly believe the developments
investment proposition and ensure we
continue to offer a compelling fund range
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
7
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
Our Asian operations have faced some
considerable external challenges over the
last two years firstly with the US/China
trade rhetoric and the demonstrations in
Hong Kong during 2019, and then the
COVID-19 pandemic in 2020.
Whilst these challenges naturally
inflows for the year of £321 million, growth
of some 27% year on year whilst net inflows
were 15% higher at £257 million. Funds
under management ended the year 26%
higher at £1.2 billion.
We remain confident about the long-term
both the fundamental attractiveness of
management businesses in those markets,
and the investment we have already made
to develop our scale and capabilities in our
chosen territories.
Having reached more than £1bn in FUM,
accelerating the path to cash result
profitability. As part of this journey we took
the decision to reduce the number of new
adviser entrants in the business and
therefore ended 2020 with 132 remaining
but experienced advisers.
This shift in focus meant that the annual
operations peaked in 2019 with the 2020
net investment reduced. As the income
from existing funds under management
net investment cost to reduce year by year
with the operations becoming cash result
positive in 2025.
Rowan Dartington continues to play an
important role in complementing the
investment capabilities of our IMA,
providing an attractive and differentiated
proposition that supports our ability to
attract advisers to the Partnership and for
our advisers to attract and retain clients.
In 2020, the difficult trading conditions
caused by the pandemic also impacted new
business for Rowan Dartington with gross
inflows some 17% lower at £426 million
Funds under management ended 2020 at
£2.9 billion which was 3% higher than the
start of the year.
The combination of lower flows and volatile
markets reduced the planned income of
discipline resulted in a lower net investment
cost in 2020 compared to 2019. We expect
the investment cost to continue to decline in
coming years with the operations becoming
cash generative in 2024.
We aspire to be a leading responsible
business, one that demonstrates positive
social impact from our core business
activities. It was therefore a really proud
back to those who are less fortunate
Charitable Foundation. The pandemic had a
significant impact on the charity sector, with
many fundraising events cancelled. The
Foundation was not immune from these
challenges, but I’m delighted to announce
that our community still raised a fantastic
£9 million (including matching) which
enabled the Foundation to provide more
than £10.5 million of grants to support
many great causes through a difficult year.
We were also able to advance future
commitments and increase the flexibility
£1.2bn
£2.9bn
8
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
As well as helping those charities with
whom the Foundation had an existing
relationship, a special Foundation appeal to
our community raised £550,000 (including
matching) for the National Emergencies
Trust and NHS Charities Together, two
leading charities involved in the Country’s
frontline COVID-19 response. The
fundraising supplemented a donation of
£200,000 by the Foundation to the National
Emergencies Trust and a combined
Corporate and Foundation donation of
£150,000 to the Trussell Trust.
Of equal importance to providing financial
support, was providing the time and effort
of our people, so during the pandemic we
allowed all employees to take unlimited
volunteering days.
As covered earlier in my statement, as the
custodian of £129.3 billion of our clients’
savings and pensions, it is important that
we invest this money in a responsible
manner, ensuring that we have a positive
impact on the world around us. We have
developed our approach to responsible
investing over time and we are also
progressing our reporting frameworks with
our Task Force on Climate-related Financial
Disclosures (TCFD) report for 2020 to
become available on our website. In 2020
we took the important step of joining the
Net Zero Asset Owners Alliance (NZAOA),
making a public commitment that all our
investment portfolios will be carbon neutral
by 2050. We have the desire for both
ambition and action in order to drive
I am delighted to welcome Paul Manduca to
the Board as a Non-executive Director and,
subject to regulatory approval, Chair
designate. Paul brings a wealth of expertise
forward to working with him in the
I would like to take the opportunity to
express my sincere thanks to Iain Cornish
who will be stepping down from the Board
as Chairman at the 2021 AGM. Iain has
provided wise and valuable counsel to the
Board since joining in 2011 and we wish him
well for the future.
2020 was an extraordinary year that will
individuals choose to live their lives and
backdrop, we were delighted with the
which again delivered for its clients,
Partners shareholders and employees.
During 2020, despite the disruption caused
by COVID-19, we continued with our 5 year
business planning cycle although we were
able to factor in the lessons we have learned
this review, we have tested and refined our
in the light of the attractive market outlook
for our face to face advisory business
model, the scale of the business we
management of £129.3 billion at
developments we have made to our
technology infrastructure. The key
• We believe that the demand for trusted
advice and helping individuals’ financial
wellbeing, is stronger than ever. As the
largest wealth manager in the UK, with
strength of our client proposition, together
with the resilience of our community, we
are ideally placed to continue to grow
gross flows at some 10% per annum.
• This growth will be supported by the
continued recruitment of experienced
advisers, Academy graduations and
supporting Partners to grow their
easier to do business with.
• The advice and service provided to clients
by the Partnership, together with their
strong relationships and our client
proposition, will provide for continued
strong retention.
• This continued growth in gross flows and
strong retention should see funds under
management increase to in excess of
£200 billion by the end of 2025. This will,
however, be influenced by investment
returns.
• Whilst we will continue to invest in the
business to support our continued growth
and maintain our market leading position,
the technological foundations that we
have in put in place provide us with
greater operating flexibility and efficiency
such that our annual expense growth
going forward will be around 5%.
• Year by year, growth in the cash income
emerging from the release of funds in
gestation will support significant growth
in the underlying cash result.
• A dividend pay-out ratio set at 70% of the
underlying cash result, balancing cash
distributions to shareholders and
retention in the business, in particular
given the change in mix towards pensions
business; future interim dividends will be
set at 30% of the full year dividend for the
prior year.
Clearly the external environment will be
important but achievement of these
planning assumptions would see
attractive new business growth over the
next five years and, underpinned by the
release of cash from funds in gestation,
significant growth in the cash result and
therefore dividends per share.
In the near term, whilst we are encouraged
by the moderate growth in new business we
have seen in the early weeks of 2021, the
external environment remains challenging.
There remain difficult months ahead but as
COVID-19 restrictions ease, we are hopeful
there will be an economic recovery and we
will see a return to more normal growth in
new client investments.
24 February 2021
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
9
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
COVID-19
Given the speed with which the pandemic
escalated here in the UK, our initial focus
was on three priorities: first, ensuring the
safety and wellbeing of all our people,
whether employees or the Partnership;
second, optimising our operating systems
and processes so that we and our advisers
could continue to provide uninterrupted
support to clients throughout these difficult
and unique times; and third, extending our
financial support through the grants
Having set these priorities in place, we were
then able to respond quickly and with clarity
of focus. For example, we transitioned rapidly
to remote working practices for our people,
leveraging the flexibility that already existed
within our technology estate. This meant that
within a matter of days of the initial national
lockdown we had all but a handful of our
employees performing critical roles (for
example managing the post) working from
home. We also recognised the need to
consider the physical and mental health of
our people in this new environment so we
provided staff and their families with access
to online 24/7 GP services, mobilised our
Mental Health First Aiders to help support
our people, and increased the frequency of
our communication and engagement with
employees to ensure that social distancing
did not result in emotional distancing.
From the perspective of our business
operations, we have benefited enormously
from our investment in re-platforming our
Bluedoor. As well as facilitating electronic
straight through processing, Bluedoor
enabled us to accelerate the roll out of
complementary technology to help advisers
continue to support their clients. For example,
we launched DocuSign, a secure e-signature
system that streamlines document
professional and secure messaging platform
that facilitates conversations between
advisers and clients. The Partnership naturally
seeks to remain close to clients at these times
of uncertainty, providing them with continuity
of advice and service. Our deployment of
these innovative tools has proved helpful
We know that we are in a fortunate position
to have benefited from such resilience and
we do not take this for granted. We have
therefore continued to do our best to provide
help those for those who need it, particularly
through support and funding for charities
that are able to make a real difference in
people’s lives. This has been particularly
important during 2020 when the charitable
sector has been hit hard by funding
Foundation has responded by forward
funding its financial commitments to the
charities with which it is associated, and
for the National Emergencies Trust and NHS
Charities Together. In addition, we allowed
our employees to take unlimited volunteering
time in support charitable causes.
Our aim throughout has been to remain
focused on our key priority areas while
acting with agility and flexibility to changing
circumstances over time. For example,
guidelines to quickly close all of our
corporate offices early on in the pandemic,
but we were able to re-open them in a
COVID-19 safe way and on a case by case
basis as and when the Government advice
changed accordingly. This was important
for us as while we know that our colleagues
can work remotely, this will not have been
appropriate for all of them.
Another example is the way in which we
utilised the breadth of skills and expertise
across our business in a more flexible
manner during the year. Recognising the
need to pivot towards areas of critical
business dependency during March and
areas for a limited period of time. This proved
invaluable in ensuring we continued to deploy
appropriate levels of resource into those
areas of most pressing operational priority.
Overall, our business has proved resilient
the COVID-19 pandemic. Having sought
environment, we saw the Partnership
10
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
working hard to support their clients at a
time of heightened uncertainty and market
volatility. Virtual client meetings replaced
physical ones, allowing our advisers to
remain in face-to-face contact with their
clients at a time when their need for a
guiding hand was more important than
investments remained strong through 2020,
and clients continued to invest in order to
support their long-term financial objectives.
We have though seen some impact on the
ability of advisers to attract new clients as
result of lockdowns, tiering systems and
general social distancing measures.
Technology has played an important role
contact with existing clients, but there is
introductions in helping to build the levels
During 2020, we attracted gross inflows
attractiveness of our overall proposition for
clients, while the retention of over 96% of
existing client investments resulted in net
inflows of £8.2 billion. We think this is a
of the operating environment we have faced.
Growth in the Partnership was also
impacted by the COVID-19 pandemic in
2020. Sensitive to the challenging external
environment for many financial advice
slow the pace of our experienced adviser
recruitment activity and allow financial
advisers to focus fully on looking after their
clients and businesses during this time.
We also paused all new intakes to our
Academy programmes and moved all
existing cohorts of student to virtual
learning and assessment. Despite this,
continued strong adviser retention coupled
with modest recruitment resulted in net
adviser growth to 4,338 advisers
From a financial perspective, our fee
income was impacted by lower investment
market levels, particularly in the first half
business volumes. We continued to invest
into the business in order to underpin future
growth and we also accelerated investment
into technology in order to facilitate remote
client engagement and servicing. However,
Second, that the Partnership represents
a remarkably resilient and agile collective
mile to support their clients. The
challenges of 2020 have been
considerable, but the Partnership has
adapted admirably to the circumstances,
displaying true entrepreneurial spirit.
Third, that we have a community of
really do care about helping those who
need it. The time and funds that out
people have donated to support the
and other good causes, highlights this
key aspect of our shared culture and one
that we should be proud to preserve.
While the COVID-19 pandemic has had a
significant economic impact for the UK
as a whole and for the personal finances
of individuals, it has if anything increased
the need for people to seek advice to
help them achieve financial wellbeing.
Social distancing and lockdown
restrictions have resulted in individuals
comfortable with the use of technology,
whether to access data and information,
or as a channel for communications.
investment we have made into these
areas in order to enhance our leading
proposition as a wealth management
business built on the strength of
personal, trusted relationships
supported by leading technology.
Providing face-to-face advice in the
facing pressures from increased
regulation, economic volatility,
COVID-19 pandemic have made this
environment even more challenging, so
proposition for advisers and clients alike.
We are therefore confident in our growth
prospects.
recognising the more challenging
environment we also took measures to
expenditure where possible and where
Partnership, nor our ability to accommodate
new business growth. Whilst we continue to
be a very profitable business, our Underlying
cash result has therefore decreased from
£273.1 million in 2019 to £264.7 million
Importantly, our financial position has
remained strong throughout, with the
resilience of our solvency position providing
protection and comfort for all stakeholders.
This reflects the fundamental simplicity of
our business model and therefore the way
in which we manage our balance sheet,
which is to do so prudently in order to
ensure we can safeguard our clients’ assets
and protect our business. We recognise too
that in order to be able to ensure our clients’
interests are protected, it is important that
the Partnership remains in good financial
health. During 2020 and in light of the
pandemic, we undertook work to consider
not only the potential stresses to our
solvency and liquidity that could emerge
from COVID-19, but also what stresses
therefore what support we might need to
extend to them in extremis. This thinking
was an important input into the Board’s
decision, in April, to withhold 11.22p of the
proposed 2019 final dividend.
While 2020 was a very challenging year
operationally and financially. The COVID-19
pandemic has not ended so we will continue
to carefully monitor the risk its presents to
our business and the Partnership over tim
2020 has been a very challenging year but
one in which we have learned numerous
lessons. We would highlight the following
First, that an engaged workforce allied to
excellent technological capability, means
we have been able to work remotely very
effectively. While we look forward to the
time when we can all come together as
colleagues once more, we see the holistic
benefits of operating more flexible working
practices going forward.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
11
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
0 105
Source:
ONS
Million
30%
22%
20%
23%
5%
Despite the adverse economic impact of
COVID-19, total UK retail wealth remains
large and is projected to grow, with third-
party data suggesting that retail liquid
assets alone account for some £3.4 trillion
(as at the end of 2020), of which c. 70% is
market of individuals with £50,000 to
GlobalData). Additionally, individual
wealthfrom personal pension assets and
insurance-wrapped savings is currently
estimated to stand at £1.2 trillion
We know, however, that 51% of total UK
personal wealth is concentrated in the
hands of savers between the ages of 45
This outlines the extent of future asset
decumulation and the size of opportunity
that intergenerational wealth transfer
presents.
We estimate that there are c.11 million
individuals in our target market in the UK,
with around half currently seeking some
form of financial advice. Although there has
been a growing trend of low-touch, digital
advice propositions in recent years, demand
for personal, face-to-face advice has
continued to grow as individuals lacking
either the time, inclination or ability to
manage their financial affairs, seek help
from a trusted adviser. We expect the
demand for face-to-face advice to continue
to grow.
Factors driving this continued demand for
advice include:
• intergenerational wealth transfer;
• the complexity of personal taxation;
• the decline of defined benefit pension
schemes;
• the flexibilities and complexities afforded
to individuals via ‘pensions freedom’; and
• the scale and projected growth of the UK
savings gap.
While demand for advice continues to
increase, the population of financial
advisers across the UK is forecast to decline
in the coming years as experienced advisers
approach retirement or sell their businesses
due to regulatory pressures. As a result, the
‘advice gap’ looks set to widen.
established as the leading advice-led wealth
management business in the UK with 4,338
advisers at the end of 2020. We are a
business with a proven track record of
attracting and retaining experienced
financial advisers, as well as those looking
to establish new careers via our Academy
programmes.
Source:
FCA
12/10
12/11
06/12
12/12
07/13
01/14
10/14
11/15
12/16
11/17
12/18
12/19
0 10 5020 30 40
Thousand
GlobalData
12
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Million
2018
2019
2020f
2021f
2022f
2023f
2024f
0 5 1510
Source:
GlobalData
The UK wealth management
market is constantly evolving,
providing both opportunities and
challenges to market participants.
Below are five key trends that
are shaping the UK wealth
management landscape of
tomorrow:
market demands that we continuously
strive to improve our technology offering,
demands.
long-lasting relationships throughout
recognise that as we continue to grow in
size and influence, we have the opportunity
to effect positive social change through
engaging in public policy, as that is
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
13
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
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14
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
The Our Responsible Business section on
pages 30 to 49 describes our priorities in
becoming a leading responsible business
as well as the progress we have made on
this journey.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
15
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
S
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THE
PARTNERSHIP
CLIENTS
EMPLOYEES
804,000
4,338
£129.3 billion
16
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
+2%
89%
-23%
£102.1m
807
1 The dividend per share disclosed in 2019 was
in April 2020 to withhold 11.22 pence per share until
such a time as the financial and economic impacts
of COVID-19 became clearer. The withheld amount
of 11.22 pence per share has now been reinstated as
a further 2019 interim dividend and will be paid on
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
17
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
G
Our growth strategy for delivering
increasing gross inflows involves:
• Growing the size of the Partnership;
• Improving adviser efficiency; and
• Broadening our client proposition.
£14.3bn
96%
Our support strategy for delivering
sustained retention of FUM involves:
• Delivering high-quality service to advisers
and clients;
• Driving consistently good long-term
investment performance; and
• Ensuring we remain a robust and resilient
business that clients trust.
t
B
18
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
G
t
B
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
19
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
•
•
•
•
We work hard to give clients the confidence
to create the futures they want. This means
working together with clients and our
advisers in order to plan, grow and protect
their financial futures. This approach is
underpinned by our careful fostering and
nurturing of a culture that focuses on
value of investing in long-term relationships.
There are no ‘typical’ clients of
supporting the financial futures of over
800,000 individuals ranging from teachers
to bankers, infants to elderly, and those with
vastly complex financial affairs as well as
those whose affairs are much simpler. All
have different requirements, demands and
expectations but what all share is the need
for a trusted adviser to help guide them over
the long term.
Our advisers are able to provide expert
advice on long-term investment, retirement
planning, intergenerational wealth and
protection, and this is complemented by
providing clients with access to an array of
financial solutions including our proprietary
funds and investment portfolios as well as
products and services such as general
insurance, legal services or investment in
venture capital trusts.
Clients benefit from the security of investing
We have the capacity to perform in-depth
due diligence as part of our Investment
Management Approach as well as to
undertake rigorous quality assurance on
the suitability of advice delivered by the
Partnership, thereby providing clients
Our business model is based on managing client wealth
and so the number of clients is a key measure of the
health of the business. As well as reflecting past
performance, it also indicates future opportunity, as
comes from existing clients or their referrals. As a result,
increased client numbers during 2020 is a strong positive
indicator for the future.
2018 682
733
804
2019
2020
Our business is long-term and client retention feeds
directly into the financial results. However, it is also an
indication that minimum standards have been met. We
are therefore delighted that retention was again above
95%, continuing the trend of recent years.
%
2018 96.4
97.0
96.9
2019
2020
1 We have removed client advocacy (percentage of clients that would recommend
importance of measuring client satisfaction on a frequent basis, we have ceased conducting
biennial Wealth Account surveys as the primary method of measuring this. As a result, data is
unavailable for 2020 and 2019. We will instead be conducting more frequent surveys of client
opinion, commencing in 2021, and we will report on these in due course.
20
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
We firmly believe that the provision of
trusted, long-term face-to-face advice
outcomes and give them greater control
and confidence in their futures. A number
take advice are financially better off over
1
.
In 2020, we supported work undertaken
explored the non-financial benefits of
financial advice. Its findings
2
included
• People who take advice are more
confident about their financial future
• Advice improves financial literacy and
confidence, and delivers greater control,
reassurance and peace of mind.
These findings highlight that financial
advice can provide valuable non-financial
benefits to clients, but they also recognise
that achieving such benefits is not
automatic. Rather, delivering these
non-financial benefits can be supported by
providing an ongoing personalised and
tailored service for clients delivered by a
well-qualified adviser with appropriate
people skills.
This resonates with how we see our
advisers supporting their clients through
our Plan, Design, Review process, which
The combination of long-term financial
advice, long-term investment returns,
relationship with a trusted adviser, is one
that helps drive positive client outcomes
and create tangible value for all
We provide an integrated wealth
management service for clients and believe
that the costs and charges we disclose are
.
Importantly, we frequently commission
independent experts to benchmark our costs
and charges against comparable offerings
across the UK wealth management industry.
Recent research conducted by Ernst & Young
found that when compared to 19 other
businesses in the UK, our total costs were
towards the lower end of the range on a
like-for-like basis.
To ensure we consistently deliver positive
client outcomes we work hard to identify,
and appropriately mitigate, the risks that our
client proposition fails to meet the needs,
objectives and expectations of our clients,
and that we fail to provide quality, suitable
advice or service to clients. Successful risk
management not only protects clients and
our business from harm, but it also confers
commercial advantage as we can benefit
from superior client retention, advocacy and
referrals, and further build our reputation as
a safe, trusted custodian of clients’ financial
wellbeing.
On pages 76 and 77 we give details of the
principal risks associated with our business,
however, the following list is a summary of
those that we consider most relevant to
supporting our objective of delivering
positive client outcomes:
•
enables us to be confident clients’
experience of our administration meets
their expectations
•
client proposition-related risks enables us
to be confident in meeting the changing
needs, objectives and expectations of
•
related risks enables us to be confident
•
risks enables us to be assured of being a
financially resilient company that clients
can trust with their money
•
Partner proposition-related risks enables
us to be assured that clients will have
continuity of service from highly qualified
and supported Partners
•
Management of risks to our brand
ensures clients can be assured that they
are investing their wealth with the UK’s
leading financial advice company.
1 What it’s worth: revisiting the value of financial advice. International Longevity Centre UK, 2019
2 Peace of mind: Understanding the non-financial benefits of financial advice. International Longevity Centre, 2020.
:
The firm represented by the first bar (Reduction in Yield
of 1.3% each year) does not offer an ongoing advice
service.
The figures shown have been produced by Ernst &
Young LLP (EY), an external consultancy. They show
the Reduction in Yield each year over a period of
managed, unwrapped mutual funds (Unit Trust, OEIC
Investment returns of 5% each year have been
assumed. EY has collated and computed these figures
not be relied upon by any third party in making
management or investment decisions.
St. James’s Place
0% 2% 4%
1.3%
2.3%
3.5%
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
21
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
•
•
•
•
Our services are promoted and available
exclusively through our Partnership, a group
consisting of 4,338 professional highly
qualified advisers and their 5,914 support
staff. We put our confidence in their ability
to build and develop long-term relationships
with their clients. The Partnership support
their clients by providing investment,
financial and tax planning advice, allowing
them to play an ongoing financial coaching
role in pursuit of positive long-term
We provide a wealth of support to
successful businesses. We ensure they
have the confidence to create the futures
they want and leave them well positioned
Without our advisers, we would have no clients. We are
therefore pleased to have delivered growth in adviser
numbers despite having decided to slow the pace of
experienced adviser recruitment in 2020, sensitive to
advice businesses across the UK in the year.
2018 3,954
4,271
4,338
2019
2020
Adviser retention reflects advisers’ continuing satisfaction
with our proposition. We are therefore pleased to note that
%
2018 93.4
92.5
92.3
2019
2020
Gross inflows per adviser is a measure of their success as
business people, but also feeds into success for the Group.
In 2020 gross inflows per adviser decreased from £3.5
million to £3.2 million, reflecting the challenging operating
environment.
2018 4.0
3.5
3.2
2019
2020
22
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Our Partnership represents a diverse group
of 2,540 businesses, which range from
some of the UK’s largest financial advice
firms to small family practices and
sole-proprietor businesses. We make
available to them a range of financial
products and services that can meet the
diverse needs of their clients, including our
own broad range of investment funds and
portfolios. Our Partner businesses benefit
too from the backing of an established
FTSE 100 group that guarantees the
suitability of the advice that they provide
To facilitate the Partnership operating safely
and flexibly, we offer access to a range of
business services, including the following:
• Approved and regulatory-compliant
marketing and client literature
• Advice, technical support and tax
guidance
• Risk management and business
assurance
• Ongoing technology and back-office
administration
• Professional individual and business
development
Although increasing the number of advisers
across the Partnership remains core to our
strategic growth targets, the onset of the
COVID-19 pandemic made it appropriate for
us to focus more on supporting our existing
advisers. Sensitive to the challenging
external environment for many financial
advice businesses across the UK, we
decided to slow the pace of our experienced
adviser recruitment activity, allowing them
to focus on supporting their clients in a
challenging environment. Meanwhile, we
suspended all new intakes for the Academy
in 2020 and moved all existing Academy
cohorts to virtual learning and development.
Despite this, strong adviser retention
coupled with recruitment activity and
welcoming into the Partnership 156
graduates from our Academy programmes,
resulted in net adviser growth of 2% over the
year to 4,338 across 2,540 separate Partner
businesses. The broader Partnership
community has grown too with total
headcount including Partnership support
Our commitment to providing professional
development for the Partnership has
continued through 2020. It ensures our
advisers remain appropriately qualified,
technically able and fully equipped to deliver
a first-class service. Provision of learning
and development has been almost
exclusively digital, but innovative virtual
conferencing technology has been utilised
to enhance our leading offering. Providing
on-demand content has allowed our
advisers to continue their development at
Opportunities for developing the capabilities
of the Partnership have had an additional
focus on technology. The roll out of
Salesforce software, continued
enhancements to Bluedoor, and new
website infrastructure together with
enhanced support for Partner business
Successful management of Partnership-
related risks ensures that the Partner
proposition continues to remain attractive
for existing advisers and prospective joiners
so that we can attract and then retain
On pages 76 and 77 we discuss principal
risks associated with our business, but the
following text lists those that we consider
most relevant to supporting our objective
Partner business and Academy propositions:
•
of Partnership proposition-related risks
enables us to be assured that we remain
attractive to both existing and prospective
advisers, and that we can offer compelling
Academy and Next Generation programmes
•
client-proposition-related risks enables
advisers to be assured that they can meet
their clients’ needs
•
Management of risks to our brand
enables advisers to be assured that they
and their clients will be best served by
association with a leading and reputable
wealth management group
•
enables us to be confident that advisers
and their clients’ experience of our
administration continues to meet
expectations, and allows them to manage
their businesses efficiently and effectively
•
risks enables us to be assured that we
continue to comply with all regulatory
requirements and are also able to support
Partner businesses in meeting all their
regulatory requirements.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
23
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
•
•
•
•
helping give clients the confidence to create
the futures they want. We aim to deliver the
best possible client outcomes at every step
of the client’s journey by providing tailored
financial advice, incorporating goals-based
planning, alongside the implementation of
bespoke investment solutions and regularly
reviewing these plans to ensure they
circumstances of our clients. Delivering
financial wellbeing throughout what could
be a 100-year life only has meaning for us if
it is allied with a commitment to use money
as a force for good when it comes to the
treatment of the planet, people and fair play.
Gross inflows are the gross new investment and pension
business (principally single-premium) received during the
year. We aim to grow gross inflows by 10% per annum over
the long term. In 2020, gross inflows fell by 5%. This
reflected the challenging market conditions.
2018 15.7
15.1
14.3
2019
2020
Retention of funds is a result of satisfied clients and is
essential if FUM is to continue to grow. Net inflows reduced
by 8% in the year, largely due to higher stock markets in
2020 compared to 2019 meaning outflows were at a higher
value, combined with lower gross inflows.
2018 10.3
9.0
8.2
2019
2020
The profitability measures of the Group are ultimately driven
by the income we earn from FUM, which has exhibited
compound annual growth of 17% over the last ten years.
2018 95.6
117.0
129.3
2019
2020
24
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Our client proposition can be characterised
as Plan, Design, Review:
Our advisers start with a clear focus on their
clients’ goals, building a financial roadmap
through the use of technology and tools, to
meet short and long-term objectives.
Advisers can design a tailored investment
solution, taking into account risk, timeframe
and preferences, from our range of 42 funds
and nine Growth and Income portfolios
which form part of our Investment
Management Approach (IMA). Our range
funds fully integrate responsible investment
best fund managers from around the globe,
in a process overseen by our internal
investment team, our Investment
Committee and a range of independent
consultants. Our holistic client offering
range to encompass other more complex
solutions such as Client Banking offerings,
tax-advantaged panels and Private Client
services as well as discretionary fund
management and stockbroking services.
Once plans have been implemented,
advisers regularly review them with clients
to ensure they remain on track to meet their
goals and that the roadmap remains fit for
purpose, allowing for any changes in
circumstance. This helps to ensure that
clients maintain a long-term investment
mindset and are not swayed by short-term
market events.
The data below illustrates the breadth of
research, analysis and monitoring
conducted during 2020 by the various
functions that support our IMA, which
includes the dedicated in-house investment
analyst function, based in Cirencester and
London, our Investment Committee and
external investment consultants.
2019
Fund manager monitoring
meetings conducted 627
Investment Committee
22
Investment professionals
working exclusively on behalf
63
The scale and resources of the
function in the UK and Asia have increased
in recent years. The team now comprises
more than 60 specialists who are not
funds and portfolios, but also investment
management operations and adviser/client
consultancy services. During 2020, there
was also a clear focus on broadening the
range of external expertise and input to
support the work conducted by our
in-house team.
been recognised as a global leader in data,
analysis and insight, covering public and
private markets. We also engaged Rocaton
to assist in strategic development of our
fund range with a key change to our Global
Rocaton has broad experience of consulting
to over 80 investment firms and gives
platform with impressive scale.
Prudence, Balanced and Growth. These
challenges faced in decumulation, often
such a difficult financial planning area
These include longevity risk, whereby you
outlive savings, and sequencing risk, which
involves the erosion of capital due to
withdrawals during market falls and can
lead to shortfalls.
These new funds allow clients, with the
to map out their objectives and find a
suitable investment solution that is able
according to client need. This approach
demonstrates engagement with individual
client needs and the focus on modelling
client outcomes through the use of financial
planning tools. Technology is already
helping us to underpin our advice and
investment process to help provide clients
Our Investment Management Approach
clients to achieve financial wellbeing through
the careful and responsible management of
their investments. As a result, our risk
framework places a strong emphasis on
ensuring client assets are invested in
accordance with their expectations and that
they deliver positive risk-adjusted returns
discuss the principal risks associated with
our business, but the following text lists
those that we consider most relevant to
management proposition to help clients
achieve financial wellbeing:
•
client-proposition-related risks enables
client expectations and that we design
investment fund and portfolio solutions
that help meet long-term client goals,
using an appropriate blend of asset
classes and investment strategies, and
delivered through high-quality external
fund management teams
•
related risks enable us to be assured that
clients’ goals and risk appetite are well
understood and that their funds are
invested appropriately.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
25
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
Our financial business model is
straightforward. We generate revenue
investments and then stay with us. This
grows our funds under management (FUM),
on which we receive:
• advice charges for the provision of
valuable, face-to-face advice; and
• product charges for our manufactured
investment, pension and ISA/unit trust
products.
Further information on our charges can be
found on our website:
.
A breakdown of our fee and commission
income, our primary source of revenue
reported under International Financial
Reporting Standards (IFRS), is set out in
Note 4 on page 169.
The primary source of the Group’s profit is
the income we receive from annual product
management charges on FUM. As a result,
growth in FUM is a strong positive indicator
of future growth in profits. However, most
management charges are not taken for the
first six years after the business is written,
so the ongoing benefit of these gross
inflows into FUM for a given year will not be
seen until six years later. This means that
the Group always has six years’ worth of
FUM in the ‘gestation’ period. FUM subject
to annual product management charges is
known as ‘mature’ FUM. More information
about our FUM and the fees we earn on it
can be found in Sections 1 and 2 of the
Financial Review on pages 55 to 70.
Does not yet generate annual
product management charges
Generates annual product
management charges
Business moves from gestation
FUM to mature FUM after 6 years
1
The European Embedded Value (EEV) reporting basis
assesses the full value of the emergence of shareholder
cash returns over the long term. New business (gross
inflows) is the most significant underlying driver of EEV
operating profit. The reduction in new business was partially
offset by strong retention, overall resulting in a 3% decrease
in EEV operating profit before tax year-on-year.
2018 1,002.0
952.0
919.0
2019
2020
Underlying cash result reflects the regular emergence of
cash from the business operations whilst also reflecting
Underlying cash result reduced 3% reflecting the challenging
market conditions.
2018 309.0
273.1
264.7
2019
2020
Delivering profit, particularly cash, means the Company
2018 48.22
49.71
2
38.49
2019
2020
1 Each of these measures reflect the underlying performance of the business. IFRS profit before tax,
and IFRS profit after tax, are not covered by the objective: information about why these do not
reflect the underlying performance of the business is set out on page 57.
2 The dividend per share disclosed in 2019 was 49.71 pence, which was prior to the Board’s decision
in April 2020 to withhold 11.22 pence per share until such a time as the financial and economic
impacts of COVID-19 became clearer. The withheld 2019 dividend has now been reinstated as an
interim dividend and will be paid on 24 March 2021 to shareholders on the register on 5 March
2021. For further information, refer to page 5.
IFRS profit before shareholder tax has increased by 75% from £187.1 million in
2019 to £327.6 million in 2020. This significant increase reflects the impact of
policyholder tax asymmetry, as well as an increase in wealth management fees
and a reduction in expenses. Further detail on the effect of policyholder tax is
included in the Financial Review on page 57.
26
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Initial and ongoing advice charges and initial
product charges levied when a client first
invests into one of our products are not
major drivers of the Group’s profitability,
because:
• most advice charges received are offset by
corresponding remuneration for Partners,
so an increase in these revenue streams
will correspond with an increase in the
associated expense and vice versa; and
• under IFRS, initial product charges are
spread over the expected life of the
investment through deferred income (DIR
The contribution to the IFRS result from
spreading these historic charges can be
seen in Note 4 as amortisation of DIR.
Initial product charges contribute
immediately to our Cash result through
margin arising on new business.
Our income is used to meet overheads,
in the business. Overhead expenditure is
carefully managed with clear targets set
infrastructure, which are known as
‘establishment expenses’. Other ongoing
expenses, including payments to Partners,
increase with business levels and are
generally aligned with product charges.
The Group invests in order to:
• continue building adviser capacity and
attract new funds;
• enhance the Group’s future capability
Academy, our discretionary fund
management proposition, and
• develop administration systems and
processes that will accommodate growth,
contribute to future improvements in
Partner and client experience, and reduce
the cost of business processing.
Whilst our financial business model is
straightforward, the impact of having a life
insurance company at the heart of the
Group results in accounting complexity
under our IFRS statutory reporting
framework. For this reason, we continue,
to supplement IFRS information with the
disclosure of alternative performance
measures (APMs). Our key APMs are the
Cash result and European Embedded Value
(EEV). A full Glossary of APMs is provided
on pages 232 to 234, in which we define
each APM, explain its use and, if applicable,
explain how the measure can be reconciled
to the IFRS Financial Statements.
Our IFRS Statement of Financial Position,
presented on page 155, contains
policyholder interests in unit-linked liabilities
and the underlying assets that are held to
match them. To understand the true assets
and liabilities that the shareholder can
benefit from, these policyholder balances,
along with non-cash ‘accounting’ balances
such as DIR and deferred acquisition costs
(DAC), are removed in the Solvency II Net
Assets balance sheet.
This balance sheet is straightforward
(2019: £1,131.8 million) is invested in
AAA-rated money market funds. This deep
liquidity represents 47% of total assets on
the Solvency II Net Assets balance sheet
Further information on why we believe
Statements is set out on page 57.
borrowings, including securitisation,
The Group’s primary source of net cash
generation is annual product management
charges on FUM. As noted on the page
above in relation to profit generation, most
of our investment and pension business
experiences a six-year gestation period
where there is no cash generated after initial
charges. This means that the amount of
cash generated will increase year-on-year
as FUM in the gestation period becomes
mature and subject to annual product
management charges, as well as increasing
due to new business.
Cash is used to make both short- and
long-term investments in the business
Our business model and risk appetite
results in the Group holding assets to fully
match the encashment value of our clients’
investments. This means that movements
in equity markets, currency markets, interest
rates, mortality, morbidity and longevity
have very little impact on our ability to meet
liabilities. This, combined with a prudent
approach to investing shareholder funds
and surplus assets in highly rated liquid
assets, means that we have a resilient
solvency position capable of meeting
liabilities even in adverse market conditions.
Further information is provided on page 71.
The Group seeks to create long-term value
for shareholders through executing on its
strategic objectives in order to deliver
sustainable growth in profitability over time.
Of key importance is carefully balancing
investment to underpin future shareholder
returns while exercising disciplined cost
management to achieve scale benefits.
We ensure the business is managed in a
financially prudent way and investment in
new projects is carried out after appropriate
due diligence is conducted, allowing the
business to scale in a controlled manner.
We continue to maintain an open dialogue
with our regulators and liaise closely with
them on existing and emerging regulatory
issues. On pages 76 and 77 we set out
detail around the principal risks associated
with our business, but the following text lists
those that we consider most relevant to
creating shareholder value:
•
financial risks enables us to support
which ultimately drive growth in FUM
financial risk management also ensures
the business is more resilient to adverse
external and internal events
•
Partner proposition-related risks enables
us to be assured that we will continue to
safely grow the Partnership and that we
are able to support the Partnership in
becoming more efficient over time,
thereby aiding FUM growth and retention
•
client proposition-related risks enables us
to be confident that we are able to meet
the needs of our clients, in turn contributing
to high retention of FUM
•
third-party scale and expertise enables us
to operate with a lower cost base whilst
accessing high-quality specialist services.
Management of outsourcing-related risks
enables us to be confident of maintaining
continuity of services and standards
across our third parties
•
of risks in this area enables us to be
confident that we will avoid material
disruption to our operations or costly
security breaches.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
27
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
•
•
•
•
We aim to be an employer of choice within
the financial services sector, one that is able
to attract, develop and retain some of the
best talent in the UK and give our people the
confidence to create the futures they want.
Beyond offering a career with a fast-
growing business with ambition, we place
great store in the commitment we make to
personal and professional development and
retaining the core values that have
underpinned our business success over
time. Our objectives are supported by a
clear sense of purpose and the pursuit of a
working environment that is committed to
equality, inclusion and diversity. In our 2020
employee engagement survey 87% of
employees throughout the Group,
outsourced providers, and 4,338 advisers
service to over 800,000 clients.
While not employees of the Group, we
consider the Partnership a critical part of the
our professional and personal development
support to them too. During 2020 rapid
changes to traditional working practices
came into effect as a result of the COVID-19
pandemic and in order to maintain our
support for the Partnership at this difficult
time, it was critical that we transitioned
rapidly to virtual engagement for our
programme of communication, training and
development. Virtual conferences, webinars
and workshops have focused on how
advisers can maintain effective performance
and client engagement in a fast-changing
environment, and we also developed
programmes that centred on maintaining
personal wellbeing through building
resilience and a positive mindset.
2 2019 comparative data presented here is derived from a ‘Pulse’ survey conducted in the year rather
than our formal employee engagement survey.
92%
95%
89%
87%
28
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
1.
2.
3.
4.
5.
5 1
2
3
4
We believe that the right culture is essential
to building a successful and sustainable
business. We have strong core values in
place that reflect what we believe in and
how we act.
We are a warm, inclusive community with
core values of always doing the right thing,
being the best version of ourselves and
investing in long-term relationships. We
have codified the culture of our organisation
to conserve and protect all those elements
that have helped make us successful today
and we have also identified some areas that
we will evolve to achieve our strategy.
Further information about our culture and
values and how they relate to our people
can be found on page 14.
ensuring that every person across the
organisation and Partnership feels a strong
sense of engagement and belonging in their
work, which we know plays a significant role
in people’s performance and success.
As COVID-19 driven changes to working
practices were implemented, these
objectives became vital, and the
organisation was able to respond
with little disruption.
With more flexible, ‘Anytime, Anywhere’
delivery options, content was focused
people’s changing circumstances and
conferences, webinars and in-house
produced videos and communications.
accelerated a ‘digital-first’ approach to
learning design and delivery.
A key focus for employee and adviser
development throughout 2020 has been
topics such as mindset, resilience, wellbeing
and change. These areas go hand in hand
with a focus on high performance. Other
initiatives included providing guidance on
practical ways to support people working
from home, leading remotely and returning
to the office environment.
Hearing directly from our people is very
important to us in providing real-time insight
into how our people are feeling. Typically,
surveys and monthly virtual round table
lunches hosted by members of our
Executive Board and the Senior Leadership
Team. Feedback and responses are shared
with our Board and Executive Board
enabling any areas of concern to be quickly
acted upon. In 2020, one such topic that
arose from these sessions was the matter
of clarity around promotions processes.
undertaken to embed improvements for
2021 and beyond.
As the initial impact of COVID-19 was felt
through the first lockdown, we took rapid
steps to support our employees by way of
supply of equipment to use remotely at
home, round the clock technical support
and the opportunity to participate in various
wellbeing activities such as on-line yoga
classes and mindfulness seminars, as well
the access to personal individual support.
Pulse surveys have been run at regular
intervals throughout the year covering a
variety of topics including leadership
visibility, culture and the impact of
COVID-19. One such pulse survey,
conducted in April 2020, was circulated
and wellbeing in the initial stages of the
COVID-19 crisis. We received more than
• 88% of employees agreed or strongly
agreed that they felt connected with their
teams;
• 90% agreed or strongly agreed that they
were clear on their current work priorities;
and
• 89% felt their managers were providing
the support they needed.
Attracting, developing and retaining
employees with suitable skills and
experience is crucial to ensuring the Group
is able to operate effectively, manage risks
appropriately and implement the Board’s
strategy. With the majority of our people
having experienced remote working for
most of the past year, it has been even more
important to ensure that risks relating to
employee wellbeing and morale are
appropriately managed. On pages 76 and
77 we discuss the principal risks associated
with our business, but the following text lists
those that we consider most relevant in
supporting our ambition to attract, develop
and retain high-quality employees:
•
risks ensures we are able to develop our
employees and help them forge long and
fulfilling careers with us
•
Management of risks to our brand helps
ensure we are viewed favourably by our
current and prospective employees,
enabling us to attract and retain a diverse
and skilful workforce.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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We aim to work in partnership to
plan, grow and protect clients’
financial futures. We do this by
creating a connected and
sustainable business that puts
creating healthy communities
centre of our strategy, both for our
clients and wider society. This
report evidences our impact on the
long-term wellbeing and resilience
of individuals, communities, the
environment and society.
Our approach ...........................................................30
Governance ............................................................. 31
Our lasting impact ..................................................32
A great place to develop your career .................34
Responsible investing ...........................................38
Our achievements ..................................................38
Managing our environmental impact ............... 40
Building relationships with suppliers ................ 44
Supporting our communities ..............................45
Charitable Foundation ..................................... 48
Our vision is to become a leading responsible business.
We demonstrate this through:
Our vision is to become a leading Responsible Business. Our business purpose and
approach seek to ensure our clients and their families have the confidence to create the
future they want through: financial advice, supported by advisers whom we help to develop
responsible and sustainable businesses; and by considering the global impact of our funds
through responsible investing. In our operations and business approach we support the
wellbeing of our employees, aim to work with sustainable suppliers, minimise and offset our
operational environmental impact and engage with a range of national and local community
programmes. Our approach is set out in the diagram below.
30
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Andrew Croft To ensure the strength and maintenance of the
unique culture throughout our community, and
Andrew Croft
To set the Group’s responsible business strategy and
approach, supported by the Social Value Steering
Group which oversees the management and
integration of responsible practice in the business.
Robert Gardner
1
Foundation, including overseeing grant-making and
compliance with the charity’s objectives.
sections 414CA and 414CB of the Companies Act 2006. The following table sets out where, within our Annual Report, we provide
further detail on the matters required to be disclosed under the sections above. In particular, it covers the impact we have on the
environment, our employees, social matters, human rights, anti-corruption and anti-bribery matters, policies pursued and the outcome
of those policies, and principal risks that may arise from the Company’s operations and how we manage those risks, to the extent
necessary for an understanding of the Company’s development, performance and position and the impact of its activity.
Our Responsible Business (page 34)
Our Business Model (pages 16 and 17)
Attracting, Retaining and Developing Talent (pages 28 and 29)
Our Responsible Business (pages 30 to 49), section 172(1) Statement (pages 88 to 95)
Delivering Positive Outcomes to Clients (pages 20 and 21), Growing and Developing the
Partnership (pages 22 and 23), Enhancing our Investment Proposition (pages 24 and 25),
Attracting, Retaining and Developing Talent (pages 28 and 29), Our Responsible Business
(pages 30 to 49)
Risk and Risk Management (pages 73 to 80), Strategic Report (pages 4 to 81)
Our Responsible Business (page 34)
Our Responsible Business (pages 30 to 49)
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
embed the UNSDGs that we align to into our long-term approach to business. Consequently, we have increased our
focus from four to six Goals. Below you can find the six Goals we have chosen to support, with our promise and results.
To improve money management in the
next generation by supporting schools in delivering
financial education and providing resources. Alongside
this, we aim to provide our Partners with the resources
and knowledge to teach financial education.
To also provide relevant financial skills and education to
our clients to give them confidence to create the future
they want.
In light of the closure of schools for part of 2020 in
response to the COVID-19 pandemic, we created virtual resources for
primary and secondary school students on financial education. We
have also created an online accreditation for advisers so they can
become qualified virtually to deliver financial education. These home
all, and have been advertised to local schools, Partners and employees.
In 2020 we delivered face-to-face financial education to 2,461 children
in over 37 sessions in 29 locations. Our free online resources also had
1,320 unique downloads.
To ensure equal opportunities for women
through our Inclusion and Diversity programmes and by
ensuring we align to national commitments.
In 2020, we increased female representation on the Board
to 42%. We have also committed to the Women in Finance Charter,
and to increasing the number of women in senior roles in our business
to at least 30% by 2023; we reported an increase in 2020 to 23%.
To invest in our employees through training
and development.
To increase the aspirations of young people by working
with schools and charities to support employability and
provide positive work experiences. As part of our social
mobility strategy we actively seek to support
disadvantaged young people into financial services careers.
We have further developed our internships,
apprenticeships and graduate programmes, creating new learning
This year 86 employees supported 726 people with virtual mentoring
and virtual work experience before they embarked on their careers.
We have also made a commitment to increase the volume of our 2021
intake and paid internships, all aiming to increase awareness of and
access to financial services jobs.
To encourage responsible practice among
our suppliers and fund managers in the areas of
environmental impact, societal impact and governance.
To support our Partner practices in operating responsibly
and aligning to national standards.
In 2020 we undertook an extensive project to improve the
due diligence of our suppliers.
We also launched a responsible business programme aimed at our
Partnership. We partnered with the Good Business Charter to support
practices on their responsible journey and offer a coherent framework
for responsibility.
Charitable Foundation, through funding and volunteering,
as its grants support charities that reduce social
inequality and promote economic inclusion.
To support employability programmes throughout
In 2020, the Charitable Foundation raised £9 million and
supported 807 charities. Since the Charitable Foundation’s inception,
over £102.1 million has been raised for over 3,700 charities,
supporting over 1.8 million people.
We have a strategic partnership with the DofE and have developed
virtual work experience programmes in 2020.
To control and reduce our environmental
impact and promote sustainable business practices.
We have incorporated ESG issues into our investments
and reported against the Taskforce for Climate related Financial
Disclosures (TCFD) framework, which covers governance structures,
risk management, targets and metrics. We maintained our 100%
purchasing of electricity from renewable sources, our Carbon
Disclosure Project ‘Grade B Management’ score and our carbon
neutrality through offsetting. All emissions are also in line with the
Greenhouse Gas Protocol.
32
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Acting responsibly is key to
achieving positive outcomes for all
stakeholders (see page 90 in the
Corporate Governance Report).
We have a defined approach and strategy
responsible business and we are striving for
excellence. To support us on this journey,
we undertook a materiality study to better
evaluate where we might focus our
resources and communications.
Our people are our greatest asset
and integral to our continued
success. Feedback from our
employees has indicated a greater
desire for increased flexibility, not
only where they work but also
when and how they work, so they
can balance both their professional
and personal commitments.
80%
Providing greater flexibility for part-time
work, job-sharing, remote working and
flexibility on hours has resulted in an
increase in our existing employee
satisfaction around achieving a better work/
home-life balance. As an employer, these
changes have and will continue to enable us
to attract and retain the best talent from a
the creation of an inclusive and diverse
workforce where employees can be
themselves.
Beyond providing an attractive proposition
to our employees, what sets us apart is our
commitment to create fulfilling careers for
all those within our community. In 2020 we
embarked on a programme to review how
we were organised. While some of this work
is ongoing, at the forefront is our continued
commitment to the development of our
employees from both a personal and
professional perspective, to ensure they
have the right skills and access to
Increasingly we need to be able to adapt
quickly to a changing world, a need which
was brought into even sharper focus due to
the COVID-19 pandemic. As a result, in 2020
we further increased our provision for
real-time access to digital learning platforms
for our employees, where knowledge and
skills were readily available from their homes.
In 2019, we commissioned a dedicated
independent materiality study from
Corporate Citizenship, an independent
sustainability management consultancy,
strategy and decision-making at an
operational level. Culture, ethics and people
were found to be the priority areas for both
internal and external stakeholders, closely
followed by customer service and sustained
and sustainable returns. The study also
helped us consider how we prioritise the
United Nations Sustainable Development
Goals that we align to as a business.
However, it is not only what we do that is
important but also how we do it, and in
support of this it is essential that we aspire
and adhere to the highest professional
standards we set for ourselves, our
managers and our leaders if we are to
create a truly inclusive and responsible
working environment and business.
At the beginning of 2020 we launched
MyCareer, an online performance
management system available to every
manager and every employee where
performance, development and everyday
check-in conversations can be facilitated
and recorded. The importance of regular
communication, conversation and two-way
feedback with our colleagues, team
members and managers has never been
more important than through 2020, and the
creation of a unified performance management
platform has helped to ensure that regular
Integrity, responsibility and professionalism
are essential characteristics of our leaders
and during 2020 every employee underwent
Senior Manager Regime Training to help
understand the importance of integrity and
the role it plays in leadership and within our
organisation.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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STRATEGIC REPORT
Taking responsibility for our own
development and personal growth has been
a recurring theme in recent periods. Having
first introduced online access to LinkedIn
Learning in 2019, we are encouraged that
64% of employees are now enrolled on the
platform, while our mentoring programmes
have also progressed. We now have 388
employee mentors mentoring 469 mentees,
and an additional 49 mentoring groups have
been established supporting a further 239
mentoring relationships.
In support of our ambition to increase
gender diversity and inclusion from
under-represented groups within our
business, we actively participate in the 30%
Club (
) which is a cross-
Company mentoring programme created
and perform at, their best. We have also
created and provided our employees with
further mentoring opportunities with
organisations such as the Aleto Foundation
() and
Upreach () to boost
social mobility by supporting students
We are committed to managing our
business in an ethical manner and
recognise that responsible management
shareholders, clients, the Partnership,
employees, suppliers and the communities
in which we operate. We will not tolerate or
condone abuse of human rights (including
modern slavery) in any part of our business,
and we are committed to minimising the
risk of slavery or human trafficking in all
parts of our supply chain.
All employees receive a copy of our Code
which make clear that we oppose all forms
of unfair discrimination or victimisation.
Harassment, in general terms, is defined as
unwanted conduct affecting the dignity of
people in the workplace. It may be related to
age, sex, race, disability, religion, nationality
or any personal characteristic of the
individual and may be persistent or an
isolated incident.
approach to bribery and corruption. The
Board has responsibility for oversight of the
Group’s anti-bribery and corruption policy
and procedures and annually carries out a
review of their adequacy. Employees and
advisers are provided with annual training
with regards to money laundering, financial
crime, fraud, bribery and corruption via
online training programmes, the completion
of which is compulsory. The anti-bribery
and corruption policy, which contains
additional information, is available on
When working in synergy, diverse teams
and inclusive environments provide the
foundations for creativity, innovation and
growth. We look to attract, retain and
develop individuals from all backgrounds,
so we are building an environment where
difference is embraced, helping us to foster
a feeling of belonging where people can be
themselves and thrive. Being the best
version of ourselves and embracing
diversity is one of our core cultural values,
and this came to the fore with the COVID-19
pandemic as we increasingly worked
remotely. Through interrupted calls with
children, partners and pets, we shared
understanding and empathy for each
other’s lives outside the office.
Early in the year we focused on gathering
diversity data in order to better understand
the shape of our business. In February 2020
we invited UK employees to take part in an
anonymous diversity survey; over 75%
shared their data, helping us establish
benchmarks so we could thereafter better
consider progress and direction. We found
that our Black, Asian and minority ethnic
employees make up around 7% of UK
employees, an increase from approximately
5% in 2018.
Throughout the year we have continued to
progress towards our public commitments
for increased diversity in the business, with
an aim to:
• increase female representation on our plc
Board to at least 33% by 2020;
• increase female representation in senior
roles to at least 30% by 2023; and
• increase the representation of Black,
Asian and minority ethnic employees
Our commitments to female representation
support the United Nations Sustainable
Development Goal for Gender Equality,
representation on the Board as of
representation across the business, we
have undertaken in-depth reviews of our
recruitment and promotion processes and
this has helped us pinpoint obstacles to
attracting, retaining and developing diverse
talent. We are implementing a number of
changes to our recruitment processes,
including establishing a requirement for
diverse shortlists and interview panels,
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ST. JAMES’S PLACE PLC
STRATEGIC REPORT
To directly support our women to advance
through the business, we ran focus groups
with every senior female, seeking to
understand what we are doing well and
where we need to improve. This was also
the third year of our participation in the 30%
Club Mentoring Scheme; we are supporting
30 female mentees who are paired with
external mentors from across a wide range
of sectors, as well as providing 30 mentors
to help support the scheme.
We are also committed to supporting the
United Nations Sustainable Development
Goal for Reducing Inequalities. In 2020 we
continued to consider how best to drive
equality in our business and recognise and
support all minority groups. We give full and
fair consideration to all applicants, having
regard to an individuals’ aptitudes and
abilities. When needed, we will consider
modifications to the working environment
so employees with disabilities can take up
opportunities or enhance their role, and we
aim to assist employees who become ill
appropriate support and training. To raise
awareness of and empathy for the different
lives we lead we collectively celebrated a
range of cultural and religious events, but in
at the tragic killing of George Floyd in the
United States of America.
As a community, we listened to our
colleagues and advisers as they shared
their experiences of racism throughout
positive action we can all take and
reinforcing our desire to drive out conscious
and unconscious bias. In August we gave
access to specialist learning material on
bias and inclusion and we are pleased that
828 of our employees and a further 485
advisers and support staff undertook this
voluntary training. We also continued
education on race fluency, helping senior
managers become more inclusive leaders
and break down barriers to talking about
race in the workplace.
Engagement and collaboration with external
organisations is an important part of our
strategy. We work with organisations such
as the Aleto Foundation and take part in
initiatives including #100blackinterns and
Classroom to Boardroom, providing work
experience, mentoring and financial literacy
to young black talent often marginalised
from the industry.
Our work in I&D continues to be directed by
the I&D Steering Group, with support from
the Nomination Committee and our Board.
Andrew Croft chairs our Steering Group, and
all Executive Board members take an active
role in I&D, each sponsoring a different
aspect of diversity.
Over this year we have enhanced the scope
of our I&D Champions & Advisory Board,
and increased our internal networks
including:
•
•
and community;
•
with over 10 chapters internationally; and
•
the pandemic for increased connection
and support.
We also took steps to improve our structural
support. In policy development, we
launched the Time Off for Parents policy
significantly increasing paternity leave;
created a policy to support transgender
employees with recognition, transition,
secure data management and medical
support; and began developing a formal
approach to flexible working. Enhancing
colleagues, we were awarded the highest
level of Leader on the government Disability
Confident scheme.
We have made steady and purposeful
progress this year and continue to
recognised along the way with several
awards, validating both the positive steps
we are taking and helping us demonstrate
our commitment. We know we have more
to do, but we are confident in our progress
here, and in the wider industry.
As at 31 December 2020 we employed 2,818 people across the world, including
2,585 in the UK (31 December 2019: 2,634 people across the world, including 2,365
in the UK) and the breakdown of our workforce by gender was:
2019 2
5
2020
2019 6
6
2020
2019 60
69
2020
2019 213
237
2020
2019 1,315
1,434
2020
2019 1,319
1,384
2020
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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STRATEGIC REPORT
Supporting our people and their families in
times of need continues to be an integral
part of our culture and became even more
important this year due to COVID-19, and
long-term isolation on mental health.
We experienced a rapid increase in demand
for support around mental health during
2020, and our approach to the commitment
to supporting our employees’ health and
wellbeing was consolidated through the
appointment of a Head of Wellbeing and an
increased emphasis on a range of services
to address the breadth of challenges our
people and their families have had to face.
Some of the areas where we particularly
focused our efforts and have continued
• doubling the number of Mental Health
First Aiders through the training and
development of an additional 64 bringing
the total to 115;
• extending the availability of counselling
and workplace health services provided
by our Company doctor from once a
month to eight times per month;
• delivering a virtual Mental Health
Awareness Week with activities such
for employees on how to look after
themselves both physically and
emotionally;
• providing access for employees to a
nutritionist who ran numerous webinars
about how what we eat can affect our
physical and emotional wellbeing;
• launching the Babylon Virtual GP service
(to those who are members of BUPA)
which provides access to a GP through
video or phone call 24 hours a day, 7 days
a week;
• running a menopause awareness and
information session in support of
International Women’s Day and the
creation of specialist menopause
information webinar in collaboration
• in May 2020, partnering with the
‘Mayathon’ team ()
to encourage our communities
become more active, stay well and
support a buddy during the first lockdown,
whilst working from home.
We were also delighted to join the Hospice
UK Compassionate Employers Programme.
The initiative is a comprehensive workplace
programme, which aims to assist
organisations to best support those in
life-limiting or terminal illness, caring
responsibilities or bereavement. By signing
up to the Programme, we are committing
compassionate environment for all our
communities. The Programme aligns well
with our philosophy of treating people
during challenging times. In addition, we
have supported various I&D related themes
throughout the year including Mental Health
Awareness Week, International Women’s
Day and International Men’s Day. All
initiatives have not only raised awareness
around a particular subject but have
provided the opportunity for open
discussion within a safe environment,
promoting the concept of ‘it’s good to talk’.
36
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
engagement survey. The response rate
best-in-class results from our surveying
partners’ best performing clients, i.e. those
who score in the 75th percentile in different
categories. This allows us to compare
ourselves against the best performing
companies across the world using figures
taken from responses from all their clients
(11.3 million respondents) regardless of
country and industry.
Communication with our employees
continues to be a primary focus. We ensure
our people are aware of the financial and
economic factors affecting the Group
through communications issued to all
management meetings providing an
overview of business performance and
communicate using various media including
written communications, videos,
newsletters, social media platforms such
through the senior leadership teams and
people managers. The impact of this
conscious and increased focus on
employee communications produced the
following results from the survey:
• the Company does a good job of keeping
me informed about matters that affect
increase of 13 percentage points
• senior managers are open and honest in
78% favourable response (an increase
Our reward and benefits are a key part of
our employee value proposition. They are
performance and increasingly in serving
We provide market-competitive rewards
equality. We have maintained our Living
Wage employer status for all our employees
in the UK and in equivalent initiatives
overseas.
Our focus in 2020 has been on strengthening
the links to performance, while ensuring
that clear checks and balances are in place
so that business goals are achieved in line
with our values and do not encourage
inappropriate behaviour or risk-taking.
We have also seen our benefits offering play
a key role in supporting the wellbeing of our
employees throughout the COVID-19 crisis.
We have provided additional counselling
services, wellbeing seminars and activities.
We have stepped up our recognition of
employees who have made extraordinary
contributions to maintain the services we
provide for clients and in supporting the
Partnership. Naturally, the impact of
COVID-19 on our business has resulted in
our having to take some tough decisions
around reward, and like most companies
been diverted from a progressive agenda.
Looking ahead we will be taking steps to
simplify our reward framework, remove
complexity and further align our Group wide
approach to reward, including in Asia.
We also believe it is important that our staff
build a sense of ownership and share in the
success of the business. We encourage
employee equity participation through
participate.
95%
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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Responsible investing incorporates the
consideration of a wide spectrum of
Environmental, Social and Governance
(ESG) issues and the effect that those
factors can have on a company’s long-term
prospects. Due to our size and scale we
have an opportunity to use our voice to
make a meaningful positive impact.
investments as a key part of a sustainable
lifestyle and want their money to be used
investing is not only about taking
environmental and social responsibility,
During 2020 discussions about responsible
investing have accelerated in frequency, in
depth and in expectation. Responsible
investing now underlies the whole of our
investment approach and is an integral
long-term value for the clients we serve.
The PRI is rapidly becoming a globally
recognised standard of good practice within
the investment industry, so we are delighted
for the last three years. In 2020 100% of our
fund managers became PRI signatories too.
In 2018, when we became a signatory, only
69% of our fund managers had made the
same commitment.
This important milestone has been
achieved through frequent engagement
with our fund managers alongside setting
them explicit minimum standards. Our
Investment Committee has formally
endorsed the requirement for all our fund
managers to be PRI signatories moving
forward. This demonstrates our drive to
raise responsible investing standards for
Consistent with our aim to be responsible
stewards, over the last six years we have
assessed our fund managers’ investment
decision-making processes through an
principles are embedded in every aspect
Monitor and Change’ approach, overseen
Design, Review’ framework used throughout
the Partnership to connect clients with their
investments. Further information on these
frameworks is set out on page 24.
Standards have progressively risen over
recent years through increasingly frequent
fund manager meetings, setting explicit
expectations and developing high reporting
standards with improved data coverage.
on responsible investing with fund
managers and service providers, which
Chief Executive
38
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
During 2020 we reconstructed our annual
responsible investment fund manager
assessments to include greater opportunity
for fund managers to evidence their
responsible investing best practices.
responsible investment is fundamental
funds and how fund managers incorporate
ESG into their investment decisions.
The United Nations Sustainable Development
Goal 13 Climate Action warns of the dangers
climate change will bring upon our world,
and encourages the implementation of
against such outcomes. We recognise the
impact of climate change and that the
transition to a low-carbon economy poses
both significant risks and opportunities to
our clients’ financial outcomes. Reducing
the human impact on climate change has
never been higher on our agenda. This is
reflected within our investment beliefs and
we continue to set high expectations for our
fund managers to integrate climate-related
factors into their investment decisions.
In 2020 we started to openly communicate
the carbon emissions of all our Growth,
Income and InRetirement Portfolios, in
allow clients to understand the impact
gets managed and reporting the carbon
emissions of our portfolios is a key first
impact. We joined the Net-Zero Asset
Owner Alliance (NZAOA) to collectively
influence economy-wide transition towards
net zero by 2050.
This year we have worked with The
company specialising in financial services.
They have explored client sentiment and
wider consumer engagement around
responsible investing. The research
environmental concerns remained a top
priority, and the expectation that leading
brands such as ours should incorporate
sustainable practices into their business.
These findings will help to shape our future
strategy, activities and communication.
In 2019 we became signatories of the
Disclosures (TCFD) and have
commissioned an independent review
approach to climate impacts and define
how we can further improve. More detail
Communicating our commitment to
responsible investing increased significantly
during 2020. Understanding what our
clients wanted to know about the
environmental impact of their investments
helped drive the decision to create the
Carbon Emissions Report and to include
this information in the Value Assessment
Statement.
We have held numerous virtual presentations,
webinars and interviews with advisers,
clients and other industry bodies. All new
advisers receive training to build their depth
of knowledge around the issues pertinent to
responsible investing. We are also
committed to building on our clear client
reporting by disclosing other responsible
investing issues such as inclusive growth,
information becomes available.
We will continue to take a prominent role in
addressing relevant responsible investment
conversations at industry level, strengthening
our collective voice and driving positive
change.
Our commitment to improving reporting
standards through increased data analysis
will be supported by developing reporting
capability across wider responsible investing
topics and frequent engagement with,
Across the Partnership we will continue
ensure meaningful client conversations can
take place that encompass all our clients’
responsible investing priorities.
Further embedding responsible investing
into the core investment proposition will
enable us to deliver client outcomes that are
even more aligned to our clients’ objectives.
100%
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
39
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
150
100
50
0
2018 2019 2020
As a business focused on giving our key
stakeholders the confidence to create the
futures they want, it is important that we
operate in a way that considers the need to
take a responsible, focused and long-term
mindset towards our environmental impact.
Although our business operations having
little effect on the environment, we
recognise that we can still have a central
role to play in promoting sustainability.
• through responsible investment of our
funds under management, see pages 24,
25 and 38;
• through decreasing our direct emissions
(scope 1 and 2), see page 42;
• by offsetting the carbon that we do use
business; and
• through our non-investment supply chain,
see page 44.
Accountability for managing climate-related
risks and opportunities is led by the Board,
which decides the strategic direction of our
environmental strategy. The Executive
Board then facilitates the execution of the
activities, and these are supported by the
Environmental Reporting Group, the Risk
Committee, the Investment Executive
Committee and our Sustainable Investment
Regulation Programmes.
The main committee overseeing activities
Environmental Reporting Group meets
monthly to co-ordinate Group carbon
reduction plans, review environmental
performance and agree mandatory and
voluntary environmental reporting and
Head of Environmental Strategy at the
beginning of 2021 to oversee this
framework and deliver our Group-wide
strategy. More information about
governance of climate related risks is
,ex Governor
40
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
one of our Executive
Board members said:
During 2020 we have made significant
progress with responsible investing, which
now underlies the whole of our investment
approach and is an integral part of how we
maintained our 100% purchasing of
electricity from renewable sources and our
carbon neutrality through offsetting. As a
result we maintained our Carbon Disclosure
Project ‘Grade B Management’ score for the
fourth year running.
We have also worked with our suppliers to:
• Provide more electric vehicle charging
points (EVCPs) through a partnership with
a new supplier. In 2020 we more than
doubled the charging points at our head
office and completed phase one of
planned installation of EVCP at our new
Bristol office.
• Initiated condition surveys across the
estate to identify inefficient plant such
longer-term replacement schedule which
will be proposed to the business.
• Set up DocuSign for digital signatures
saving 16,503kg carbon and 1,143kg
paper across the group. We also looked
donating on their behalf to the Woodland
Trust. In 2020, we donated £121,146 and
40,382 clients went paperless.
Like many businesses during 2020 we saw
a dramatic decrease in our travel and use
employees to make the low carbon choice
as the norm.
Whilst we engage with the Carbon
Disclosure Project to help measure and
understand the environmental effect of our
business operations, we appreciate that our
greatest environmental impact is through
our stewardship of £129.3 billion of funds
under management held on behalf of
investment is embedded into our
investment management approach. We
have reported against the Task Force on
Climate-related Disclosures (TCFD)
framework for the first time for the year
ended 31 December 2020. This covers
governance structures, strategy, risk
management, targets and metrics across
our business, and can be found in our
separate TCFD report which will be available
on our website
ensures that we continue to bring together
various departments, including Risk, Audit
and Investments, to take a strategic whole
business approach to tackling climate
change.
We collect and report our environmental
data from October to September. The tables
below summarise our targets and progress,
expressed in terms of both absolute and
normalised carbon dioxide equivalent
(CO
2
e) emissions for our core business
activities in recent years. Core business
activities are defined as those within
‘operational control’. Our emissions are
calculated in line with the Greenhouse Gas
Protocol using the 2020 emission factors
provided by the Department for
Environment, Food and Rural affairs
(DEFRA). The emissions were calculated by
our external sustainability partner, EcoAct.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
We are committed to doing our part to cap global warming to two degrees Celsius by 2050, and are now aiming to set science-based targets.
On the journey to limiting global warming to 2 degrees by 2050 we have set the following interim targets for 2025.
Abs1 1 Gas and owned vehicles 100% 50% 2018 835 2025
Abs2 2 (Market-based) Electricity 100% 100% 2018 167 2025
Abs3 3 Business travel, waste,
and well to tank (WTT)
100% 50% 2018 10,830 2025
Abs1 1 544 70% With restrictions on travel from March 2020 from COVID-19 lockdowns, company car
usage fell in 2020 by 57%. Throughout this period the adoption of teleconferencing
enabled the continuation of business activities.
Abs2 2 (Market-
based)
108 35% In 2020, we continued to purchase 100% renewable electricity for our UK operations,
reflecting best practice and driving demand in the renewable energy market. In our Asia
operations, office electricity usage reduced by 27% due to the COVID-19 pandemic. A drop
in the electricity grid factor accounts for the remaining decrease in Scope 2 emissions.
Abs3 3 2,917 144% Restrictions on global travel from March 2020 as a result of the COVID-19 pandemic has
contributed to the reduction of business travel emissions by 63%. Throughout this period
the adoption of teleconferencing enabled the continuation of business activities.
emissions in accordance with the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations
we have used the requirements of the Greenhouse Gas Protocol Corporate Standard along with the UK Government GHG Conversion Factors
for Company Reporting 2020. The results below represent 100% of our activity using the Operational Control approach. Any estimates
included in our totals are derived from actual data which have been extrapolated to cover the full reporting period.
2018
2019
UK
Global
(excl. UK) UK
Global
(excl. UK)
1 Emissions from gas,
refrigerants and owned vehicles
tCO
2
e 835 725 –
2
Location-based
Electricity emissions using
geographical location
tCO
2
e
1,836 168 1,861 141
Market-based
Electricity emissions using
purchased electricity factor
168 141 –
3 Business travel in private cars tCO
2
e 1,208 1,459 –
1, 2 & 3
Location-based
Total emissions tCO
2
e
3,879 168 4,045 141
Market-based 2,043 168 2,184 141
Direct and indirect
energy consumption
kWh 15,471,870 263,607 17,684,002 245,956
1, 2 & 3
Location-based
Normalised emissions to kWh
tCO
2
e/
kWh
0.0003 0.0006 0.0002 0.0006
Market-based 0.0001 0.0006 0.0001 0.0006
3 Business travel, waste, hotel
stays, WTT and T&D
tCO
2
e 9,171 5,495
3 Property Trust tCO
2
e 11,4 69 9,561
tCO
2
e 22,851 17,380
We account for 100% of our operational activity accounting the Operational Control Approach. There are no exclusions’.
42
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Towards the end of 2020 we carried out works to ensure that all lighting installations, both internal and external, at our Head Office campus
use LED fittings, reducing greatly the amount of energy consumed. A review of the whole business estate is underway to identify other
locations where this is possible and we will provide recommendations to the business in due course. We have also begun to investigate
services available in the market to assist us reduce and optimise our use of electricity across our estate and we have made environmental
considerations a central feature of our office furniture procurement, installing many items made from recycled materials in our most recently
opened offices.
1 1.51 1.08
Emission intensities have decreased significantly across all Scopes as a result of the
COVID-19 pandemic. Country and global restrictions on travel has resulted in
significantly reduced business miles. Throughout this period the adoption of
teleconferencing enabled the continuation of business activities.
2 (Market-based) 0.29 0.22
3 14.52 5.80
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
managing our business in a responsible and
ethical manner. We believe in treating all our
stakeholders fairly and our suppliers are
part of that process.
We recognise the benefits of building
strong, mutually beneficial relationships
with both new and existing suppliers and
objectives in order to encourage our
suppliers to adopt similar principles.
We encourage our suppliers to share our
desire to make a positive and lasting
difference to those less fortunate than
ourselves. We are delighted that many
Charitable Foundation through donations
and participation in fundraising events.
During 2020 we have continued to reduce
our environmental impact by working with
our suppliers by:
• developing our fleet provider offering with
increased focus on electric and hybrid
vehicles; and
• introducing new and additional electric
car charging points.
Our procurement processes ensure we
meet regulatory and business obligations,
as well as creating and promoting internal
and external awareness and the benefits
procurement policy requires due diligence
to be conducted on all new suppliers. This is
done through a risk-based approach which
considers legal and business requirements.
Since 2014, we have been a member of the
Living Wage Foundation (
). We also encourage our suppliers
applicable, an overseas equivalent.
We are signatories of the Prompt Payment
Code, which is encouraged by the
Department for Business, Energy and
Industrial Strategy (BEIS) and demonstrates
our commitment to good payment
practices between ourselves and our
suppliers.
Our onboarding process requires all new
suppliers to confirm their compliance to
applicable legislation, including but not
limited to; diversity and inclusion, modern
slavery, employee payments and contact
terms and gender pay gap reporting.
As we continue working towards our
business, we work closely to align
() of promoting inclusive
and sustainable industrialisation through
our work with suppliers.
,
Procurement Manager
44
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
90.1%
2.18%
£7.1m
Despite 2020 being a challenging year, our
employee engagement remains strong.
have supported their local communities
Within ten days of the first lockdown
announcement, we had two new policies in
place. We released any employee with a
medical or military background to the NHS,
medical organisations, emergency services
or armed forces, and we also extended our
volunteer allowance from two days to
unlimited. This means that employees were
able to take an unlimited number of days to
support others when needed throughout
the pandemic. As a result, we updated our
volunteering policy to be flexible. London
Benchmarking Group and Business in the
Community noted this as best practice for
volunteering policies in response to the
COVID-19 crisis.
This year, our volunteering hours reached
4,406, meaning the total value of time our
employees gave during work equated to
£147,871. As our engagement activities
were limited by COVID-19 and social
distancing requirements, we organised an
event called ‘Walk the World’, with the aim
volunteering opportunity finder. Among
• Anti-slavery projects, to help transcribe
19th century hand-written texts relating
for researchers;
• Adopt a Grandparent to help combat
loneliness;
• Age UK and The Big Knit;
• Zooniverse to help identify and monitor
wildlife populations; and
• The 2 Minute Litter Pick.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
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In total, 400 employees volunteered over
2,000 hours. We also encourage and
recognise employees who volunteer in their
own time, with 52 £300 grants given to the
charities supported.
4,406
1.6/2.0
At the start of lockdown in April, seeing the
inevitable increase in need for foodbanks,
we donated £100,000 of unrestricted funds
to The Trussell Trust to support their
scale-up to find another 20,000 volunteers.
Foundation also donated another £50,000
of unrestricted funding.
£100,000
30%
2
One of our key objectives for 2025 is to
support our Partner practices in becoming
responsible businesses in their own right.
To do this, we have partnered with the Good
Business Charter, who are an independent
organisation which recognises responsible
business practices. The Good Business
Charter measures behaviour over ten
components: real living wage, fairer hours
and contracts, employee wellbeing,
employee representation, diversity and
inclusion, environmental responsibility,
paying fair tax, commitment to customers,
ethical sourcing and prompt payment.
to receive Good Business Charter
accreditation. In 2020, we launched a
successful pilot with a range of our Partner
has become the first FTSE 100 company to
be Good Business Charter accredited,
ensuring we are one step closer to
becoming a leading responsible business
by 2025.
Business in the Community’s
CommunityMark award for excellence in
our approach to our community investment.
This prestigious award reflects the
outstanding work being undertaken by our
corporate responsibility team to engage
with, and support, our local communities.
Our community initiatives such as
employability, financial education, team
challenges, volunteering and our Charitable
Foundation are focused on supporting
social mobility and social inclusion in the
UK. We believe economic independence
independence gives people the confidence,
knowledge and opportunity to make better
decisions that positively affect their future.
We include social inclusion in our model
because we believe that people cannot
make informed decisions without
Responsible Business Lead,
Business in the Community,
2020
During 2020, engagement with our
community was more important than
governments, non-governmental
organisations and charities. As part of our
approach to tackling social mobility in and
around our Cirencester head office, we
attended meetings with Cotswold District
Council, Cirencester Town Council and
Cirencester Community Development Trust.
It was imperative during the year that we
understood the social needs of the local
community and ensured we were providing
adequate support when and where required.
46
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Our team challenges within our local
community were reassessed to ensure that
the safety of our employees was a priority.
We focused on outdoor, socially distanced
challenges that met a genuine need in the
community, from ecology to heritage.
Our holistic charity programme supports
tackle both economic and cultural poverty
and exclusion. We have five-year
relationships with these charities to provide
unrestricted funding and business expertise,
to help them grow sustainably and plan for
the long-term. The unrestricted funding
allows charities to use the money where it is
needed most, whether this be for projects,
overheads, staff costs or equipment.
Through our employability programmes and
entering into a £2 million five-year strategic
partnership with DofE, we look to support
social mobility in the UK. Funding of
£350,000 a year is directed to support the
DofE’s strategic aims of working with
disadvantaged young people - now over
70,000. Both our organisations are dedicated
to helping people define their own futures,
and through the DofE raise aspirations,
confidence and personal goals. As part of
our strategic partnership we have supported
the DofE with inclusion and diversity training,
team development through Insights training,
free employability videos for participants and
provided impact research mentoring. But the
relationship goes both ways and the DofE
has provided consultancy support for us to
develop our social mobility strategy and a
community theory of change model.
For the first three years of our partnership,
we were title sponsors of the DofE
Adventure Challenge fundraising event
which won ‘Best Charity Challenge Event’
currently working to understand the impact
of the DofE for disadvantaged young
people, by donating £50,000pa towards
research for the duration of the Partnership.
We also created a range of videos to
support our employability programmes
evidencing the variety of people, skills and
backgrounds in financial services. These
were a huge success and have been used
of and access to financial services jobs
We are one of the leading providers of
face-to-face financial education in schools
in the UK. We understand the importance
remained a core focus of our long-term
approach. In 2020, with the closure of
schools, we looked instead to create online
materials on financial education for primary
and secondary school students. These
home learning materials are provided for
website, and we have advertised them to
our local schools and partners, as well as
sharing them with employees and Partner
businesses for their personal use with
We have also created an online
accreditation for advisers to become
accredited virtually on how to deliver
financial education. In total, in 2020
employees and 22 advisers in 29 different
schools. We also had 1,320 unique
downloads of our online resources.
Young Enterprise, DofE, The Money Charity,
National Numeracy and Career Ready
Mobility Index. The Social Mobility Index is
an important benchmarking initiative that
determine where we ranked against other
leading UK employers. We have used the
feedback to help us build a corporate
strategy on social mobility with the aim
backgrounds.
disadvantaged or under-represented
economically, socially or through medical
conditions. Giving has always been a strong
part of our culture, with over 75% of our
employees donating to the Charitable
Foundation each month via covenant.
donations to the Charitable Foundation and,
as a result, in 2020 the Group gave
Our community has now given over
and our focus on high-impact local work
means that this money is truly effective
Our commitment to the Charitable
Foundation has been in place since our
business launched in 1992. Not only has
positive and lasting difference to the lives
disadvantaged economically, socially or
through disability, those affected by cancer
or mental health issues and the hospice
movement, it also offers our employees
valuable skills and insight, and provides a
cultural connection across the Group. We
know that 99% of employees who volunteer
report positive experiences, an increase in
wellbeing or skills development.
Whilst we reflect on our achievements over
the past year, it is also important to look to
the next chapter. In 2021 our aspirations
include:
• further embedding responsible investing
into our Investment Management
Approach (see pages 38 and 39);
• growing the successful ‘Partner
Responsible’ pilot to help Partner
businesses operate in a more
• integrating sustainable and ethical
decision-making into all operational
activities across the business, including
governance and oversight;
• measuring the depth of impact of our
community and group programmes
including launching longitudinal research
into financial education;
• improving our supplier selection and
monitoring processes; and
• creating and implementing a new five
year environmental strategy.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
Foundation (the Charitable Foundation) was
community to support charities across the
UK and overseas, and to encourage giving
as a strong cultural thread within the
business. The Charitable Foundation has
Group and is now the 6th largest corporate
foundation
* in the UK.
The Charitable Foundation directs its
funding to grassroots charities to support
sustained growth and create a positive and
lasting impact on people’s lives across four
core themes:
• Children and young people who are
disadvantaged or have a disability
• Hospice sector
• Cancer support
• Mental health
* Association of Charitable Foundations Giving Trends
Report 2019.
COVID-19
The COVID-19 pandemic affected all
aspects of our world and has, and will
continue to have, a significant impact on the
charitable sector. As a funder, we responded
quickly and flexibly to the needs of our
supported charities, providing £1.7 million
funds unrestricted and forward-paying
grants to support cashflow. We were
inspired by the responsiveness shown by
charities; despite the many restrictions in
place, many were able to quickly adapt to the
circumstances and maintain their essential
services to thousands of people. Examples
of the support we gave include a £475,000
grant to the National Emergencies Trust,
£275,000 to NHS Charities Together and
£50,000 to the Trussell Trust. We know that
the challenges faced by the sector are
continuing into 2021 and beyond and we are
committed to being flexible to support these
invaluable charities through difficult times.
“The generous support of the St. James’s Place Charitable Foundation has enabled Pace to
embark on our critically important SMART School programme, which will have a great
impact not only on our own children but also on thousands more children and young
people with complex neurodisabilities across the UK.”
£102.1m
£9.0m
807
•
•
•
•
48
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
The most important aspect of our
grant-making is understanding the
impact our funds have on the
charities we support, ensuring that
we are creating positive and lasting
change for the charity and its
beneficiaries. Our recent impact
survey found that 92% of people
supported through our grant-making
have experienced a positive impact
on their lives, with 38% of people
experiencing a transformational
impact. This is what we strive for
through our focus on small local
charities.
“The financial support
that the Charitable
Foundation provided has
been invaluable and
essential to enabling us
to grow, develop different
streams and areas of
expertise and expand our
services.”
We believe that working in partnership
with our supported charities creates
more impactful change, so our aim
utilising the skills and experience of
charities become more robust, more
confident and more empowered to
reach those most in need.
“In addition to supporting
young people, the
volunteers from
St. James’s Place
delivered financial
awareness training and
interview preparation
that added huge value to
the training course for
both Springboard and
the young people.”
The Charitable Foundation is grateful for
Group who year on year provide outstanding
support in the form of donations,
fundraising and volunteering time.
willingness to give back is inspiring and acts
as an agent for positive change in our
communities in the UK and overseas.
Note: The Charitable Foundation is an
independent charity (charity number
1144606) which is not controlled by the
financial performance and position of the
Charitable Foundation are not consolidated
into the Group Financial Statements
presented on pages 153 to 213.
“The support from the Charitable Foundation early in
Tthe pandemic enabled us to increase our storage and
distribution of surplus food, ensuring that those in
need had access to free emergency food boxes from
March until August. In that time, we distributed
110,000 food boxes through 77 partner organisations.
This represents over 1,000 tonnes of food with a retail
value of approximately £2 million.”
You can find out more about how the
Charitable Foundation is making a positive
and lasting difference to people’s lives at
92%
38%
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
49
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
IFRS profit after tax was £262.0 million in
2020 (2019: £146.6 million). As at half-year,
this result has benefited from significant
temporary but favourable effects linked to
life insurance tax that have arisen as a result
of movements in investment markets. We
expect this benefit to unwind over time.
Further detail on this effect, which we refer
to as the
, is included in the Financial
Review on page 57.
To address the challenge of policyholder tax
being included in the IFRS results we focus
on IFRS profit before shareholder tax as
was significantly higher at £327.6 million
As already stated in the Chief Executive’s
Report, 2020 was an extraordinary year with
events shaped by the COVID-19 pandemic.
Despite the disruption the business
exhibited resilience, with the Partnership
attracting gross inflows of £14.3 billion
(2019: £15.1 billion) and net inflows of
throughout most of the year particularly
impacted the pace of discretionary
investment flows as some clients took a
more cautious approach to investing new
funds. We did though continue to see
positive net inflows throughout the year
the appropriate actions in order to ensure
they remain well positioned to achieve their
long-term financial objectives. As we
historically, client retention remained strong
as our advisers worked hard to provide
reassurance and sound counsel in an
uncertain environment.
Coupled with the impact of positive
investment market returns, this new
business performance resulted in funds
under management closing at a record
£129.3 billion (31 December 2019:
and boding well for the development of
The resilience in our new business
performance, together with growth in funds
under management, has contributed to a
robust outcome for our financial results
challenges of operating during the
COVID-19 pandemic, our financial position
has also proven resilient with the solvency
position of our life companies and the
Group as whole exhibiting considerable
stability in the face of extreme market
volatility. This is attributable to the simplicity
of our business and our approach to
managing solvency.
Although the COVID-19 pandemic is
ongoing, we remain confident in our
ongoing prospects and the strength of
Our financial results are presented in more
detail on pages 54 to 72 of the Financial
Review, but we provide below a summary of
financial performance on a statutory IFRS
basis, as well as our chosen alternative
performance measures (APMs). We also
summarise key developments from a
balance sheet perspective and provide
shareholders with an overview of capital,
solvency and liquidity.
£262.0m
£264.7m
£919.0m
50
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
The IFRS result also includes the impact
as equity-settled share-based payment
expenses, deferred income and deferred
expenses, so we continue to supplement
our statutory reporting with the presentation
of our financial performance using two
APMs: the Cash result and the European
Embedded Value (EEV) result.
Taking each in turn:
The Cash result, and the Underlying cash
result contained within it, are based on IFRS
but adjusted to exclude certain non-cash
items, so therefore represent useful guides
to the level of cash profit generated by the
business. All items in the Cash result, and
During the year, the
was £455.9 million
(2019: £424.9 million), representing a margin
of 0.63% (2019: 0.63%) on average mature
FUM, excluding DFM and Asia FUM, in line
with prior guidance. It is only this mature
FUM excluding DFM and Asia FUM that
contributes to this net income figure and
this mature stock of FUM at any given time
substantially comprises all unit trust and
ISA business, as well as life and pensions
business written more than six years ago.
The development of mature FUM year-on-
year is dependent on four principal factors:
1. New unit trust and ISA flows;
2. The amount of life and pensions FUM
that moves from gestation into mature
FUM;
3. The retention of FUM; and
4. Investment returns on FUM.
Growth in gestation FUM has been more
rapid than growth in mature FUM in recent
years, mainly due to the strength of new
pensions business following ‘pensions
freedom’. While this therefore constrains
growth in net income from funds under
management today, it bodes well for the
future as gestation FUM matures and
begins making a positive contribution.
gestation FUM stood at £43.4 billion
movements or withdrawals) contribute in
excess of £365 million to net income from
funds under management and hence to
where initial
product charges levied on gross inflows
exceed new business-related expenses.
business in 2020 largely reflects the decline
in gross flows over the period, although the
relationship between the two is not linear.
in 2020 were
£200.0 million (2019: £186.2 million), up 7%
over the year and some £3 million below the
guidance that we provided last year, reflecting
management actions taken as the external
environment deteriorated during the year.
disciplined approach to expense
management, deferring or delaying
expenditure where possible and where
long-term growth and our ability to respond
to ongoing challenges presented by
COVID-19 will not be compromised.
were
business, laying the foundations for long-
collaboration with Salesforce as previously
announced. In addition, we accelerated the
development of certain projects and
technologies to ensure the Group and the
Partnership were able to adapt effectively
For example, we invested in providing
seamless electronic data capture systems,
electronic signature capability, and in digital
platforms to enable safe and secure virtual
interactions between the Partnership and
clients. These investments will benefit the
business in both the short and long-term.
increasing cyber risk so continue to take
appropriate action to mitigate such risks.
Our contribution to the increased
substantially and disappointingly during the
year, to £29.7 million, up from £22.3 million
in 2019. This reflected a significantly
increased rate of levy, over and above the
15% increase we expected at the beginning
of the year, exacerbated by a supplementary
levy announced in November 2020 and by
our growth as a proportion of the FSCS
funding classes in which we operate.
Although we are fundamentally supportive
of a mechanism that protects consumers,
we agree with the comment made by the
FCA chair Charles Randell when he said
“…all too often, the polluter doesn’t pay. The
cost of bad behaviour by firms which then
fail is usually mutualised through the FSCS,
rather than borne by the wrongdoers”. We
welcome the goal that has been outlined by
the FCA of redesigning the system to make
the polluters pay.
Reflecting its critical role in providing a
source of future organic growth in our
adviser population, we continue to invest
into building our programmes in
order to accommodate additional capacity
with greater geographic reach. Academy
operations adapted well to COVID-19, with the
programme being delivered online for existing
participants. However, given the uncertainty
and logistical challenges we deferred a
number of new entrants into the programmes
until 2021, which has resulted in Academy
costs decreasing by 13% year-on-year.
We have also further invested in developing
our presence in , as well as in
via
these businesses have been adversely
impacted by the financial uncertainties
expense management. Our investment for
the future also extends to our
, with one such example
being the costs associated with
reconfiguring more than 2,500 Partner
websites during the year.
The , which is a key
metric that provides a good indicator of
underlying performance and the impact
Recognised below the Underlying cash
result, our
activity has been a critical multi-year
project. In 2019, the final smooth migration
of business was completed which means
that all of our core UK business is safely
incur decommissioning expenses relating
to our legacy systems, and so our back-
office infrastructure costs were
completed these exercises no further
back-office infrastructure costs are
anticipated for 2021.
The in 2020 was therefore
£254.7 million (2019: £229.4 million).
EEV
The is sensitive to new
business written within the year and the 5%
reduction in gross flows year-on-year is the
main factor behind a reduced EEV operating
profit of £919.0 million (2019: £952.0 million).
The for the period has
been significantly impacted by the positive
but lower of
£304.4 million compared to the prior year
(2019: £768.6 million). The positive return
reflects increased market values across our
FUM as a result of stronger markets at year
end, following the recovery in the second
half of the year.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
51
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
The shareholder, or Solvency II Net Assets
Balance Sheet, is one that is derived from
the statutory IFRS Statement of Financial
Position and a reconciliation between the
two can be found on page 64 of the
Financial Review. There are several areas
that are worthy of note.
Facilitating business loans to Partners is
growing Partner businesses. Such loans
creates broad stakeholder benefits. First,
clients benefit from enhanced continuity of
time; second, Partners are able to build and
ultimately realise value in the high-quality
and sustainable businesses they have
created; and finally, the Group and, in turn,
shareholders, benefit from high levels of
adviser and client retention.
In addition to recognising a strong business
case for facilitating such lending, we
recognise too the fundamental strength and
credit quality of business loans to Partners.
Over more than ten years, cumulative
write-offs have totalled less than 5bps of
gross loans advanced, with such low
impairment experience attributable to a
number of factors that help to mitigate the
inherent credit risk in lending. These include
taking a cautious approach to Group credit
decisions, with lending secured against
prudent business valuations. Demonstrating
this, key loan-to-value (LTV) information is
set out in the table below.
31 December
2019
Aggregate LTV
across the total
Partner lending
book 32%
Proportion of the
book where LTV
is over 75% 15%
Net exposure to
loans where LTV
is over 100%
(£’Million) 9.4
If FUM were to decrease by 10%, the Net
exposure to loans where LTV is over 100%
at 31 December 2020 would increase to
£11.3 million.
Our credit experience also benefits from
repayments. The Group collects advice
charges from clients. Prior to making the
associated payment to Partners, we deduct
loan capital and interest payments from the
amount due. This means the Group is able
to control repayments.
During the year we have continued to
facilitate business loans to Partners,
however the balance has remained stable
year-on-year as new loans advanced have
approximately matched repayments
received.
31 December
2019
£’Million
476.5
Split by funding type:
Business loans
to Partners directly
funded by the
Group 316.0
Securitised
business loans
to Partners 160.5
strategy of diversifying and broadening
this successfully over time, including the
creation and execution of the securitisation
vehicle referred to in the previous years.
Position the value of loan notes relating to
the securitisation, which has the effect of
inflating the reported level of borrowings.
However, these are secured only on the
securitised portfolio of business loans
31 December
2019
£’Million
403.7
Split by borrowing type:
Senior unsecured
corporate
borrowings 287.1
Senior tranche
of non-recourse
securitisation
loan notes 116.6
After adjusting for this non-recourse debt,
borrowings have been increasing broadly
recent years, and we remain comfortable
not only with our level of borrowings, but
also with the headroom we have within our
range of facilities. At 31 December 2020
as a result of the with-held dividend
payments during the year.
We continue to manage the balance sheet
prudently to ensure the Group’s solvency is
safely maintained.
Given the simplicity of our business model,
our approach to managing solvency
remains to hold assets to match client
unit-linked liabilities plus a management
solvency buffer (MSB). At 31 December
2020 we held surplus assets over the MSB
of £717.3 million (2019: £580.6 million). We
also ensure that our approach meets the
requirements of the Solvency II regime
where we have an approach, agreed with
the Prudential Regulation Authority (PRA)
since 2017, for our largest insurance
company, the UK Life company, that targets
capital equal to 110% of the standard
formula requirement. This is a prudent and
sustainable policy given the risk profile of
our business which is largely operational.
At 31 December 2020, the solvency ratio
unchanged from the position at the start of
Corroborating our prudent approach to
managing the balance sheet, the UK Life
Fitch Ratings during the year.
Taking into account entities in the rest of
The Group has £1,527.1 million of liquid
assets (2019: £1,429.8 million) largely
comprising investments in AAA-rated
money market funds and cash balances,
represents a considerable stock of liquidity
and excludes the additional headroom that
we have in our borrowing facilities.
31 December
2019
£’Million
Fixed interest
securities 5.2
Investment in
Collective
Investment
Schemes (AAA-
rated money
market funds) 1,131.8
Cash and cash
equivalents 292.8
1,429.8
52
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
In April 2020 we announced a decision to
retain 11.22 pence per share of the 2019 Final
Dividend. As we said at the time the decision
to retain this amount was a prudent response
to a number of very challenging potential
scenarios that could have materialised.
2020was a very challenging year but these
scenarios, which were put together at the
point of greatest uncertainty, have not played
out and the business has shown resilience
throughout. The Board therefore no longer
sees a need to continue with this retention
and the withheld amount of 11.22 pence per
share will be paid as a further 2019 interim
dividend on 24 March 2021.
The dividend in respect of 2020 has been
determined under our existing dividend
policy with a proposal of 38.49 pence per
share providing for a pay-out ratio of 78%
against the underlying cash result.
During 2020, the Board also considered the
way in which future dividends should emerge
from the group. Shareholders will recall that
there is a dynamic within the IFRS result
which defers the recognition of initial cash
margin on new business, and that the
quantum of this deferral is greater for
investment bonds and pensions. Whilst this
has always been the case, given the scale
bond and pension flows today, we expect in
a sustained growth scenario, to see a timing
gap between the IFRS and the cash result
going forward, with cash continuing to
emerge ahead of IFRS and therefore
distributable profit.
As we look forward, this dynamic of cash
earnings emerging faster than distributable
profit means that we will be moving to a
pay-out ratio of around 70% of the underlying
cash result starting in 2021. This move
accommodates the timing mismatch
between the emergence of cash and
distributable profit, allows for continuing
investment in the business, and provides
certainty and sustainability to our pay-out
ratio throughout our planning horizon.
We are also simplifying our approach to
Interim Dividends which will now be based
on a formulaic approach and will be
calculated as being equal to 30% of the prior
year ordinary dividend. For 2021, this would
be calculated with reference to the 38.49p
proposed dividend for 2020.
These moves will provide certainty to the
pay-out ratio throughout and beyond our
planning horizon.
24 February 2021
Page
reference
Year ended
31 December
2019
Gross inflows (£’Billion)
55 15.1
Net inflows (£’Billion)
55 9.0
Total FUM (£’Billion)
55 117.0
Total FUM in gestation (£’Billion)
56 40.2
IFRS profit after tax (£’Million)
58 146.6
IFRS profit before shareholder tax (£’Million)
58 187.1
Underlying profit before shareholder tax (£’Million)
58 218.9
IFRS basic earnings per share (EPS) (Pence) 27.6
IFRS diluted EPS (Pence) 27.5
IFRS net asset value per share (Pence) 17 7.1
Dividend per share (Pence) 49.71
1
Operating cash result (£’Million)
60 310.7
Underlying cash result (£’Million)
60 273.1
Cash result (£’Million)
60 229.4
Underlying cash result basic EPS (Pence) 51.4
Underlying cash result diluted EPS (Pence) 51.1
EEV operating profit before tax (£’Million)
67 952.0
EEV operating profit after tax basic EPS (Pence) 148.8
EEV operating profit after tax diluted EPS (Pence) 148.0
EEV net asset value per share (Pence) 1,320.1
Solvency II net assets (£’Million)
72 1,056.8
Management solvency buffer (£’Million)
71 476.2
Solvency II free assets (£’Million)
72 999.0
Solvency ratio (Percentage)
72 132%
1 The dividend per share disclosed in 2019 was 49.71 pence, which was prior to the Board’s decision in
April 2020 to withhold 11.22 pence per share until such a time as the financial and economic impacts
The Cash result should not be confused with the IFRS Consolidated Statement of
Cash Flows which is prepared in accordance with IAS 7.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
53
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
1.1 FUM analysis
1.2 Gestation
As set out on page 26 and below, FUM is
a key driver of ongoing profitability on all
measures, and so information on growth
in FUM is provided in Section 1.
2.1 International Financial Reporting
Standards (IFRS)
2.2 Cash result
2.3 European Embedded Value (EEV)
Section 2 analyses the performance of
the business using three different bases:
IFRS, the Cash result, and EEV.
Section 3 addresses Solvency, which
regulated activities carried out within
54
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
Our financial business model is to attract and retain FUM on which we receive an annual management fee. As a result, the level of income
• our ability to attract new funds in the form of gross inflows;
• our ability to retain FUM by keeping unplanned withdrawals at a low level; and
• net investment returns.
The following table shows how FUM evolved during 2020 and 2019. Investment return is presented net of charges.
2019
Total
£’Billion
Opening FUM 95.55
Gross inflows 15.10
Net investment return 12.45
Regular income withdrawals and maturities (1.89)
Surrenders and part-surrenders (4.22)
116.99
8.99
4.0%
The following table shows the significant net inflows over the past six years, which combined with strong retention have resulted in
consistent growth in FUM. FUM has more than doubled over the last five years.
2020 117.0 8.2 4.1 129.3
2019 95.6 9.0 12.4 117.0
2018 90.7 10.3 (5.4) 95.6
2017 75.3 9.5 6.2 (0.3) 90.7
2016 58.6 6.8 8.7 1.2 75.3
2015 52.0 5.8 0.8 58.6
1 Other movements in 2017 related to the matching strategy disinvestment, and in 2016 related to the acquisition of the Rowan Dartington Group.
The table below provides a geographical and investment type analysis of FUM at 31 December.
31 December 2019
£’Billion
Percentage
of total
North American Equities 25.1 21%
Fixed Income Securities 20.9 18%
Asia and Pacific Equities 13.6 12%
UK Equities 20.2 17%
European Equities 13.8 12%
Alternative Investments 9.5 8%
Cash 7.5 6%
Property 2.9 3%
Other 3.5 3%
117.0 100%
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
55
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
As explained in our financial business model on page 54, due to our product structure, at any given time there is a significant amount of FUM
that has not yet started to contribute to the Cash result.
When we attract new FUM there is a margin arising on new business that emerges at the point of investment, which is a surplus of income
over and above the initial costs incurred at the outset. Within our Cash result presentation this is recognised as it arises, but it is deferred
under IFRS.
Once the margin arising on new business has been recognised the pattern of future emergence of cash from annual product management
charges differs by product. Broadly, annual product management charges from unit trust and ISA business begin contributing positively to
the Cash result from day one, whilst investment and pensions business enter a six-year gestation period during which no net income from
FUM is included in the Cash result. Once this business has reached its six-year maturity point, it starts contributing positively to the Cash
result, and will continue to do so in each year that it remains with the Group. Approximately 55% of gross inflows for 2020, after initial
charges, move into gestation FUM (2019: 56%).
The following table shows an analysis of FUM, after initial charges, split between mature FUM that is contributing net income to the Cash
result and FUM in gestation which is not yet contributing, as at the year-end for the past five years. The value of both mature and gestation
FUM is impacted by investment return as well as net inflows.
31 December 2020 85.9 43.4 129.3
31 December 2019 76.8 40.2 117.0
31 December 2018 62.1 33.5 95.6
31 December 2017 60.1 30.6 90.7
31 December 2016 50.2 25.1 75.3
The following table gives an indication, for illustrative purposes, of the way in which the reduction in fees in the gestation period element of
the Cash result could unwind, and so how the gestation balance of £43.4 billion at 31 December 2020 may start to contribute to the Cash
result over the next six years and beyond. For simplicity it assumes that FUM values remain unchanged, that there are no surrenders, and
that business is written at the start of the year. Actual emergence in the Cash result will reflect the varying business mix of the relevant cohort
and business experience.
2021 38.9
2022 86.3
2023 148.8
2024 226.1
2025 298.0
2026 onwards 366.9
56
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
In line with statutory reporting requirements we report profits assessed on an IFRS basis. The presence of a significant life insurance
company within the Group means that, although we are a wealth management Group in substance with a simple business model, we apply
IFRS accounting requirements for insurance companies. These requirements lead to Financial Statements which are more complex than
those of a typical wealth manager and so our IFRS results may not provide the clearest presentation for users who are trying to understand
our wealth management business. Key examples of this include the following:
• our IFRS Statement of Comprehensive Income includes policyholder tax balances which we are required to recognise as part of our
corporation tax arrangements. This means that our Group IFRS profit before tax includes amounts charged to clients to meet policyholder
tax expenses, which are unrelated to the underlying performance of our business; and
• our policy is to fully match our liabilities to clients, and so policyholder liabilities increase or decrease to match increases or decreases
experienced on the assets held to cover them. This means that shareholders are not exposed to any gains or losses on the £126.0 billion
assets and liabilities at 31 December 2020.
To address this, we developed APMs with the objective of stripping out the policyholder element to present solely shareholder impacting
balances, as well as removing items such as deferred acquisition costs and deferred income to reflect Solvency II recognition requirements
and to better match the way in which cash emerges from the business. We therefore present our financial performance and position under
three different bases, using a range of APMs to supplement our IFRS reporting. The three different bases, which are consistent with those
presented last year, are:
• International Financial Reporting Standards (IFRS);
• Cash result; and
• European Embedded Value (EEV).
APMs are not defined by the relevant financial reporting framework (which for the Group is IFRS), but we use them to provide greater insight
to the financial performance, financial position and cash flows of the Group and the way it is managed. A complete Glossary of Alternative
Performance Measures is set out on pages 232 to 234, in which we define each APM used in our Financial Review, explain why it is used and,
if applicable, explain how the measure can be reconciled to the IFRS Financial Statements.
IFRS profit after tax for the year was £262.0 million (2019: £146.6 million), with the result significantly higher year-on-year primarily due to the
impact of an exceptional life insurance tax-related effect arising from the market conditions that prevailed in 2020.
Life insurance tax incorporates a policyholder tax element, and the financial statements of a life insurance group need to reflect the liability
Income Taxes, which does not allow discounting, whereas the policy charges are designed to ensure fair outcomes between clients and so
reflect a wide range of possible outcomes. This gives rise to different assessments of the current value of future cash flows and hence an
asymmetry in the Condensed Consolidated Statement of Financial Position between the deferred tax position and the offsetting client
balance. The positive effect of the asymmetry will be eliminated over time as future cash flows become less uncertain and are ultimately
realised. Movement in the asymmetry is recognised in the Condensed Consolidated Statement of Comprehensive Income and analysed
Under normal conditions this asymmetry is small, but market conditions have resulted in a positive movement of £61.7 million for 2020
(2019: negative movement of £10.0 million), which increases both IFRS profit after tax and IFRS profit before shareholder tax. Ultimately
reverse as markets increase.
To address the challenge of policyholder tax being included in the IFRS results we focus on the following two APMs, based on IFRS, as our
pre-tax metrics:
• Profit before shareholder tax; and
• Underlying profit.
Further information on these IFRS-based measures is set out below, on page 58.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
57
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
This is a profit measure based on IFRS which aims to remove the impact of policyholder tax. The policyholder tax expense or credit is
generally matched by an equivalent deduction or credit from the relevant funds, which is recorded within fee and commission income in the
IFRS Condensed Consolidated Statement of Comprehensive Income. Policyholder tax does not therefore normally impact the Group’s overall
profit after tax. As a result, profit before shareholder tax, but after policyholder tax, is typically a useful metric, although it has been distorted
by policyholder tax asymmetry in 2020. The following table demonstrates the way in which profit before shareholder tax is presented in the
IFRS Consolidated Statement of Comprehensive Income on page 153.
Year ended
31 December
2019
£’Million
708.9
Policyholder tax (521.8)
187.1
Shareholder tax (40.5)
146.6
Profit before shareholder tax has increased significantly year-on-year. As with the increase in profit after tax, this reflects the impact of
policyholder tax asymmetry, as well as an increase in wealth management fees and a reduction in expenses.
Shareholder tax reflects the tax charge attributable to shareholders and is closely related to the performance of the business. However, it
This is profit before shareholder tax (as calculated above) adjusted to remove the impact of accounting for deferred acquisition costs (DAC),
deferred income (DIR) and the purchased value of in-force business (PVIF).
IFRS requires certain up-front expenses incurred and income received to be deferred. The deferred amounts are initially recognised on the
Statement of Financial Position as a DAC asset and DIR liability, which are subsequently amortised to the Statement of Comprehensive
Income over a future period. Substantially all of the Group’s deferred expenses are amortised over a 14-year period, and substantially all
deferred income is amortised over a six-year period.
The impact of accounting for DAC, DIR and PVIF in the IFRS result is that there is a significant accounting timing difference between the
emergence of accounting profits and actual cash flows. For this reason, Underlying profit is considered to be a helpful metric. The following
table demonstrates the way in which IFRS profit reconciles to Underlying profit.
Year ended
31 December
2019
£’Million
187.1
Remove the impact of movements in DAC/DIR/PVIF 31.8
218.9
The impact of movements in DAC, DIR and PVIF on IFRS profit before shareholder tax is further analysed as follows. Due to policyholder tax
on DIR, the amortisation of DIR during the year and DIR on new business for the year set out below cannot be agreed to the figures provided
in Note 8, which are presented before both policyholder and shareholder tax.
Year ended
31 December
2019
£’Million
Amortisation of DAC (96.6)
DAC on new business for the year 28.1
(68.5)
Amortisation of DIR 179.6
DIR on new business for the year (139.7)
39.9
(3.2)
(31.8)
58
ST. JAMES’S PLACE PLC
STRATEGIC REPORT
The scale of the £65.5 million negative overall impact of DAC on the IFRS result (2019: negative £68.5 million) is largely due to changes
arising from the 2013 Retail Distribution Review (RDR). After these changes, the level of expenses that qualified for deferral reduced
significantly, but the large balance accrued previously is still being amortised. As deferred expenses are amortised over a 14-year period
there is a significant transition period, which could last for another four to five years, over which the amortisation of pre-RDR expenses
previously deferred will significantly outweigh new post-RDR expenses deferred despite significant business growth, resulting in a net
negative impact on IFRS profits.
The reduction in new business in the year means income deferred in 2020 is lower than it was in 2019. Income released from the deferred
income liability has reduced slightly reflecting a reduced opening balance. Together, these effects mean that DIR has had a positive
The Cash result is used by the Board to assess and monitor the level of cash profit (net of tax) generated by the business. It is based on IFRS
with adjustments made to exclude policyholder balances and certain non-cash items, such as DAC, DIR, deferred tax and non-cash-settled
share option costs. Further details, including the full definition of the Cash result, can be found in the Glossary of Alternative Performance
Measures on pages 232 to 234. Although the Cash result should not be confused with the IAS 7 Consolidated Statement of Cash Flows,
The Cash result reconciles to Underlying profit, as presented in Section 2.1, as follows.
Year ended 31 December 2019
Before
shareholder tax After tax
£’Million £’Million
218.9 172.8
Non-cash-settled share-based payments 28.7 28.7
Impact of deferred tax 10.4
Impact of policyholder tax asymmetry
1
10.0 10.0
Other
1
12.8 7.5
270.4 229.4
1 The impact of policyholder tax asymmetry has been separated from other for 2020. As a result, other has decreased by £10.0 million from those amounts disclosed in 2019.
Further information on the impact of policyholder tax asymmetry can be found on page 57.
The decrease in reflects the reduction in expense for adviser share schemes and the impact
The most significant is recognition in the Cash result of the benefit from realising tax relief. This has already been
recognised under IFRS, and hence Underlying profit, through the establishment of deferred tax assets. More information can be found
The is a temporary effect due to the market losses experienced during the year. For further
explanation, refer to page 57.
represents a number of other small items, including the difference between the lease expense recognised under IFRS 16 Leases
The following table shows an analysis of the Cash result using three different measures:
•
This measure represents the regular emergence of cash from day-to-day business operations;
•
This measure includes the cost of a number of strategic investments which are being incurred and expensed in the year, but which
•
This measure includes the short-term costs associated with the back-office infrastructure project together with other items of a
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
59
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT
Year ended
31 December
2019
Total
£’Million
Net annual management fee 1 781.2
Reduction in fees in gestation period
1 (356.3)
1 424.9
Margin arising from new business
2 127.5
Establishment expenses
3 (186.2)
Operational development expenses
3 (22.3)
Regulatory fees and FSCS levy
3 (31.2)
Academy
3 (10.9)
Shareholder interest
5 12.9
Tax relief from capital losses
6 10.3
Miscellaneous
7 (14.3)
310.7
Asia
8 (19.9)
DFM
8 (9.8)
Strategic development costs
3 ( 7.9)
273.1
Back-office infrastructure development costs
3 (38.8)
Variance
9 (4.9)
229.4
The is the net manufacturing margin that the Group retains from FUM after payment of the associated costs,
for example, investment advisory fees and Partner remuneration. Each product has standard fees, but they vary between products. Overall
post-tax margin on FUM reflects business mix but also the different tax treatment, particularly Life tax on onshore investment business.
As noted on page 56 however, our investment and pension business product structure means that these products do not generate net Cash
result, after the margin arising from new business, during the first six years. This is known as the ‘gestation period’ and is reflected in the
reduction in fees in gestation period line. Further information is provided on page 56.
reflects Cash result income from FUM that has reached maturity, including FUM which has emerged from the
gestation period during the year, and this line is the focus of our explanatory analysis. As with net annual management fees, the average rate
can vary between time periods with business mix and tax. For 2020, our net income is 0.63% (post tax) of FUM (2019: 0.63%). In 2021, we
Net income from Asia and DFM FUM is not included in this line. Instead, this is included in the net Cash result presented separately for Asia
and DFM.
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This is the net positive Cash result impact of new business in the year, reflecting initial charges levied on gross inflows and new business-
related expenses. The majority of these expenses vary with new business levels, such as the incremental third-party administration costs of
setting up a new policy on our back-office systems and payments to Partners for the initial advice provided to secure the clients’ investment.
As a result, gross inflows are a key driver behind this line.
However, the margin arising from new business also contains some fixed expenses, and elements which do not vary exactly in line with gross
inflows. For example, our third-party administration tariff structure includes a fixed fee, and to provide some stability for Partner businesses,
elements of our support for them are linked to prior-year new business levels.
Therefore, whilst the margin arising from new business tends to move directionally with the scale of gross inflows generated during the year,
the relationship between the two is not linear.
Expenses are treated in two different ways in the Cash result depending on their type:
i. Overhead expenses, such as , and development expenses which relates to the Group’s core business such as
, are presented in separate lines on the face of the Cash result.
ii. Expenses which vary with business volumes, such as payments to Partners and third-party administration expenses, and expenses which
relate to investment in specific areas of the business such as DFM are netted from the relevant income lines rather than presented
separately.
The table below provides a breakdown of the Group’s overhead and development expenses as presented in separate lines in the Cash result.
Year ended 31 December 2019
Before tax Tax rate After tax
£’Million Percentage £’Million
Establishment expenses 229.9 19.0% 186.2
Regulatory fees and FSCS levy 38.5 19.0% 31.2
Academy 13.4 19.0% 10.9
281.8 228.3
Operational development costs 27.5 19.0% 22.3
Strategic development costs 9.8 19.0% 7.9
Back-office infrastructure costs 47.9 19.0% 38.8
85.2 69.0
367.0 297.3
Overhead expenses
Overhead expenses represent the cost of running the Group.
have increased by 7% year-on-year, reflecting the continued growth in the scale of the business.
The costs of operating in a regulated sector include and the .
Year ended
31 December
2019
£’Million
FSCS levy 22.3
Regulatory fees 8.9
31.2
Our position as a market-leading provider of advice means we make a very substantial contribution to supporting the FSCS, thereby providing
protection for clients of other businesses in the sector that fail. Over the last few years the levy has been at an elevated level, which was
further exacerbated by the FSCS increasing the levy by more than 20% for the current funding year, the announcement of a supplementary
levy in November 2020 and the continued relative growth of the Group in the sectors in which we operate.
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expenses represent the cost of running our Academy and Next Generation Academy. They have decreased by 13% year-on-year as
a result of new intakes into the programme being deferred to 2021 following the onset of COVID-19, partially offset by the costs involved in
moving delivery of the programme online for those students currently enrolled.
Development expenses
have increased in 2020 due to further investment, laying the foundations for long-term growth. This
includes developing our collaboration with Salesforce as previously announced. In addition, we enhanced our capability to support the
Partnership and enable them to service our clients effectively in a remote working environment.
continue to increase as result of investment in the business, particularly from the creation of regional hubs to
better support our Partner practices and the reconfiguration of 2,500 Partner websites.
Costs associated with our Bluedoor programme relate to final decommissioning work of our legacy systems,
following the final smooth migration of our core UK business onto Bluedoor in 2019. No further back-office infrastructure costs are
anticipated for 2021.
In order to reconcile the overhead and development expenses presented on separate lines in the Cash result to the total IFRS expenses set
out in the Statement of Comprehensive Income on page 153, the expenses which vary with business volumes and those which relate to
investment in specific areas of the business, both of which are included in the Cash result but are netted against the relevant income lines
and so cannot be seen explicitly, and certain IFRS expenses which by definition are not included in the Cash result need to be added in.
Year ended
31 December
2019
£’Million
367.0
Expenses which vary with business volumes
Other performance-related costs 120.4
Payments to Partners 814.7
Investment expenses 89.8
Third-party administration 110.6
Other 48.2
Expenses relating to investment in specific areas of the business
Asia expenses 23.4
DFM expenses 26.7
1,600.8
Expenses which are not included in the Cash result
Amortisation of DAC and PVIF, net of additions 71.7
Non-cash-settled share-based payments expenses 28.7
Other 6.6
1,707.8
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Expenses which vary with business volumes
, for both Partners and employees, vary with the level of new business and the operating profit
performance of the business. and are met through charges
to clients, and so any variation in them from changes in the volumes of new business or the level of the stock markets does not impact Group
profitability significantly.
Each of these items is recognised within the net annual management fee or margin arising from new business lines of the Cash result,
depending on the nature of the expense.
Other expenses include interest expense and bank charges, operating costs of acquired independent financial advisers (IFAs) and donations
and miscellaneous.
Expenses relating to investment in specific areas of the business
and both reflect disciplined expense control during the year, whilst continuing to invest to support growth.
Such investment will continue going forward.
In the Cash result, Asia and DFM expenses are presented net of the income they generate.
Expenses which are not included in the Cash result
DAC amortisation, net of additions, PVIF amortisation and non-cash-settled share-based payment expenses are the primary expenses which
are recognised under IFRS but are excluded from the Cash result.
This is the income accruing on the investments and cash held for regulatory purposes together with the interest received on the surplus
capital held by the Group. It is presented net of funding-related expenses, including interest paid on borrowings and securitisation costs.
In recent years, a deferred tax asset has been established in IFRS for historic capital losses which are regarded as being capable of utilisation
over the medium term. The tax asset is ignored for Cash result purposes as it is not fungible, but instead the cash benefit realised when
losses are utilised is shown in the tax relief from capital losses line.
Utilisation during the year of £13.7 million tax value (2019: £10.3 million) was slightly ahead of guidance provided at 2020 half-year that gave
the expected utilisation for the year of approximately £10 million. While dependent on market performance, we continue to expect utilisation
of £8 - £10 million per year.
This category represents the cash flow of the business not covered in any of the other categories. It includes ongoing administration
expenses and associated policy charges, utilisation of the deferred tax asset in respect of prior years’ unrelieved expenses (due to structural
timing differences in the life company tax computation) and movements in the fair value of renewal income assets.
These lines represent the net income from Asia and DFM FUM, including the Asia and DFM expenses set out in Note 4 on the previous page.
The growth plans for both of these businesses have been adversely impacted by the financial uncertainties during the year, but both have still
managed increases in revenues and disciplined expense management We have continued to invest to support their growth hence their
contribution to the Cash result is currently a net expense.
This reflects a number of small non-recurring items incurred during the prior year.
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The Cash result is derived from the IFRS Consolidated Statement of Financial Position in a two-stage process:
Firstly, the IFRS Consolidated Statement of Financial Position is adjusted for a number of material balances that reflect policyholder interests
in unit-linked liabilities together with the underlying assets that are held to match them. Secondly, it is adjusted for a number of non-cash
‘accounting’ balances such as DIR, DAC and associated deferred tax. The result of these adjustments is the Solvency II Net Assets Balance
Sheet and the following table shows the way in which it has been calculated at 31 December 2020.
Solvency II
Net Assets
Balance Sheet:
2019
£’Million
Goodwill – –
Deferred acquisition costs – –
Purchased value of in-force business – –
Computer software – –
Property and equipment
1 – – 166.3
Deferred tax assets
2 – 98.5
Reinsurance assets – –
Other receivables
3 1,391.9
Investment property – –
Equities – –
Fixed income securities
4 – 5.2
Investment in Collective Investment Schemes
4 – 1,131.8
Derivative financial instruments – –
Cash and cash equivalents
4 – 292.8
3,086.5
Borrowings
5 – – 403.7
Deferred tax liabilities
2 – 436.2
Insurance contract liabilities –
Deferred income – –
Other provisions
6 – – 40.6
Other payables
1, 3 1,033.7
Investment contract benefits – –
Derivative financial instruments – –
Net asset value attributable to unit holders – –
Income tax liabilities
7 – – 115.4
Preference shares – – 0.1
2,029.7
– 1,056.8
strips out the policyholder interest in unit-linked assets and liabilities, to present solely shareholder-impacting balances.
removes items such as DAC, DIR, PVIF and their associated deferred tax balances from the IFRS Statement of Financial
Position to bring it in line with Solvency II recognition requirements.
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£133.7 million (2019: £126.6 million) of the property and equipment balance represents the right to use leased assets. It has increased
period-on-period as our office footprint has grown. Lease liabilities of £132.7 million are recognised within the other payables line
Notes 9, 10 and 13 to the IFRS Financial Statements provide further detail on property and equipment, leases and other payables respectively.
Analysis of deferred tax assets and liabilities, including how they have moved year-on-year, is set out in Note 7 Income and deferred taxes of
the IFRS Financial Statements. The current year presentation of deferred tax assets and liabilities reflects a reassessment of the requirements
of IAS 12 Income Taxes, with reference to the netting of certain deferred tax balances. This has resulted in some reallocation of balances
between deferred tax liabilities and assets. Prior year comparatives have not been restated, as the changes are not material. Further
information is set out in Note 7.
Detailed breakdowns of other receivables and other payables can be found in Note 12 Other receivables and Note 13 Other payables of the
IFRS Financial Statements.
Other receivables on the Solvency II Net Assets Balance Sheet have increased from £1,391.9 million at 31 December 2019 to £1,546.2 million
at 31 December 2020, principally reflecting an increase in market trade settlements in the life unit-linked funds and consolidated unit trusts.
One of the items within other receivables is the operational readiness prepayment asset. This has arisen from the investment we have made
into our back-office infrastructure project, which has been a complex, multi-year programme. In addition to expensing our internal project
costs through the IFRS Statement of Comprehensive Income and Cash result as incurred, we have been capitalising Bluedoor development
costs as a prepayment asset on the IFRS Statement of Financial Position. The asset, which stood at £313.9 million at 31 December 2020
(2019: £299.2 million) has been amortising through the IFRS Statement of Comprehensive Income and the Cash result since 2017 and will
continue to do so over the remaining life of the contract, which at 31 December 2020 is 13 years, following a five-year contract extension
agreed with our back-office administration provider during the year.
The movement schedule below demonstrates how the operational readiness prepayment has built up over the past two years.
2019
£’Million
268.3
Additions during the year 91.8
360.1
(31.9)
Amortisation during the year (29.0)
(60.9)
299.2
The amortisation expense is recognised within third-party administration expenses in the IFRS result, and within the net annual management
fee and margin arising from new business lines of the Cash result. It is offset by the lower tariff charges on Bluedoor compared to the
previous system. The monthly amortisation charge decreased during the year following the agreement of the five-year contract extension
with our back-office administration provider. The charge will remain constant year-on-year following the final operational readiness spend
planned for 2021. However, the tariff-saving benefits will grow as the business grows, benefiting both the IFRS and Cash results.
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Cash generated by the business is held in highly rated government securities, AAA-rated money market funds, and bank accounts. Although
these are all highly liquid, only the latter is classified as cash and cash equivalents on the Solvency II Net Assets Balance Sheet. The total
liquid assets held are as follows.
31 December
2019
£’Million
Fixed interest securities 5.2
Investment in Collective Investment Schemes (AAA-rated money market funds) 1,131.8
Cash and cash equivalents 292.8
1,429.8
The Group’s primary source of net cash generation is product charges. In line with profit generation, as most of our investment and pension
business enters a gestation period, there is no cash generated (apart from initial charges) for the first six years of an investment. This means
that the amount of cash generated will increase year on year as FUM in the gestation period becomes mature and is subject to annual product
management charges. Unit trust and ISA business does not enter the gestation period, and so generates cash immediately from the point of
investment.
Cash is used to invest in the business and to pay the Group dividend. Our dividend guidance is set such that appropriate cash is retained in
the business to support the investment needed to meet our future growth aspirations.
Our most significant investment in the business in recent years has been the development of Bluedoor, which has had a substantial impact
on our liquid assets, and borrowings positions. Since the inception of the project in 2014 we have capitalised £406.6 million of development
spend on Bluedoor in our operational readiness prepayment asset. This is in addition to £196.3 million of internal project costs that we have
expensed as incurred. The total cash outflow on the project is £602.9 million.
The Group has two different types of borrowings: senior unsecured corporate borrowings, which are used to manage working capital and
portfolio of the Group’s business loans to Partners. Holders of the senior tranche of non-recourse securitisation loan notes have no recourse
to the assets held by any other entity within the Group.
31 December
2019
£’Million
Corporate borrowings: bank loans 173.3
Corporate borrowings: loan notes 113.8
287.1
Senior tranche of non-recourse securitisation loan notes 116.6
403.7
Further information is provided in Note 16 Borrowings and financial commitments to the IFRS Financial Statements.
Further information on other provisions, including how the balance has moved year-on-year, is set out in Note 15 Other provisions.
The Group has an income tax liability of £32.7 million at 31 December 2020 compared to £115.4 million at 31 December 2019. This is due
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After the Solvency II Net Assets Balance Sheet has been determined, the second stage in the derivation of the Cash result identifies a number
of movements in that balance sheet which do not represent cash flows for inclusion within the Cash result. The following table explains how
the overall Cash result reconciles into the total movement.
Year ended
31 December
2019
£’Million
1,108.0
Dividend paid (256.0)
Issue of share capital and exercise of options 8.7
Consideration paid for own shares (0.1)
Proceeds from exercise of shares held in trust 0.2
Change in deferred tax (10.4)
Impact of policyholder tax asymmetry (10.0)
Change in goodwill, intangibles and other non-cash movements (13.0)
Cash result 229.4
1,056.8
Wealth management differs from most other businesses, in that the expected shareholder income from client investment activity emerges
over a long period in the future. We therefore supplement the IFRS and Cash results by providing additional disclosure on an EEV basis, which
brings into account the net present value of the expected future cash flows. We believe that a measure of the total economic value of the
Group’s operating performance is useful to investors.
As in previous reporting, our EEV continues to be calculated on a basis determined in accordance with the EEV principles originally issued
Solvency II, in April 2016.
Many of the principles and practices underlying EEV are similar to the requirements of Solvency II, and we have sought to align them
Year ended
31 December
2019
£’Million
Funds management business 1 1,121.2
Distribution business
2 (55.6)
Back-office infrastructure development (47.9)
Other (65.7)
952.0
Investment return variance
3 768.6
Economic assumption changes
4 (27.0)
1,693.6
Tax (286.8)
Corporation tax rate change
5
1,406.8
A reconciliation between EEV operating profit before tax and IFRS profit before tax is provided in Note 3.
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The funds management business operating profit has decreased to £1,077.8 million (2019: £1,121.2 million) and a full analysis of the result is
shown below.
Year ended
31 December
2019
£’Million
New business contribution 793.0
Profit from existing business
248.5
82.1
(9.9)
Investment income 7.5
1,121.2
The for the year at £766.3 million (2019: £793.0 million) was 3% lower than the prior year, primarily reflecting the
decrease in new business volumes.
The for the year increased to £279.6 million (2019: £248.5 million). This reflects the higher opening value
The during the year was £16.9 million (2019: £82.1 million). This reflects positive retention experience offset by
increased development expenses during the year.
The impact of in the year was a positive £10.5 million (2019: negative £9.9 million), reflecting a small
reduction in the level of future expenses assumed.
The distribution loss includes the positive gross margin arising from advice income less payments to advisers, offset by the costs of investment
in growing the Partnership and building the distribution capabilities in Asia. The gross margin has reduced year-on-year due to the fall in
gross inflows during 2020. In addition, FSCS levy expenses increased to £25.2 million for the year (2019: £18.9 million), increasing the
reported loss.
The investment return variance reflects the capitalised impact on the future annual management fees resulting from the difference between
the actual and assumed investment returns. Given the size of our FUM, a small difference can result in a large positive or negative variance.
The typical investment return on our funds during the year was positive 5.5% after charges, compared to the assumed investment return of
positive 1.4%. This resulted in a positive investment return variance of £304.4 million (2019: positive £768.6 million).
The negative variance of £47.4 million arising in the year (2019: negative £27.0 million) reflects the impact of the decrease in the economic
basis arising from reduction in the 10 year Gilt yields over the year.
In the Finance Act 2016, a reduction to the UK main rate of corporation tax to 17% effective from 1 April 2020 was enacted, with the impact
incorporated into the deferred tax balances in 2016. However, in the UK Budget of 11 March 2020 it was announced that the rate will remain
at 19%, rather than the previously enacted reduction to 17%. This change was substantively enacted on 17 March 2020 and as a result the
impact of remeasuring the relevant deferred tax balances has been recognised as a corporation tax rate change in 2020.
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The largest single element of the EEV operating profit (analysed in the previous section) is the new business contribution. The level of new
business contribution generally moves in line with new business levels. To demonstrate this link, and aid understanding of the results, we
provide additional analysis of the new business margin (the margin). This is calculated as the new business contribution divided by the gross
inflows, and is expressed as a percentage.
The table below presents the margin before tax from our manufactured business.
Year ended
31 December
2019
New business contribution (£’Million) 123.0
Gross inflows (£’Billion) 2.28
Margin (%) 5.4
New business contribution (£’Million) 434.0
Gross inflows (£’Billion) 8.66
Margin (%) 5.0
New business contribution (£’Million) 236.0
Gross inflows (£’Billion) 4.16
Margin (%) 5.7
New business contribution (£’Million) 793.0
Gross inflows (£’Billion) 15.10
Margin (%) 5.3
Post-tax margin (%) 4.4
The overall margin for the year was consistent with 2019 at 5.3%. The change in margin for different business types reflects a reallocation
The principal economic assumptions used within the cash flows at 31 December are set out below.
Year ended
31 December
2019
Risk-free rate 0.9%
Inflation rate 3.3%
Risk discount rate (net of tax) 4.0%
Future investment returns:
0.9%
3.9%
3.2%
Expense inflation 3.7%
The risk-free rate is set by reference to the yield on ten-year gilts. Other investment returns are set by reference to the risk-free rate.
The inflation rate is derived from the implicit inflation in the valuation of ten-year index-linked gilts. This rate is increased to reflect higher
increases in earnings-related expenses.
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The table below shows the estimated impact on the reported value of new business and EEV to changes in various EEV calculated
assumptions. The sensitivities are specified by the EEV principles and reflect reasonably possible levels of change. In each case, only the
indicated item is varied relative to the restated values.
100bp reduction in risk-free rates, with corresponding change
in fixed interest asset values
1
10% increase in withdrawal rates
2
10% reduction in market value of equity assets
3 – –
10% increase in expenses
4
100bp increase in assumed inflation
5
1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that the
sensitivity assumes a corresponding change in all investment returns but no change in inflation.
2. The 10% increase is applied to the withdrawal rate. For instance, if the withdrawal rate is 8% then a 10% increase would reflect a change
3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in
recent years the proportion invested directly in UK and overseas equities has exceeded 70%.
4. For the purposes of this sensitivity only non-fixed elements of the expenses are increased by 10%.
5. This reflects a 100bp increase in the assumed RPI underlying the expense inflation calculation.
100bp reduction in risk discount rate
Although not directly relevant under a market-consistent valuation, this sensitivity shows the level of adjustment which would be required to
reflect differing investor views of risk.
The table below provides a summarised breakdown of the embedded value position at the reporting dates.
31 December
2019
£’Million
Value of in-force business 6,003.0
Solvency II net assets 1,056.8
7,059.8
Pence
1,320.1
The EEV result above reflects the specific terms and conditions of our products. Our pension business is split between two portfolios.
investment in the same product. Earlier business was written in our separate Retirement Plan and Drawdown Plan products, targeted at the
each of the two phases separately, and therefore has a slightly shorter term and lower new business margin.
Our experience is that much of our Retirement Plan business converts into Drawdown business at retirement, but, in line with the EEV
guidelines, we are required to defer recognition of the additional value from the Drawdown Plan until it is crystallised. If instead we were
Retirement Account business, this would result in an increase of approximately £385 million to our embedded value at 31 December 2020
and 31 December 2019.
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clients. Our clients can access their investments ‘on demand’ and because the encashment value is matched, movements in equity markets,
currency markets, interest rates, mortality, morbidity and longevity have very little impact on our ability to meet liabilities. We also have a
prudent approach to investing shareholder funds and surplus assets in cash, AAA-rated money market funds and highly rated government
securities. The overall effect of the business model and risk appetite is a resilient solvency position capable of enabling liabilities to be met
even through adverse market conditions.
Our Life businesses are subject to the Solvency II capital regime which applied for the first time in 2016. Given the relative simplicity of our
business compared to many, if not most, other organisations that fall within the scope of Solvency II, we have continued to manage the
solvency of the business on the basis of holding assets to match client unit-linked liabilities plus a management solvency buffer (MSB). This
has ensured that not only can we meet client liabilities at all times (beyond the Solvency II requirement of a ‘1 in 200 years’ event), but we also
have a prudent level of protection against other risks to the business. At the same time, we have ensured that the resulting capital held meets
with the requirements of the Solvency II regime, to which we are ultimately accountable.
For the year ended 31 December 2020 we reviewed the level of our MSB and increased the MSB for the Life businesses to £345 million,
reflecting business growth and market conditions.
The Group’s overall Solvency II net assets position, MSB and management solvency ratios are as follows.
31 December
2019 Total
£’Million
Solvency II net assets 1,056.8
MSB – 476.2
– –
1 After payment of year-end intra-group dividend.
2 Before payment of the Group final dividend.
Whilst we focus on Solvency II net assets and the MSB to manage solvency, we provide additional information about the Solvency II free
asset position for information. The presentation starts from the same Solvency II net assets, but includes recognition of an asset in respect
of the expected value of in-force cash flows (VIF) and a risk margin (RM) reflecting the potential cost to secure the transfer of the business
requirement (SCR), reflecting the capital required to protect against a range of ‘1 in 200’ stresses. The SCR is calculated on the standard
formula approach. No allowance has been made for transitional provisions in the calculation of technical provisions or the SCR.
An analysis of the Solvency II position for our Group, split by regulated and non-regulated entities at the year-end is presented in the
31 December
2019 Total
£’Million
Solvency II net assets 1,056.8
Value of in-force (VIF) – 4,303.5
Risk margin – (1,213.3)
4,147.0
Solvency capital requirement (B) – (3,148.0)
999.0
132%
1 After payment of year-end intra-group dividend.
2 Before payment of the Group final dividend.
The solvency ratio after payment of the proposed Group final dividend is 124% at the year-end. The solvency ratio after payment of the Group
second interim dividend for the period to 31 December 2019 was 128%.
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The table below shows the estimated impact on the Solvency II free assets, the SCR and the solvency ratio from changes in various
assumptions underlying the Solvency II calculations. In each case, only the indicated item is varied relative to the restated values.
The solvency ratio is not very sensitive to changes in experience or assumptions, and, due to the approach to matching unit-linked
presented below.
%
100bps reduction in risk free rates, with corresponding change in fixed interest asset values
1
10% increase in withdrawal rates
2
10% reduction in market value of equity assets
3
10% increase in expenses
4
100bp increase in assumed inflation
5
1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that the
sensitivity assumes a corresponding change in all investment returns but no change in inflation.
2. The 10% increase is applied to the lapse rate. For instance, if the lapse rate is 8% then a 10% increase would reflect a change to 8.8%.
3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in
recent years the proportion invested directly in UK and overseas equities has exceeded 70%.
4. For the purposes of this sensitivity all expenses are increased by 10%.
5. This reflects a 100bps increase in the assumed RPI underlying the expense inflation calculation.
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Effective risk management is critical to the
risks due to the business activities and the
industry in which we operate. We choose
carefully the risks we accept and those to
limit or avoid through the design and
operation of our client and Partner
proposition, including the way in which
In addition, the Group is exposed to a number
of current and emerging external factors and
trends, including the impacts from COVID-19,
political risks such as Brexit, macro-
economic factors, cyber crime and climate
change, some of which may impact on our
short- and/or longer-term profitability. Under
the leadership, direction and oversight of our
Board, these risks are carefully understood
and managed to achieve our strategic
We do not, and cannot, seek to eliminate risk
entirely, rather we seek to understand our
risks fully and manage them appropriately.
The emphasis is on applying effective risk
management strategies, so that all material
risks are identified and managed within the
agreed risk appetite. Risk management is
embedded within our culture and therefore
is a core aspect of decision-making.
Risk management forms a key part of
decisions on strategic developments to our
client and Partner propositions, investments
and dividend payments.
The internal control environment is built
upon a strong control culture and
organisational delegation of responsibility.
The ‘first line’ business is responsible and
accountable for risk management. This
‘second line’ risk, controls and compliance
functions and assurance from the ‘third
line’ internal audit function to form a
The risk management and controls
framework is the combined processes
measures, manages and monitors the
risks that may impact on the successful
delivery of its strategic objectives. Based
upon our risk appetite, the risks identified are
either accepted or appropriate actions are
taken to mitigate them.
The Board, through the Risk Committee,
takes an active role in overseeing the Risk
Management Framework, for which it is
responsible. As part of this the Board
robustly assesses its principal and emerging
risks, which are considered in regular
reporting and summarised annually in the
Own Risk and Solvency Assessment: Further
On behalf of the Board, the Audit Committee
takes responsibility for assessing the
effectiveness of the Group’s risk
management and internal control
systems, covering all material controls,
including financial, operational and
compliance controls. It does this
self-assessments and monitoring of
model throughout the year. The systems
have been in place for the year under
review and up to the date of approval
The Board receives regular reports from
the Board Risk Committee and Audit
Committee and approves key aspects
Framework including the Risk Appetite
Statement and Group ORSA.
1. Loss event reporting
2. Emerging risk assessment
3. Stress and scenario testing
4. Risk and controls self assessment
5. Operational risk assessments
6. Reverse stress testing
7. Own Risk and Solvency Assessment
8. Recovery and resolution planning
9. Risk registers
10. Regular risk reporting
11. Key Risk Indicators (KRIs)
12. Risk relationship meetings
Insights
communicated
to inform further
activity
1
2
3
4
5
67
8
9
10
11
12
M
o
n
i
t
o
r
M
a
n
a
g
e
A
s
s
e
s
s
I
d
e
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t
i
f
y
The diagram below depicts our Risk Management Framework.
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STRATEGIC REPORT
Assess
changes to risk
risks; agree
scenarios
update policies
Agree
own needs,
thresholds and
recovery plans
Present
draft ORSA
Assess
sensitivities
and own
solvency needs
Update
The Board carefully sets its appetite for
taking risk against the Group’s strategic
objectives. These choices are set out in
detail in our Risk Appetite Statement, which
is reviewed at least annually by the Risk
Committee, senior risk owners and the
Executive Board risk owners before being
approved by the Board.
The Risk Appetite Statement also provides
clarity over ownership, enabling us to identify
the key individuals within the Group who
have responsibility for managing these risks.
The Risk Appetite Statement includes a risk
appetite scale. This scale has several risk
acceptance levels, ranging from no appetite
for taking risks at all, through to acceptance
of risk. The level of risk we are willing to
accommodate will vary depending on
individual risk scenarios.
Risk appetite can and will change over time,
sometimes rapidly as economic and
business environment conditions change,
and therefore the statement is an evolving
document. A comprehensive suite of Key
Risk Indicators (KRIs) is reported regularly
to enable the Risk Committee, on behalf of
the Board, to monitor that the Group
remains within its accepted appetite.
We are classified as an insurance group
and are subject to Solvency II insurance
regulation. A key part of this regulation
requires a consistent approach to risk
management across the Group,
supported by the production of an
annual ORSA, which considers both
The ORSA process follows an annual
cycle, which links the Group’s activity
and strategic objectives with
comprehensive risk assessments that
the business faces, and ensures the
Group is resilient to stresses in the
following diagram.
The solvency capital requirement (SCR)
for insurers allows for at least a ‘1 in
200-year’ risk event over a one-year
and scenarios are used to help provide
insight into the ability to maintain the
regulatory capital in these conditions.
Our results show that it would be
possible to maintain regulatory capital
across the Group under all stresses for
the business planning horizon. The
outcomes of these activities assist us
when considering the calculations and
allocation of risk capital to all major risks
in the Group, and the adequacy of capital
positions. This process ensures our
continued confidence that the regulated
entities remain strongly capitalised.
The ORSA uses a five-year projection
period for the medium term. Due to the
gestation period across our pension and
investment products we do not earn
annual management fees in the first six
years. As a result, considering a five-year
projection period, which is less than the
gestation period, is a prudent view of the
Group’s viability as we consider ongoing
revenues generated on existing business
only. The ORSA is particularly useful in
assessing viability as it involves a
comprehensive assessment of risk and
capital requirements for the business.
Consideration is given to factors or
management, investment growth, retention
of clients and ability to attract new clients,
downturn. Combinations of these factors
are used to form scenarios which are tested,
providing for more extreme combinations of
events. Therefore, assumptions are robustly
analysed to predict both the immediate
impact of an event along with the impact
over the longer term (in the wake of the
event). In addition to these more extreme
‘combination’ scenarios, assessments
are also completed based on more
current/topical or emerging risk
exposures affecting the Group or
financial services more generally.
The ORSA aids decision-making by
bringing together the following processes:
• strategic planning;
• risk appetite consideration;
• risk identification and management;
and
• capital planning and management.
The ORSA continues to evolve and
further strengthen risk management
processes throughout the Group.
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Over the past year, the emergence and
impact of COVID-19 has been a major
external risk event. No event of this nature
can be precisely forecast and planned for,
however, through our approach to the
fundamentals of risk management the
Group has been able to demonstrate
resilience, from a financial and operational
perspective, against COVID-19. We remain
confident in our ability to withstand further
challenges that may or may not emerge.
The Board has been actively involved in
defining the Group’s strategic response to
COVID-19. Timely and targeted risk-based
information has been provided to the Board
to support decision-making and help
understanding of key issues. We remain
acutely aware of the changing threat to
health, further restrictions and the longer-
term potential macro-economic impacts,
however, whilst these could further impact
profitability, we continue to be confident of
the ongoing resilience to risk and the
viability of the Group.
Some of the key risk considerations around
COVID-19 for the Group have been and
continue to be:
• safety and wellbeing of employees,
Partners, clients and others in our
• maintaining operational continuity whilst
working remotely and social distancing;
• the impact on financial markets;
• changes in investor sentiment impacting
new business inflows and retention;
• managing risks to client outcomes;
• supporting Partner businesses; and
• managing operational risks
When the risk considerations from
COVID-19 are broken down in this way,
the Group is familiar with (and are included
in the Principal Risk section) and shown
and operational risk assessments.
The primary financial impact of the
pandemic on the Group has been the
impact on funds under management due
new business caused by the surrounding
uncertainty. However, these financial
impacts have not been as severe as our
more extreme stress and scenario tests.
Our market risk exposure is limited because
we hold matching assets for policyholder
liabilities and a significant portion of our
expenses are variable with the level of funds
under management and new business.
management, and although the income
varies as funds under management
resilience as it is a reliable income stream
even in challenging market conditions. Our
clients tend to have medium to long-term
investment objectives and so our lapse
experience tends to improve as market
uncertainty increases; this feature of our
experience also helps to provide resilience
against challenging market conditions.
The nature of these extreme circumstances
also presents increased operational
challenges. The primary operational risks
are those associated with remote working,
particularly since we are an advice-led,
face-to-face business. The use of
technology has enabled both employees
and advisers to maintain the face-to-face
element of our operations whilst allowing
the flexibility to work remotely, recognising
that face-to-face meetings can be carried
out virtually through video conferencing
tools. However, we acknowledge that
remote working has introduced or increased
the likelihood of other risks crystallising,
such as cyber security for example.
The ‘first line’ in general has taken steps
increased in likelihood as result of remote
working. Using cyber security as example,
we conduct regular phishing email tests to
ensure employees remain vigilant. In most
instances our internal controls continue to
remain appropriately robust. Where new
processes have been created in response
been created and documented to help
reduce the risk of an operational failure,
audit function.
The management decision-making
necessary during this time has been
appropriately informed by consideration
continues to appropriately manage risks
including those heightened due to COVID-19.
The situation continues to be monitored
carefully and we remain focused on
understanding the degree to which the
various outcomes might impact the
operations of the business.
In addition to the uncertainties surrounding
COVID-19, the short and longer-term
consequences of Brexit impact upon
investor sentiment and the wider external
environment in which the Group operates.
Stress and scenario testing has been
performed which demonstrates that the
business is resilient and we continually
monitor the changing environment, to
ensure our analysis and scenario testing
remain appropriate.
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We fail to deliver
good quality
administration
services to clients
and advisers.
• Clients and advisers receive
poor policy administration
• Failure of key administration
system change projects
• Administrative complexity
• Management of administration centres to ensure key
service standards are met
• Continuous development of technology
• Effective planning of large-scale change projects
• Ongoing activity to reduce administrative complexity
Our product
proposition fails to
meet the needs,
objectives and
expectations of
our clients. This
includes poor
relative investment
performance and
poor product
design.
• Investments provide poor
returns relative to their
benchmarks and/or do not
deliver expected client
outcomes
• Range of solutions does not
align with the product and
service requirements of our
current and potential future
clients
• Failure to meet client
expectations of a
sustainable business, not
least in respect of
responsible investing
• Regular monitoring of manufactured products’
performance
•
most appropriate funds from a risk/net return perspective
• Continuous development of the range of services offered
to clients
• Engagement with fund managers around principles
We fail to provide
quality, suitable
advice or service
to clients.
• Advisers deliver poor quality
or unsuitable advice
• Failure to evidence the
provision of quality service
and advice
• Licensing programme ensuring appropriate standard
• Technical support helplines for advisers
• Timely and clear responses to client complaints
• Robust oversight process of the advice provided to clients
delivered by Business Assurance, Compliance Assurance,
Field Risk and Advice Guidance teams
We fail to
effectively manage
the business
finances.
• Failure to meet client
liabilities
• Market risk
• Credit risk
• Liquidity risk
• Insurance risk
• Expense risk
• Policyholder liabilities are fully matched
• Excess assets generally invested in high-quality, high-
liquidity cash and cash equivalents
• Lending to the Partnership is secured
• Reinsurance of insurance risks
• Ongoing monitoring of all risk exposures and experiences
•
• Setting and monitoring budgets
• Implementing new systems to allow for future cost
reductions
• Monitoring and management of individual entities’
solvency to minimise Group interdependency
Whilst the external risk landscape has
changed dramatically over the course of
the year, causing certain risks to materialise
and making further downside risk more
likely, the types of principal risks that the
Group faces have not changed from the
previous year.
The strategic areas on which these risks
impact, and the high-level controls and
processes through which we aim to mitigate
them, are set out in the tables on the
following pages. Reputational damage
stakeholders are a likely consequence
The following symbols are used to indicate
which primary strategic objectives our
principal risks could impact, recognising
that they could also have a secondary
impact on other strategic objectives.
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Third party
outsourcers’
activities impact
our performance
and risk
management.
• Operational failures by
material outsourcers
• Failure of critical service,
significant areas include:
• Investment administration
• Fund management
• Custody
• Policy administration
• Cloud services
• Oversight regime in place to identify prudent steps to
reduce risk of operational failures by material third-party
providers
• Ongoing monitoring, including assessments of operational
resilience
• Due diligence on key suppliers
Our proposition
solution fails to
meet the needs,
objectives and
expectations of
our current and
potential future
Partners.
• Failure to attract new
members to the Partnership
• Failure to retain advisers/
Partners
• Failure to increase adviser
productivity
• Available technology falls
short of client and Partner
expectations and fails to
support growth objectives
• The Academy does not
adequately support adviser
growth
• Focus on providing a market-leading adviser proposition
• Adequately skilled and resourced population of supporting
Field managers
• Reliable systems and administration support
• Expanding the Academy capacity and supporting recruits
through the Academy and beyond
• Market-leading support to Partners’ businesses
We are unable to
attract, retain and
organise the right
people to run the
business.
• Loss of key personnel
• Poor employee morale
• Lack of inclusion and
diversity in our business
• Our culture of supporting
social value is eroded
• Measures to maintain a stable population of employees,
including competitive total reward packages
• Monitoring of employee engagement and satisfaction
• Corporate incentives to encourage social value
engagement, including matching of employee charitable
giving to the Charitable Foundation
• Whistleblowing hotline
We fail to meet
current, changing
or new regulatory
and legislative
expectations.
• Failure to comply with
changing regulation
• Inadequate internal controls
• Failure to respond to
regulatory-driven changes
• Solvency risk
• Compliance functions provide expert guidance and carry
out extensive assurance work
• Strict controls are maintained in highly regulated areas
• Maintenance of appropriate solvency capital buffers, and
continuous monitoring of solvency experience
• Fostering of positive regulatory relationships
We fail to
adequately secure
our physical
assets, systems
and/or sensitive
information, or to
deliver critical
business services
to our clients.
• Internal or external fraud
• Core system failure
• Corporate, Partnership, or
third-party information
security and cyber risks
• Disruption in key business
services to our clients
•
key suppliers
• Identification, communication, and response planning for
the event of cyber crime
• Data leakage detection technology and incident reporting
systems
• Internal awareness programmes
•
Challenge from
competitors and
the impact of
reputational
damage.
• Increased competitive
pressure from traditional
and disruptive (non-
traditional) competitors
• Cost and charges pressure
• Negative media coverage
• Clear demonstration of value delivered to clients through
advice, service and products
• Investment in improving positive brand recognition
• Ongoing development of client and Partner propositions
• Proactive engagement with external agencies including
media, industry groups and regulators
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Emerging risks are identified through
conversations and workshops with
stakeholders throughout the business,
reviewing academic papers, attending
industry events (webinars and in person),
and other horizon scanning by Group Risk.
The purpose of monitoring and reporting
emerging risks is to give assurance that we
are prioritising our response to emerging
risks appropriately in our strategy, which is
the primary risk management tool for
longer-term strategic risks. Examples of
emerging risks which have been considered
during the year include:
• risks resulting from a failure to
demonstrate value for money to clients;
• risks associated with the wider macro-
economic environment;
• risks associated with failing to keep our
business model relevant to clients’ needs;
• risks resulting from failing to adapt to the
‘new working world’ and the operational
challenges it presents;
• risks resulting from a failure to embrace
• risks relating to changes in tax regimes;
• risks relating to changes in regulations;
• risks relating to climate change;
• risks resulting from geo-political events
that are unforeseen; and
• risks resulting from a failure to invest in
The business considers five-year financial
forecasts when developing the strategy.
These incorporate our budget for the next
financial year and four further years of
forecasts based on reasonable central
assumptions around development of
business drivers.
At the core of assessing our viability we
seek to understand how different principal
risks could materialise. We consider risks
which might present either in isolation or in
combination and which could result in acute
shocks to the business or long-term
underperformance against forecasted
business drivers. We consider the five-year
time horizon sufficiently long to assess
potential impacts and ensure that the
business could remain viable whilst
enacting any management actions to
restore the business’s prospects.
When considering how the principal risks
previously described might impact the
business, we consider our ability to deal
with particular events such as COVID-19,
which may impact one or more of the
following key financial drivers:
• reduction in client retention;
• reduction in new business relative to
forecasts;
• market stresses;
• increases in expenses; and
• direct losses through operational
We carry out stress and scenario testing on
these key financial drivers, alongside
operational risk assessments. To provide
comfort over viability over the next five
years, the scenarios and assessments look
at events which would be extreme, whilst
still remaining plausible. This work
demonstrates that, although there would
resilient and could continue to meet
regulatory capital requirements over five
years should even the more extreme risks
materialise.
As well as robust scenario testing the
Directors have given consideration to
assessments of the current risk
environment, including how risks are
managed through controls relative to
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STRATEGIC REPORT
A wide variety of stresses and scenarios
are applied to test all material drivers in a
variety of ways to provide understanding
of any dynamic impacts. Most recently
we have considered the 2021 Bank of
England scenario for stress testing banks.
Whilst this scenario contains many
elements which are not directly relevant
to the Group, we have considered how the
scenario might impact the business and
we believe this would have a less onerous
financial impact than the scenarios which
we regularly consider.
As an example of a scenario which the
business developed and was considered
financial implications of COVID-19 under
a range of economic recovery scenarios.
Within these scenarios, we modelled and
allowed for adverse market movements, a
decrease in new business, increased
lapses, allowances for large one-off
expenses and a reduction in the yield
curve (in anticipation of a reduction in
base rate).
In our more pessimistic scenario we
looked at the immediate impacts and the
impact over five years, where we further
assumed there was an ‘L’ shaped
recovery for new business and market
performance over the projection period.
That is to say, in this pessimistic scenario,
we assumed both the market performance
and the impact on new business do not
our ‘pessimistic COVID-19’ scenario is
sufficiently extreme to adequately stress
the viability of the business for all
plausible impacts on the Group which
scenarios, the Group is expected to
remain adequately capitalised with
sufficient liquid resources and therefore
viability. While we remain viable in these
more extreme scenarios, the Group’s
profits and therefore the dividend diminish.
It is also worth noting that when extreme
events materialise, or the level of
uncertainty in the external environment
increases, management react accordingly
by taking appropriate and measured
actions. For example, following the initial
uncertainty around COVID-19, the Board
decided to withhold around one-third of
the proposed 2019 final dividend until
such a time as the financial and
economic impacts of COVID-19 become
clearer. This prudent judgement ensured
we were able to protect clients and
long-term value for shareholders, as
business so we are well placed to benefit
from the growth opportunity that will
undoubtedly emerge on the other side of
the crisis. The Board has since concluded
year, the more extreme downside
scenarios we had planned for did not
materialise and the business has shown
resilience throughout. The Board
therefore no longer sees a need to
continue with this retention and the
will be paid as an interim dividend to
shareholders.
As a result, we remain confident that the
Group is able to respond to any unforeseen
events to ensure it remains viable.
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STRATEGIC REPORT
The table below provides an indication of which risks are relevant over different timeframes and why the Group is considered to be resilient
over these timeframes.
The key risks to business resilience in the
short term are likely to be operational in
nature, such as data loss or increased
cyber crime as a result of remote working.
It is not expected that solvency will be an
issue in the short-term due to our matching
approach for client liabilities. Liquidity risks
would be relevant for this time window
since liquidity risks tend to be short-term in
nature. However, we do not anticipate there
being any liquidity risks given the Group’s
approach to paying the external and
subsidiary dividends. These risks are also
relevant for the longer time periods.
The Group generates relatively steady cash
profits on new business and existing funds
under management which we would
expect to increase each year as funds
materialised over the year and resulted in
significant costs, the Group would have
options to deal with the financial
implications. Whilst other options would
reducing dividends would be obvious ways
to protect the financial strength of the
business.
Operational resilience and business
continuity are also important and risks
which might cause severe business
disruption are carefully managed.
There are not considered to be any material
uncertainties over the ability of the Group
to survive over the one-year time horizon.
Investor sentiment, market impacts,
changes to regulation following Brexit and
tax changes following the UK Government’s
relief strategy for COVID-19 continue to
provide uncertainty.
Aside from COVID-19 and Brexit, risk
relating to changes to advice regulation
would likely impact the business in the next
five years, or beyond.
The importance of technology in the client
proposition is only likely to become more
important and risks may materialise from
non-traditional competitors seeking to
disrupt the UK financial advice market.
Risks which have a more gradual effect,
such as talent retention and acquisition, are
also relatively more important over a longer
time horizon.
Counteracting the medium-term risks, there
is more time to respond and take actions to
manage the Group’s prospects. As already
referenced stress and scenario testing
(such as the COVID-19 scenario) takes place
which provides comfort over the Group’s
ability to weather storms over a five-year
time horizon and adapt. The Group’s
strategy is designed to navigate the threats
and keep our proposition current for existing
and potential clients. As the largest wealth
manager in the UK the Group is well resourced
to effectively respond to regulatory change
and deal with increased regulatory complexity.
Most of the shorter-term risks will remain
relevant, however, over the longer-term,
client expectations around digital services
are likely to become more important.
machine learning on both the investment
management and advice spaces will
become more prevalent.
Risks from climate change are starting to
have an impact on investor sentiment and
drive political change and this is only likely
to increase. Beyond 2024 climate change
Whilst the importance of technology in
to value human interaction in discussing
sensitive financial matters. We recognise
however that the advice proposition will
develop, and our advisers will need to be
technology-enabled. With increased use
automate processes and allow our advisers
to focus on the high-value advice and
service aspects.
We have been developing our responsible
investing proposition for some years and
welcome the focus in this area as the
maximise client benefit through our active
Investment Management Approach.
In accordance with the UK Corporate Governance Code (Provision 31), the Directors have assessed the Group’s current financial position
its liabilities as they fall due. The Directors believe that the Group’s risk planning, management processes and culture allow for a robust and
effective risk management environment.
In addition to the assessment of longer-term viability and resilience set out above, the Board has assessed the Group’s going concern status.
Further information is provided in the Directors’ Report on page 140.
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The Directors have a duty to promote the success of the company for the benefit of its
with the requirements of section 172(1) of the Companies Act 2006, a statement providing
further information on how the Directors fulfil this duty is set out on pages 88 to 95 of the
Corporate Governance Report.
The purpose of the report is:
• to inform members of the Company and help them assess how the Directors have
performed their duty under section 172(1) of the Companies Act 2006 (duty to promote
the success of the Company).
The objective of the report is to provide shareholders with an analysis of the Company’s past
performance, to impart insight into its business model, strategies, objectives and principal
risks and to provide context for the Financial Statements in the Annual Report.
The Directors consider that the report, comprising pages 4 to 80 of this document, meets
On behalf of the Board:
24 February 2021
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Corporate Governance
The Board seeks to hold itself to the highest
IAIN CORNISH
Chair
1
Board leadership and Company purpose
(section 172(1) Statement).
See pages 88 to 95.
2
Role of the Board and its responsibilities.
See pages 96 and 97.
3
Board composition, succession and evaluation.
See pages 98 to 103 and also the Nomination
Committee Report (pages 117 to 120).
4
Audit, risk and internal control.
See the Audit Committee Report and Risk Committee
Report on pages 104 to 116.
5
Remuneration.
See the Report of the Remuneration Committee
The UK Corporate Governance Code (the Code)
The Corporate Governance Report on pages 88 to 103 explains how the Board leads
the Company’s approach to corporate governance, including an explanation of how
the principles of the Financial Reporting Council’s UK Corporate Governance Code
have been applied in practice.
Provision 19 of the Code requires that the chair should not remain in post beyond
nine years from their date of appointment to the Board. Iain Cornish’s tenure
reached nine years in October 2020. However, as explained in last year’s Report,
following consultation with major shareholders it had been concluded that, in order
his appointment, with a view to his successor as Chair taking up their post no later
than the end of October 2022. Paul Manduca was appointed as a Non-executive
Director and Chair-designate on 1 January 2021 and Iain intends to step down as
Committee until 19 August 2020, when Rosemary Hilary’s appointment as chair
received regulatory approval. As stated in last year’s Report of the Remuneration
Committee, pension contribution rates for Executive Directors will align with the
wider workforce by 1 January 2023 and until such time the Company will not meet
(available at: www.frc.co.uk) during 2020. Detailed reporting on remuneration, as
required by the Code, can be found in the Directors’ Remuneration Report.
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Governance
84
86
88
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
GOVERNANCE
1 3 5
2 4 6
Board of Directors
1. Iain Cornish
Chair
Date of appointment
Experience
External appointments
2. Andrew Croft
Chief Executive Officer
Date of appointment
Experience
External appointments
3. Craig Gentle
Chief Financial Officer
Date of appointment
Experience
External appointments
4. Ian Gascoigne
Managing Director
Date of appointment
Experience
External appointments
5. Emma Griffin
Independent Non-executive Director
Date of appointment
Experience
External appointments
6. Rosemary Hilary
Independent Non-executive Director
Date of appointment
Experience
External appointments
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ST. JAMES’S PLACE PLC
5432
1. BOARD LEADERSHIP AND COMPANY PURPOSE
1
7 9
8 10
11
12
7. Simon Jeffreys
Independent Non-executive Director
Date of appointment
Experience
External appointments
Independent Non-executive Director
Date of appointment
Experience
External appointments
Independent Non-executive Director
Date of appointment
Experience
External appointments
Baroness
10. Lesley-Ann Nash
Independent Non-executive Director
Date of appointment
Experience
External appointments
11. Baroness Wheatcroft
Independent Non-executive Director
Date of appointment
Experience
External appointments
12. Roger Yates
Senior Independent Non-executive Director
(SID)
Date of appointment
Experience
External appointments
www.sjp.co.uk
Committee key
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GOVERNANCE
Chair’s Report
Introduction
their outstanding efforts throughout
The Board
Performance
The Board therefore no longer sees a need
Clients
that focus remains on the
long-term development of
the business, with a clear
sustainable long-term
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ST. JAMES’S PLACE PLC
5432
1. BOARD LEADERSHIP AND COMPANY PURPOSE
1
Colleagues, workforce
engagement and culture
and has agreed to take on the role as our
Strategy
migration to the Bluedoor administration
Concluding remarks
IAIN CORNISH
Chair
chair@sjp.co.uk
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A
B
C
D
E
F
Purpose and Leadership
A focus on long-term success
Section 172 factor:
A
•
•
•
•
•
•
Reputation and standards
of business conduct
Section 172 factor:
F
Section 172(1) Statement
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1
Responding to challenges
COVID-19
As with society at large, the COVID-19 pandemic had a significant
impact on the way in which the Board worked in 2020. Like other
boards we had to quickly adapt to virtual meetings, with a dry run
in early March providing an opportunity to test the technology
Group’s business continuity plans would need to be deployed
which involved more regular touchpoints with management
management’s response and the impact on the business, but also
ensure that management had adequate support. As explained
elsewhere in this Annual Report, our primary concern was the
welfare of our employees and the Partnership, but the Board
workforce, the technology estate and the performance of our
administration centres which enabled the Board to gain the
necessary comfort that risks were being adequately managed.
During this initial period, the Board also received updates from
individuals with responsibility for functions of the business most
impacted by the pandemic, including those responsible for
technology, employee welfare and Partnership support. Pulse
surveys provided regular insight and the Chief Executive and other
members of the Executive Board held Q&A sessions with teams
The business demonstrated immense resilience during 2020
circumstances. Having taken account of the insight captured
permanent shift in the way the Partnership and clients engage,
with technology now more prominent alongside face-to-face
engagement. The impact on employees has been widely reported
in the media, with the role of the office expected to change in
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GOVERNANCE
Our stakeholders
Section 172 factors:
B
C
D
F
Section 172(1) Statement continued
S
O
C
I
E
T
Y
C
O
U
N
I
T
Y
R
E
G
U
L
A
T
O
R
S
G
O
V
E
R
N
E
N
T
E
N
V
I
R
O
N
E
N
T
S
U
P
P
L
I
E
R
S
S
H
A
R
E
H
O
L
D
E
R
S
THE
PARTNERSHIP
CLIENTS
EMPLOYEES
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1
Stakeholder How we engage
Further information
Shareholders
Pages 92, 93 to 95
and 123.
The
Partnership
Pages 6, 10, 22, 24,
34, 46, 86, 87 and 93
to 95.
Employees
Pages 10, 28, 29, 33,
34, 35, 36, 37, 86, 87,
93 to 95, 120 and 123.
Clients
Pages 6, 20, 21, 25
and 93 to 95.
Society
Pages 8, 32, 34, 38,
39, 40, 44, 45, 46, 47,
86 and 93 to 95.
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Section 172(1) Statement continued
Relations with
shareholders
shareholders in understanding the
How we engage
Opportunity for engagement
Institutional
shareholder
roadshows
Investor studies
Individual
shareholder
meetings
Direct
correspondence
with major
shareholders
Annual General
Shareholders
2019 Final Dividend
As was the case for many of our peers and other companies
potential longer-term impacts of the 2019 final dividend
recommendation announced on 27 February 2020. The Board
immediately recognised that there was unlikely to be a decision
that would meet the expectations of all stakeholders and
therefore arranged additional meetings to discuss in more
final dividend. For many shareholders, dividends make up an
important part of their annual pension income but the Board,
acknowledging the heightened regulatory sensitivity at the
time, felt it was important to focus on the long-term
confident that the business was resilient, it was aware that
operating environment for the business and our clients for
business had the ability and flexibility to continue providing
clients with the quality of service they needed through the
Partnership even in scenarios that had the potential to become
significantly more challenging. The Board ultimately decided
proposed 2019 final dividend, until such time that the financial
and economic impacts of COVID-19 became clearer.
be able to deal with such scenarios and protect clients, the
long-term value of the business, and our proven ability to
benefit from the growth opportunity that will undoubtedly
emerge on the other side of this crisis.
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What the Board did in the year
Strategic pillars
Grow and develop the Partnership
Deliver positive outcomes to clients
Achieve sustainable growth in profits
Attract, retain and develop talent
Increase funds under management
Board topic
Strategic
pillars
Stakeholder interests How engaged Outcomes/influence
COVID-19
Operational Excellence
Organisational Design – To remain leaders in our
stakeholders informs us of their
insight gained from our stakeholders
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Section 172(1) Statement continued
What the Board did in the year continued
Board topic
Strategic
pillars
Stakeholder interests How engaged Outcomes/influence
Dividend
Non-executive Director appointments
engagement has taken the form
The insight gained from our
Partner recognition
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Board topic
Strategic
pillars
Stakeholder interests How engaged Outcomes/influence
Culture
from a range of stakeholders in the
Inclusion and diversity
Whilst the Board and management
Partner business lending
–
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Powers of Directors
The role of the Board and its responsibilities
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Division of responsibility
THE BOARD
Leadership
Chair
and for ensuring that the Board is
Chief Executive Officer
Chief Financial Officer
Independent oversight
Senior Independent
Non-executive Director
Independent
Non-executive Directors
Company Secretariat
Responsible for guiding the Board in
meeting the requirements of relevant
legislation and regulation and for
ensuring that Board procedures are
both followed and regularly reviewed.
Directors have access to the advice
of the Company Secretary at all
times, as well as independent
professional advice where needed,
2. ROLE OF THE BOARD AND ITS RESPONSIBILITIES
Scheduled Board
meetings
Ad-hoc Board
meetings
NED performance
updates
Board working
dinners
Strategy meetings
NED meetings
Development
sessions
Other meetings
Planning and preparing
See pages 104 to 123
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GOVERNANCE
Composition
Summary Board composition
Independence
Further information can be found in the
Nomination Committee Report on page 119
committees have a
combination of skills,
experience and knowledge.
Our succession plans
social, ethnic and
Board composition, succession and evaluation
Tenure
4
2
6
0–3 years 4–7 year s 8+ years
Board
composition
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3. BOARD COMPOSITION, SUCCESSION
F Female (5)
Male (7)
Board Chair Executive Directors (3)
Independent Non-executive Directors (9)
F
F
F
F
F
Our Non-executive Board Committees
Board and Committee structure and attendance
Remuneration
Committee
Chair:
Report on
page 121
Nomination
Committee
Chair:
Report on
page 117
Risk
Committee
Chair:
Report on
page 112
Audit
Committee
Chair:
Report on
page 104
Director Board Audit Risk Nomination Remuneration
– –
– – – –
– – – –
– – – –
Emma Griffin
– –
–
–
– –
Attendance in 2020
Other Committees reporting to the Board
Board/Committee Purpose
Technology
Advisory
Group (TAG)
Executive
Board
Defence
Committee
Disclosure
Committee
Share scheme
Committee
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GOVERNANCE
Directors’ appointments
Appointment,
replacement
Duration of
appointments
Terms of
appointment
Time
commitments
Conflicts of
interest
Directors’ and
officers’
indemnity and
insurance
Board composition, succession and evaluation continued
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3. BOARD COMPOSITION, SUCCESSION
Inductions for
new Directors
Continuing
professional
development
Approach
Examples in 2020
sessions and training
management forums
their duties
Directors’ development
Engagement
Directors’ induction
Induction programmes typically run for around six months for new Directors and are tailored to meet their individual needs.
Element What the element provides Examples
Information
and
materials
•
•
•
Individual
meetings
•
•
Meeting
attendance
•
•
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GOVERNANCE
Reflecting on the 2019 review
Area Update on progress in 2020
Deepening the
collective
understanding
of the business
of today and
shaping the
business of
tomorrow
Board operations
and dynamics
Reflections on
lessons learned
Management
succession
2020 Board effectiveness review
The 2020 review
Board composition, succession and evaluation continued
PREPARATION
REVIEW
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3. BOARD COMPOSITION, SUCCESSION
Actions agreed by the Board
Purpose, strategy
and risk
alignment
Structure and
processes
People and
composition
IAIN CORNISH
Chair
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GOVERNANCE
Dear Shareholder,
On behalf of the Audit Committee
On behalf of the Audit Committee
Report of the Audit Committee
The Audit Committee’s primary purpose is to
oversee financial reporting, the internal and
external audits and the Group’s systems of
internal control, and to provide guidance and
advice on these areas to the Board and, where
applicable, other boards and committees in
Member Joined
LAN
The Audit Committee’s terms of reference set out the Audit Committee’s role and
authority as Audit Committee for the Company and certain subsidiaries. They can
Chair of the Board; Chief Financial Officer;
Finance (Chief Actuary); Chief Risk Officer;
and Senior Statutory Auditor.
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4
Operation and performance
of the Audit Committee
Corporate reporting
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GOVERNANCE
Report of the Audit Committee continued
Key corporate reporting topics
Theme What did the Audit Committee do? What was the conclusion and impact?
•
•
•
•
•
Asset valuations •
•
•
Accounting
judgements
and actuarial
assumptions
•
•
•
•
106
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4
Theme What did the Audit Committee do? What was the conclusion and impact?
Accounting
regulation
and audit
•
•
Final results and
Annual Report
•
Regulatory
reporting
• Solvency II
• CASS
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GOVERNANCE
Report of the Audit Committee continued
‘Fair, balanced and
understandable’ opinion
External audit
Auditor activity and effectiveness
Auditor independence
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4. AUDIT, RISK AND INTERNAL CONTROL
4
Internal audit
Theme Description Example audits undertaken
Client and the
Partnership
•
•
•
•
•
•
Operational
excellence
• IT asset management
•
•
•
•
•
Regulation and
reputation
•
•
•
•
•
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GOVERNANCE
www.sjp.
co.uk/about-us/corporate-governance
Internal controls
Systems of internal control
ensuring that management maintains
for managing risk and for assessing their
•
•
•
Report of the Audit Committee continued
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4. AUDIT, RISK AND INTERNAL CONTROL
4
Whistleblowing
Bribery and fraud review
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GOVERNANCE
On behalf of the Risk Committee
Report of the Risk Committee
Dear Shareholder,
The Committee’s primary role is to provide
guidance, advice and constructive challenge to
relevant boards in relation to the Group’s risk
its wholly owned subsidiaries (together the
SJP Group), including its principal regulated
Member Joined
LAN
Note: Iain Cornish was a member of the Committee from 1 January to 16 September 2020 and stepped down
as Chair on 19 August 2020.
The Committee’s terms of reference set out the Committee’s role and authority and can be
found on the corporate website at www.sjp.co.uk.
The Chairman, Chief Executive Officer, Chief
Financial Officer, Managing Director, Chief
Risk Officer and Internal Audit Director are
regular attendees. Subject-matter experts
are also invited to attend and present on
specific topics throughout the year.
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4
On behalf of the Risk Committee
Operation and performance
of the Committee
Oversight of risk
Interactions with Regulators
Activities during the year
•
•
•
•
•
•
and
•
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GOVERNANCE
Report of the Risk Committee continued
Risk area What did we do? What were the conclusions?
Administration
service
Administration performance
Client proposition Investment risk landscape
Discretionary fund management (DFM) risks –
Conduct Clients with vulnerable characteristics –
–
Financial
ORSA
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4
Risk area What did we do? What were the conclusions?
Outsourcing Outsourcing
Outsource provider exit management – The
Partner
proposition
Technology suppor
Supervision of Partner Businesses
Recruitment and retention of advisers – The
People
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GOVERNANCE
Risk area What did we do? What were the conclusions?
Regulatory Regulatory change
Client money and client assets
Regulator engagement
Security and
resilience
Operational resilience
Data and cyber risks
Strategy,
competition
and brand
Strategy impact on clients
Emerging risks
Outlook
Report of the Risk Committee continued
continued
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4. AUDIT, RISK AND INTERNAL CONTROL
4
IAIN CORNISH
On behalf of the Nomination Committee
Report of the Nomination Committee
Dear Shareholder,
IAIN CORNISH
On behalf of the Nomination Committee
The Committee has overall responsibility for
planning Board succession, leading the
process for new appointments and ensuring
that these appointments bring the required
skills, experience and diversity to the Board.
consideration and oversees senior
management succession and also reviews
Member Joined
Note: Simon Jeffreys was a member of the Committee from 1 January to 22 July 2020
The Committee’s terms of reference set out the Committee’s role and authority and can be
found on the corporate website at www.sjp.co.uk.
structure, size and composition of the
Board and its Committees to ensure they
are made up of the right people with the
necessary skills and experience to direct
the Company in the successful execution
The Chief Executive, Company Secretary
and representatives of external consultants.
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GOVERNANCE
Report of the Nomination Committee continued
Activities during the year
Topic Summary of activity Find out more
Board composition
See below
Committee composition
See below
Chair succession
See below
Management succession
See below
Inclusion and diversity
See below
Group governance
See below
Board effectiveness
See page
102
Operation and performance
of the Committee
Board and Executive succession
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4. AUDIT, RISK AND INTERNAL CONTROL
4
Appointing a successor to the Chair
•
•
•
•
•
ROGER YATES
Senior Independent Director
Group governance
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GOVERNANCE
Inclusion and diversity
Board effectiveness
Report of the Nomination Committee continued
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Section 1: Chair’s annual statement (unaudited)
Dear Shareholder,
Impact of COVID-19
Report of the Remuneration Committee
ROGER YATES
On behalf of the Remuneration
Committee
The Committee’s primary purpose is to ensure
that remuneration arrangements support the
strategic aims of the business as well as the
recruitment, motivation and retention of senior
executives, whilst also complying
Member Joined
The Committee’s terms of reference set out the Committee’s role and authority.
They can be found on the corporate website at www.sjp.co.uk.
Chair, Chief Executive, Chief Financial
Officer, Director – People, and Chief Risk
Officer
Contents
Section 1: Chair’s annual
statement
Section 2: Remuneration at a
glance and annual report on
remuneration
Section 3: 2020 Directors’
Remuneration Policy
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5. REMUNERATION
5
Remuneration outcomes 2020
not met although the threshold for the Total
Changes to the Board
Remuneration for 2021
remuneration arrangements for the
Report of the Remuneration Committee continued
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GOVERNANCE
Engagement with stakeholders
and best practice
the alignment of remuneration and
Corporate governance developments
and regulatory change
Conclusion
ROGER YATES
On behalf of the Remuneration Committee
THE OBJECTIVES OF THE
• to support the retention of
individuals with the experience
and skills to drive the performance
of the Company;
• to ensure remuneration is
transparent and reflects the
performance of the Group in the
relevant year and the longer-term.
Annual bonus and long-term
incentive opportunities are
therefore linked to the
achievement of demanding
performance targets; and
• to align pay with the strategic
objectives of the Company and the
interests of our shareholders
whilst giving due regard to
principles of best practice and
relevant regulations.
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5. REMUNERATION
Report of the Remuneration Committee continued
Summary of Executive Directors’ remuneration for the year (audited)
How were our Executive Directors rewarded?
Single figure remuneration for performance period ending 31 December 2020, compared with 2019
ANDREW CROFT
Chief Executive
CRAIG GENTLE
Chief Financial Officer
IAN GASCOIGNE
Managing Director
99
693
714
707
£1,500
£1,000
£500
£0
£’000
72
504
359
517
£1,500
£1,000
£500
£0
£’000
72
585
629
596
£1,500
£1,000
£500
£0
£’000
2020 2020 2020
Base salary 537,049 388,327 388,327
Benefits 48,329 38,358 118,668
Pension 107,410 77,665 77,665
Annual bonus
(cash)
– – –
Annual bonus
(deferred)
– – –
Total
3
692,788 504,350 584,660
PSP vested
99,286 71,791 71,791
Linking remuneration to achievement of key business goals (audited)
Weighting (maximum
potential percentage
points per item)
Outturn
(actual points
earned)
Percentage
of base salary
earned
Annual bonus for 2020
Total bonus opportunity 0
PSP (2018 award)
)
Total PSP opportunity 9
Section 2: Remuneration at a glance and annual report on remuneration
5
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2.1 How the Remuneration Policy was applied in 2020
2.1.1 Remuneration payable in respect of performance in 2020 (audited)
Summary of total remuneration
Executive Director
Base salary Benefits Annual bonus
incentives Pension Other Total
Total fixed
remuneration
Total variable
remuneration
£ £ £ £ £ £ £ £ £
Andrew Croft
2020 537,049 48,329 – 99,286 107,410 178 792,252 692,788 99,464
Craig Gentle
2020 388,327 38,358 – 71,791 77,665 – 576,141 504,350 71,791
Ian Gascoigne
2020 388,327 118,668 – 71,791 77,665 178 656,629 584,660 71,969
Fees Benefits Total
£ £ £
Iain Cornish
2020 210,622 10,017 220,639
Emma Griffin
2020 88,632 1,192 89,824
– – –
Rosemary Hilary
2020 95,089 692 95,781
–
Simon Jeffreys
2020 102,339 1,291 103,630
Baroness
Morrissey DBE
2020 80,418 – 80,418
– – –
2020 49,379 – 49,379
– – –
Baroness
Wheatcroft
2020 80,418 – 80,418
Roger Yates
2020 108,240 – 108,240
–
Benefits
Pension allowance
Annual bonus
Other
Remuneration/waiver
Payments to past Directors or for loss of office
Report of the Remuneration Committee continued
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5. REMUNERATION
2.1.2 Summary of total annual bonus for 2020 performance (audited)
Measure
Weighting
(percentage
of salary)
Weighting
(percentage
of maximum)
Threshold
Maximum
value
Actual
Payout
(percentage
of salary)
Payout
(percentage
of maximum
total bonus)
Total payout
Annual bonus strategic targets performance assessment
5
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GOVERNANCE
Examples of achievements
Clients
•
•
•
•
The Partnership
•
•
•
•
Administration/operational excellence
•
•
People and culture
•
• Women in senior roles – Women in senior roles
Social value
•
•
•
Reputation and risk
•
Report of the Remuneration Committee continued
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5. REMUNERATION
2.1.3 Long-term incentive awards (audited)
Vesting of Performance Share Plan (PSP) awards
Performance hurdle
TSR relative to the FTSE 51 to 150
Average annual adjusted EPS growth
(including the unwind of the discount
rate) in excess of RPI
Average annual adjusted EPS growth
(excluding the unwind of the discount
rate) in excess of RPI
Performance
required
Percentage of
award vesting
Performance
required
Percentage of
award vesting
Performance
required
Percentage of
award vesting
Threshold
Director
Total number of
shares granted
Percentage of
awards vesting
Number of
shares vesting
vesting (£)
Granting of PSP awards in 2020
Director Type of award
Basis of award
granted
Average share
price at
date of grant
Number of SJP
shares over which
award was granted
Face value
of award
(£’000)
Percentage of
face value that
would vest at
threshold
performance
5
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GOVERNANCE
2.1.4 Share awards (audited)
Performance Share Plan awards outstanding
Director Date of grant
Market price
at grant
Shares
originally
awarded Face value (£)
Shares vested
Remaining
unexercised at
31 December
2020
–
–
–
–
–
–
–
–
–
Deferred Bonus Scheme – shares held during 2020
Director
Balance at
1 January
2020
Released
in year
Awarded
in year
Balance at
31 December
2020
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
Report of the Remuneration Committee continued
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5. REMUNERATION
2.1.4 Share awards (audited) continued
Save As You Earn (SAYE) share option scheme – shares held during 2020
Director
Options held at
1 January
2020
Granted
in year
Lapsed
in year
Exercised
in year
Options held at
31 December
2020
Exercise
price
Dates from
which exercisable
– – –
– – –
– – –
– – –
Share Incentive Plan – shares held during 2020
Director
Balance at
1 January
2020
Partnership
shares
allocated
in year
1
Matching
shares
allocated
in year
2
Dividend
shares
allocated
in year
3
Balance at
31 December
2020 Holding period (matching shares)
– – –
– – –
– – –
– – –
– – –
– – –
– – –
– –
– – –
– – –
– – –
– – –
– – –
– – –
– – –
– – –
– – –
– –
5
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GOVERNANCE
2.1.5 Shareholding requirements and Directors’ share interests (audited)
Shareholding requirements
Director
Shares held at
1 January
2020
Shares held at
31 December
2020
Percentage of base salary
held in SJP shares as at
31 December
2020
Emma Griffin – –
– –
– –
– –
Executive Directors’ shareholdings and outstanding share awards
Executive Director
Beneficially
owned at
31 December
2020
Outstanding
PSP awards
(performance
conditions)
SAYE options
(no performance
conditions)
Outstanding
DBS awards
(no performance
conditions)
SIP shares
(no performance
conditions)
–
Report of the Remuneration Committee continued
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4321
5. REMUNERATION
2.1.6 Dilution (unaudited)
Share scheme
Number of new
ordinary shares
of 15 pence each
Percentage of
total issued share
capital as at
31 December
2020
Total 34,961,799
2.1.7 Total shareholder return performance and CEO pay over the same period (unaudited)
Value £ (rebased)
600
500
400
300
200
100
0
31/12/2031/12/10 31/12/11 31/12/12 31/12/13 31/12/14 31/12/15 31/12/16 31/12/17 31/12/18 31/12/19
St. James’s Place
FTSE All Share
Year ending 31 December
David Bellamy
Andrew Croft
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total
remuneration £792,252
Annual bonus
LTIP vesting
5
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GOVERNANCE
2.1.8 Percentage change in remuneration of all Directors and employees (unaudited)
Remuneration element
Average
employee
2
A Croft I Gascoigne C Gentle I Cornish E Griffin S Jeffreys
5
Baroness
Morissey
4
4
Baroness
Wheatcroft R Yates
–
– –
Benefits
– – – – – –
Bonus – – – – – – – –
2.1.9 Relative importance of spend on pay (unaudited)
2020
£’Million
262.0
919.0
206.8
193.2
2.1.10 CEO pay ratio (unaudited)
Year Method
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
CEO pay P25 pay P50 pay P75 pay
£ £ £ £
Report of the Remuneration Committee continued
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5. REMUNERATION
2.1.10 CEO pay ratio (unaudited) continued
2.2. Remuneration Committee (unaudited)
2.2.1 Role, activities and performance of the Committee
www.sjp.co.uk
Topic Summary of activity Find out more
Bonus objectives
and new awards
See page 126
Payments to EDs
and Code Staff
PSP awards and
vestings
See page 128
Assessing risk
Monitoring the
remuneration of
employees
See pages 122,
133 and 134
Regulatory
developments and
feedback from
investors
Implications of
See page 121
2.2.2 Committee membership and attendance in 2020
2.2.3 Advisers to the Committee
5
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GOVERNANCE
Directors’
Remuneration
Report vote
Percentage
of votes cast
Directors’
Remuneration
Policy vote
Percentage
of votes cast
2.3. Implementation of the Remuneration Policy in 2021 (unaudited)
2.3.1 2021 salary
Executive Director
Salary from
1 March 2020
Salary from
1 March 2021
Percentage
increase £ £
2.3.2 Annual bonus for 2021
•
•
•
•
•
•
Report of the Remuneration Committee continued
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4321
5. REMUNERATION
5
2.3.3 Performance Share Plan awards for 2021
Performance level hurdle
TSR relative to the FTSE 51 to 150
Average annual adjusted EPS
growth in excess of CPI
Performance
required
Percentage of one
third of award vesting
Performance
required
Percentage of two
thirds of award vesting
Threshold
2.3.4 Shareholding requirement
2.3.5 Duration of contracts
2.3.6 Fees for the Board Chair and Non-executive Directors for 2021
Fees from
1 January to
31 December 2020
Fees from
1 January to
31 December 2021
Percentage
increase
from 2020£ £
ROGER YATES
Chair of the Remuneration Committee
5
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GOVERNANCE
Section 3: Summary of the 2020 Directors’ Remuneration Policy
www.sjp.co.uk
Element Purpose and link to strategy Operation including maximum opportunity Performance metrics
Base salary
Whilst there are no
Pension
Other
benefits
Report of the Remuneration Committee continued
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5. REMUNERATION
Element Purpose and link to strategy Operation including maximum opportunity Performance metrics
Annual bonus
Deferred element aids
Performance
Share Plan
5
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GOVERNANCE
Element Purpose and link to strategy Operation including maximum opportunity Performance metrics
Minimum
shareholding
requirements
To ensure alignment of
the long-term interests
cessation
shareholding
requirements
alignment of the
long-term interests
and shareholders
executive
Directors’
fees
Disclosure Location
•
•
•
•
Status of Company
Going concern
Share capital
Structure of the Company’s capital
Voting rights
Restrictions on voting rights
Articles of Association
Restrictions on share transfers
140
ST. JAMES’S PLACE PLC
Directors’ Report
Substantial shareholders
Shareholder
Holding at
31 Dec 2020
Percentage
held at
31 Dec 2020
1
Holding at
23 Feb 2021
Percentage
held at
23 Feb 2021
1
Results and dividends
the Board has determined that it no longer
Our people
Fostering business relationships
Significant contracts
and change of control
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GOVERNANCE
Financial instruments
Directors and Directors’ indemnities
Political and charitable donations
meaning of the definitions set out in the
Monday 17 May 2021.
Important events since
the financial year-end
Disclosure of information to auditors
•
•
ANDREW CROFT
Chief Executive
CRAIG GENTLE
Chief Financial Officer
Directors’ Report continued
142
ST. JAMES’S PLACE PLC
•
•
•
•
Directors’ confirmations
•
•
•
ELIZABETH KELLY
Company Secretary
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GOVERNANCE
Statement of Directors’ Responsibilities
IFRS profit before shareholder tax
£327.6m
IFRS profit after tax
£262.0m
IFRS basic earnings per share
49.1p
144
FINANCIAL STATEMENTS
Financial Statements
Independent Auditors’ Report to the
............ 146
..................................... 153
........................... 153
...................................... 154
...................................... 155
.................................................. 156
................... 157
............. 214
........... 221
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FINANCIAL STATEMENTS
Independent Auditors’ Report to
Report on the audit of the Financial Statements
Opinion
•
•
•
•
Separate opinion in relation to international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union
Basis for opinion
Independence
Our audit approach
Overview
•
•
•
•
•
•
146
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
•
•
•
•
•
•
The scope of our audit
Capability of the audit in detecting irregularities, including fraud
•
•
•
•
•
•
•
•
Key audit matters
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FINANCIAL STATEMENTS
Independent Auditors’ Report to
Key audit matter How our audit addressed the key audit matter
Valuation of investments with judgemental
valuation, being investment properties,
derivatives and level 3 investments in the
Diversified Assets Fund (Group)
Investment properties
•
•
•
Level 3 assets in the Diversified Assets Fund
Derivatives
Valuation of the operational readiness
prepayment in respect of the development of an
administration platform at an outsourced provider
(Group)
•
•
•
•
148
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Key audit matter How our audit addressed the key audit matter
Impact of the COVID-19 pandemic (Group and
Parent)
•
•
•
•
•
How we tailored the audit scope
opinion.
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FINANCIAL STATEMENTS
Materiality
Financial Statements - Group Financial Statements - Parent Company
Conclusions relating to going concern
•
•
•
Independent Auditors’ Report to
150
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Reporting on other information
Strategic report and Directors’ Report
Directors’ Remuneration
Corporate governance statement
•
•
•
•
•
•
•
•
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
Responsibilities for the Financial Statements and the audit
Responsibilities of the directors for the Financial Statements
to do so.
Auditors’ responsibilities for the audit of the Financial Statements
www.frc.org.uk/
auditorsresponsibilities
Use of this report
Other required reporting
Companies Act 2006 exception reporting
•
•
•
•
Appointment
ANDREW MOORE (SENIOR STATUTORY AUDITOR)
Independent Auditors’ Report to
152
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Note
Year ended
31 December
2020
£’Million
Net insurance premium income
4
Investment return
6
Net income
20.4
Net policyholder claims and benefits incurred
3.6
Net change in insurance contract liabilities
6
5
Profit before tax
3
7 (98.8 )
Profit before tax attributable to shareholders’ returns
7
7 98.8
7
Profit and total comprehensive income for the year 262.0
– –
Profit and total comprehensive income for the year 262.0
Pence
Basic earnings per share
Diluted earnings per share
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FINANCIAL STATEMENTS
Note
Equity attributable to owners of the Parent Company
Non-
controlling
interests
Total
equity
Share
capital
Share
premium
Shares in
trust reserve
Retained
earnings
Misc.
reserves Total
£’Million £’Million £’Million £’Million £’Million £’Million £’Million £’Million
2.5
– – – – –
– – – – –
– – – –
– – – –
– – – – –
– – – – – –
– – – – –
– – – – –
At 31 December 2019 80.2
– – – – –
– – – – –
0.4 – – – 3.3 –
– – – – –
– – 5.5 (5.5 ) – – – –
– – – – –
At 31 December 2020
154
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Note
As at
31 December
2020
£’Million
Assets
23.5
7
14 92.3
12
Investments
11
11
11
11
11 1,386.8
11
Total assets
Liabilities
16
7
14
Other provisions
15
13
11
11
11
Total liabilities
Net assets
Shareholders’ equity
2.5
Equity attributable to owners of the Parent Company
Total equity
Pence
Net assets per share
ANDREW CROFT CRAIG GENTLE
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FINANCIAL STATEMENTS
Note
Year ended
31 December
2020
£’Million
Cash flows from operating activities
426.4
4.2
1.9 –
Interest expense
15
–
Changes in operating assets and liabilities
65.5
6.0
Cash inflow from operating activities
7
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Net cash outflow from investing activities
Cash flows from financing activities
3.3
–
16
16
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
11
(0.4 )
Cash and cash equivalents at 31 December
11
156
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
1. Accounting policies
i. Statement of compliance
•
•
•
•
ii. New and amended accounting standards not yet adopted
•
•
•
•
•
IFRS 17 Insurance Contracts
iii. Basis of preparation
Going concern
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FINANCIAL STATEMENTS
1. Accounting policies continued
iv. Summary of significant accounting policies
(a) Basis of consolidation
158
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
(b) Fee and commission income
(c) Insurance and reinsurance premiums
(d) Insurance claims and reinsurance recoveries
(e) Investment return
(f) Expenses
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FINANCIAL STATEMENTS
1. Accounting policies continued
(f) Expenses continued
(g) Income taxes
(h) Dividends paid
(i) Investment contract deposits and withdrawals
160
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
(j) Goodwill
(k) Deferred acquisition costs
(l) Intangible assets
(m) Property and equipment
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FINANCIAL STATEMENTS
1. Accounting policies continued
(m) Property and equipment continued
(n) Reinsurance assets
(o) Other receivables
(p) Investment property
(q) Equities, fixed income securities and Investment in Collective Investment Schemes
162
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
(r) Derivative financial instruments
(s) Cash and cash equivalents
(t) Insurance contract liabilities
(u) Investment contract benefits
(v) Deferred income
(w) Net asset value attributable to unit holders
(x) Provisions
(y) Borrowings
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FINANCIAL STATEMENTS
1. Accounting policies continued
(z) Other payables
(aa) Employee benefits
(ab) Share capital
(ac) Product classification
164
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
(ad) Impairment
(ae) Foreign currency translation
(af) Segment reporting
(ag) Current and non-current disclosure
(ah) Alternative performance measures
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FINANCIAL STATEMENTS
2. Critical accounting estimates and judgements in applying accounting policies
Judgements
Consolidation
•
•
•
Determining non-performing business loans to Partners
•
•
Estimates
•
•
•
Measurement of insurance contract liabilities
•
•
•
•
166
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Determining the fair value of investment property
Determining the fair value of Level 3 fixed income securities and equities
3. Segment reporting
Segment revenue
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FINANCIAL STATEMENTS
3. Segment reporting continued
Segment profit
Underlying cash result
Year ended
31 December
2020
£’Million
Underlying cash result after tax 264.7 273.1
(10.6)
(8.2)
(10.0)
(29.6)
61.7
Other
(6.0)
IFRS profit after tax 262.0 146.6
65.6
Profit before tax attributable to shareholders’ returns 327.6
98.8
IFRS profit before tax 426.4
EEV operating profit
Year ended
31 December
2020
£’Million
919.0
304.4
(47.4)
EEV profit before tax 1,176.0
(3.2)
(465.7)
(91.9)
(287.6)
Profit before tax attributable to shareholders’ returns 327.6
98.8
IFRS profit before tax 426.4
168
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Segment assets
Funds under management (FUM)
31 December
2020
£’Million
Investment 32,220.0
61,310.0
35,810.0
Total FUM 129,340.0
(4,864.4)
Other 1,551.9
Gross assets held to cover unit liabilities 126,027.5
605.4
3,248.4
Total assets 129,881.3
4. Fee and commission income
Year ended
31 December
2020
£’Million
767.4
112.2
812.4
70.4 71.6
98.8
61.7
17.5 16.2
Fee and commission income before DIR amortisation 1,940.4
156.0
Total fee and commission income 2,096.4
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FINANCIAL STATEMENTS
4. Fee and commission income continued
5. Expenses
Year ended
31 December
2020
£’Million
827.0
0.3
0.5
0.5
0.4
– –
Total fees payable to the Company’s auditors and its associates 1.7 1.5
151.9 151.5
16.3 17.5
15.0
10.0 12.4
Total employee costs 193.2
Average monthly number of persons employed by the Group during the year 2,746
www.sjp.co.uk.
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ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
6. Investment return and movement in investment contract benefits
Investment return
Year ended
31 December
2020
£’Million
Investment return on net assets held to cover unit liabilities:
86.3
(109.7)
4,832.4
4,809.0
Attributable to unit-linked insurance contract liabilities 25.4 65.4
Attributable to unit-linked investment contract benefits 4,783.6 10,696.1
4,809.0
1,127.1
5,936.1
Investment return on shareholder assets:
(4.2)
17.7
13.5 37.6
Total investment return 5,949.6
Movement in investment contract benefits
2020
£’Million
83,558.5
10,215.4
(4,586.4)
4,783.6
(838.4)
Balance at 31 December 93,132.7
Current 4,841.0
88,291.7
93,132.7
Movement in unit liabilities
4,783.6
1,127.1
Movement in investment contract benefits in the Consolidated Statement of Comprehensive Income 5,910.7
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FINANCIAL STATEMENTS
7. Income and deferred taxes
Tax for the year
Year ended
31 December
2020
£’Million
Current tax
157.9 215.7
(1.0)
8.5
–
165.4
Deferred tax
(4.0)
(10.4)
11.8
– 1.1
13.7
0.8
(10.0)
Other items (1.9) 1.1
(0.5)
(1.4) –
0.9
(1.0) 334.4
Total tax charge for the year 164.4 562.3
Attributable to:
98.8
65.6
164.4 562.3
172
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Reconciliation of tax charge to expected tax
Year ended
31 December
2020
£’Million
426.4
(98.8)
Profit before tax attributable to shareholders’ return 327.6
62.2 19% 35.5
Adjustments:
(1.3) 0.0%
Expected shareholder tax 60.9 18.6%
Effects of:
(0.9)
– 1.1
(1.4) –
0.4 1.3
0.4
(0.3) 1.2
3.8 2.3
1.7 –
Other 0.2
0.8 2.6
4.7 1.4% 5.5
Shareholder tax charge 65.6 20.0%
Policyholder tax charge 98.8
Total tax charge for the year 164.4 562.3
Tax paid in the year
Year ended
31 December
2020
£’Million
165.4
(30.3)
113.6
Other (0.6)
Tax paid 248.1
233.1
2.4
12.6
Total 248.1
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FINANCIAL STATEMENTS
7. Income and deferred taxes continued
Deferred tax balances
Deferred tax assets
Unrelieved
expenses
on life
insurance
business
Deferred
acquisition
costs (DAC)
Deferred
income (DIR)
Capital
losses
(available for
future relief)
Renewal
income
assets
Share-based
payments
Fixed asset
temporary
differences
Other
temporary
differences Total
£’Million £’Million £’Million £’Million £’Million £’Million £’Million £’Million £’Million
42.5 – 35.6 55.7 – 1.3 147.1
– – –
At 31 December 2019 41.2 – 32.6 44.6 – 6.5 4.9 1.3 131.1
(41.2) (19.5) – (44.6) (10.9) – – (0.7) (116.9)
(Charge)/credit to the
Statement of Comprehensive
Income:
– 2.3 (3.0) – 2.3 (0.1) 0.1 0.1 1.7
– (2.2) 3.5 – (1.6) 0.4 0.6 (0.1) 0.6
Total credit – 0.1 0.5 – 0.7 0.3 0.7 – 2.3
– – – – (2.1) – – – (2.1)
At 31 December 2020 – (19.4) 33.1 – (12.3) 6.8 5.6 0.6 14.4
Expected utilisation period
As at 31 December 2020 6 years 14 years 14 years 6 years 20 years 3 years 6 years
Deferred tax liabilities
Unrelieved
expenses
on life
insurance
business
Deferred
acquisition
costs (DAC)
Capital
losses
(available for
future relief)
Renewal
income
assets
Unrealised
capital gains
on life
insurance
(BLAGAB)
assets
backing unit
liabilities
Purchased
value of
in-force
business
(PVIF)
Other
temporary
differences Total
£’Million £’Million £’Million £’Million £’Million £’Million £’Million £’Million
– – 4.1 1.2
– –
– – – 2.4 – – – 2.4
At 31 December 2019 – 57.5 – 11.1 420.1 3.5 1.5 493.7
(41.2) (19.5) (44.6) (11.1) – – (0.5) (116.9)
Charge/(credit) to the
Statement of Comprehensive
Income:
1.4 (10.1) 14.5 – (2.8) (0.6) (0.3) 2.1
– 4.2 (5.4) – – 0.4 – (0.8)
1.4 (5.9) 9.1 – (2.8) (0.2) (0.3) 1.3
At 31 December 2020 (39.8) 32.1 (35.5) – 417.3 3.3 0.7 378.1
Expected utilisation period
As at 31 December 2020 6 years 14 years 6 years 20 years 6 years 6 years
174
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
8. Goodwill, intangible assets, deferred acquisition costs and deferred income
Goodwill
Purchased
value of
in-force
business
Computer
software and
other specific
software
developments DAC DIR
£’Million £’Million £’Million £’Million £’Million
Cost
15.6 73.4 16.1
Additions – –
– – –
At 31 December 2019
15.6 73.4 25.0 1,309.8 (1,538.6)
Additions 15.4 – 18.8 27.1 (121.2)
Disposals – – – (103.0) 90.6
At 31 December 2020 31.0 73.4 43.8 1,233.9 (1,569.2)
Accumulated amortisation
– 14.7
– 3.2 1.4
– – –
At 31 December 2019
– 52.6 16.1 819.8 (923.9)
Charge for the year – 3.2 4.2 92.6 (156.0)
Eliminated on disposal – – – (103.0) 90.6
At 31 December 2020 – 55.8 20.3 809.4 (989.3)
Carrying value
15.6 1.4
15.6
At 31 December 2020 31.0 17.6 23.5 424.5 (579.9)
Current – 3.2 3.4
14.4
31.0 17.6 23.5 424.5 (579.9)
Outstanding amortisation period
At 31 December 2020 n/a 5 years 5 years 14 years 6–14 years
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FINANCIAL STATEMENTS
8. Goodwill, intangible assets, deferred acquisition costs and deferred income continued
Goodwill
31 December
2020
£’Million
0.4 –
7.7 –
10.1
3.7 3.7
1.8
7.3 –
Balance at 31 December 31.0 15.6
Purchased value of in-force business/DAC/computer software
DIR
176
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
9. Property and equipment, including leased assets
Fixtures,
fittings
and office
equipment
Computer
equipment
Leased assets:
properties Total
£’Million £’Million £’Million £’Million
Cost
52.7 7.7 –
– –
Additions 16.2 1.1
–
At 31 December 2019 68.1 8.4 141.5 218.0
Additions 6.6 1.4 26.1 34.1
Disposals (2.3) (4.3) (3.6) (10.2)
At 31 December 2020 72.4 5.5 164.0 241.9
Accumulated depreciation
27.3 4.6 –
–
At 31 December 2019 30.6 6.2 14.9 51.7
Charge for the year 5.5 1.4 17.2 24.1
Eliminated on disposal (2.2) (4.3) (1.8) (8.3)
At 31 December 2020 33.9 3.3 30.3 67.5
Net book value
25.4 3.1 –
37.5 2.2 126.6 166.3
At 31 December 2020 38.5 2.2 133.7 174.4
Depreciation period (estimated useful life)
At 31 December 2020 5–15 years 3 years 1–22 years
10. Leases
The Group’s leasing activities and how these are accounted for
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FINANCIAL STATEMENTS
10. Leases continued
Amounts recognised in the Consolidated Statement of Financial Position
31 December
2020
£’Million
Leased assets – properties 133.7 126.6
Lease liabilities – properties 132.7
Amounts recognised in the Consolidated Statement of Comprehensive Income
Year ended
31 December
2020
£’Million
17.2
3.3
– 2.6
1.2 1.3
Total lease expense for the year 21.7 21.7
Total cash outflow for leases during the year 13.3 11.1
Reconciliation of lease liabilities
2020
£’Million
118.6 –
–
Additions 25.4 43.6
(1.3) –
3.3
(13.3)
Closing lease liabilities 132.7
2020
£’Million
3.3
10.0
Lease payments made 13.3 11.1
178
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
11. Investments, investment property and cash and cash equivalents
Net assets held to cover unit liabilities
31 December
2020
£’Million
Assets
1,526.7
83,359.2
27,694.0
4,625.4
6,405.2
1,030.2 733.1
– Currency forwards 999.9 588.2
– Interest rate swaps 58.5 76.7
– Index options 49.7 23.3
– Contracts for differences 11.8 359.3
– Equity rate swaps 6.1 8.1
– Foreign currency options 0.1 7.0
– Total return swaps 135.5 129.0
– Fixed income options 79.5 41.4
– Credit default swaps 45.7 109.9
1,386.8
Total assets 126,027.5
Liabilities
759.7 745.4
– Currency forwards 472.9 295.2
– Interest rate swaps 79.5 81.5
– Index options 43.6 49.1
– Contracts for differences 7.2 357.7
– Equity rate swaps 11.2 40.1
– Foreign currency options – 6.1
– Total return swaps 87.3 88.3
– Fixed income options 33.2 6.6
– Credit default swaps 15.0 24.2
749.9
Total liabilities 1,509.6
Net assets held to cover linked liabilities 124 ,517.9
93,132.7
30,919.1
466.1 464.2
Net unit-linked liabilities 124,517.9
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FINANCIAL STATEMENTS
11. Investments, investment property and cash and cash equivalents continued
Investment property
2020
£’Million
1,750.9
Additions – 42.5
27.5 14.4
(142.0)
(109.7)
Balance at 31 December 1,526.7
•
•
•
•
•
Year ended
31 December
2020
£’Million
86.3
21.1
31 December
2020
£’Million
76.0
72.3
67.1 7 7.3
61.8 71.7
53.2
276.6
Total undiscounted contractual rental income to be received 607.0 723.3
180
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Cash and cash equivalents
31 December
2020
£’Million
254.9
6,405.2
Total cash and cash equivalents 6,660.1
12. Other receivables
31 December
2020
£’Million
479.3 313.6
64.3
313.9
54.2
70.3 67.6
476.7 476.5
87.4
0.1
Total other receivables on the Solvency II Net Assets Balance Sheet 1,546.2
1,030.2 733.1
2.8 2.1
Total other receivables 2,579.2
Current
1,804.8
774.4
2,579.2
Business loans to Partners
31 December
2020
£’Million
319.6
157.1
Total business loans to Partners 476.7 476.5
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FINANCIAL STATEMENTS
12. Other receivables continued
Reconciliation of the business loans to Partners opening and closing gross loan balances
Stage 1
performing
Stage 2
under-
performing
Stage 3
non-
performing Total
£’Million £’Million £’Million £’Million
Gross balance at 1 January 2020 459.7 12.9 7.5 480.1
(16.5) 17.1 (0.6) –
(2.7) – 2.7 –
5.4 (4.5) (0.9) –
166.6 2.9 1.4 170.9
12.8 0.8 0.2 13.8
(174.5) (6.9) (2.7) (184.1)
Gross balance at 31 December 2020 450.8 22.3 7.6 480.7
performing
performing
performing
Gross balance at 1 January 2019 7.6
– –
3.5 –
4.7 –
– –
– –
Gross balance at 31 December 2019 7.5
Business loans to Partners: provision
Business loans to Partners as recognised on the Statement of Financial Position
31 December
2020
£’Million
480.7
(4.0)
Net business loans to Partners 476.7 476.5
182
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Renewal income assets
Movement in renewal income assets
2020
£’Million
85.7 72.1
Additions 16.5 17.1
(14.8)
Total renewal income assets at 31 December 87.4
31 December
2020
5.0%–15.0%
15.0%–25.0%
5.8%–10.1%
13. Other payables
31 December
2020
£’Million
233.6
488.1
124.0
66.8 72.1
118.1
132.7
79.6
Total other payables on the Solvency II Net Assets Balance Sheet 1,242.9
759.7 745.4
35.4 3.6
Total other payables 2,038.0
Current 1,800.7
237.3
2,038.0
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FINANCIAL STATEMENTS
14. Insurance contract liabilities and reinsurance assets
Risk
Risk Description Management
Underwriting
Epidemic/disaster
Expense
Retention
Insurance contract liabilities
2020
£’Million
556.6
1.9
–
(1.8)
4.8 4.1
1.1 3.1
4.1 5.6
Balance at 31 December 562.6 556.6
466.1 464.2
96.5
562.6 556.6
Current 108.8
453.8
562.6 556.6
Reinsurance assets
2020
£’Million
88.6
3.7
Reinsurance assets at 31 December 92.3
Current 17.8 15.7
74.5
92.3
184
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Assumptions used in the calculation of insurance liabilities and reinsurance assets
Assumption Description
Interest rate
Mortality
Morbidity –
Critical Illness
Age
Rate – 2019
and 2020
25
35
45
Permanent Health
Insurance
Age Rate 2020
25
35
45
Expenses
Product
Annual cost
2020
£40.56
Persistency
2019 and 2020
Lapses
Year 1 Year 5 Year 10
Sensitivity analysis
Sensitivity analysis
Change in
assumption
Change in
profit/(loss)
before tax
2020
Change in
net assets
2020
Percentage £’Million £’Million
0.9 0.9
(0.2) (0.2)
0.0 0.0
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FINANCIAL STATEMENTS
15. Other provisions and contingent liabilities
Complaints
provision
Lease
provision
Clawback
provision
Total
provisions
£’Million £’Million £’Million £’Million
– 22.7
22.6 11.2 34.6
– –
– –
At 31 December 2019 25.7 11.2 3.7 40.6
Additional provisions 19.2 0.5 – 19.7
Utilised during the year (21.3) (0.1) (0.2) (21.6)
Release of provision (3.2) (1.2) – (4.4)
At 31 December 2020 20.4 10.4 3.5 34.3
Current 11.7 0.1 1.2 13.0
8.7 10.3 2.3 21.3
20.4 10.4 3.5 34.3
16. Borrowings and financial commitments
Borrowings
•
•
Senior unsecured corporate borrowings
31 December
2020
£’Million
112.7 173.3
113.8
Senior unsecured corporate borrowings 226.5
•
•
186
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Total borrowings
31 December
2020
£’Million
226.5
115.3 116.6
Total borrowings 341.8
Current 11.0 –
330.8
341.8
31 December
2020
£’Million
48.1
115.3 116.6
Total non-recourse securitisation loan notes 163.4 166.5
157.1
6.3
Total net assets held by SJP Partner Loans No.1 Limited 163.4 166.5
Movement in borrowings
Senior
unsecured
corporate
borrowings
Senior tranche
of securitisation
loan notes
Total
borrowings
Senior
2020 2020 2020
£’Million £’Million £’Million
Borrowings at 1 January 287.1 116.6 403.7
270.0 – 270.0
(331.1) (1.0) (332.1)
– (0.8) (0.8) –
0.5 0.5 1.0
Borrowings at 31 December 226.5 115.3 341.8 116.6
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FINANCIAL STATEMENTS
16. Borrowings and financial commitments continued
Financial commitments
Guarantees
Loans drawn Facility
31 December
2020
31 December
2020
£’Million £’Million
63.3 5 7.7 70.0
– – 25.0 –
25.9 50.0
39.8 45.7 61.0
22.1 15.1 50.0
49.6 44.5 50.0
Total loans 200.7 306.0
17. Financial risk
Risk management objectives and risk policies
•
•
•
•
•
•
Risk Description Management
Shareholders’
assets
Reinsurance
reinsurers.
Business
loans to
Partners
188
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Risk Description Management
Cash or
expense
requirement
them.
Risk Description Management
Client
liabilities
Retention
New
business
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
17. Financial risk continued
Shareholder assets
31 December 2020
Financial
assets at fair
value through
profit and loss
Financial
assets
measured at
amortised cost
Financial
liabilities
measured at
amortised cost Total
£’Million £’Million £’Million £’Million
Financial assets
7.4 – – 7.4
1,264.8 – – 1,264.8
– 476.7 – 476.7
87.4 – – 87.4
– Other – 546.5 – 546.5
Total other receivables 87.4 1,023.2 – 1,110.6
– 254.9 – 254.9
Total financial assets 1,359.6 1,278.1 – 2,637.7
Financial liabilities
– – 341.8 341.8
– – 132.7 132.7
– Other
– – 1,145.6 1,145.6
Total other payables – – 1,2 78.3 1,278.3
Total financial liabilities – – 1,620.1 1,620.1
Financial assets
5.2 – – 5.2
– –
– 476.5 – 476.5
– –
– Other – –
Total other receivables 85.7 881.8 – 967.5
– –
Total financial assets –
Financial liabilities
– –
– –
– Other
– –
Total other payables – – 1,037.6 1,037.6
Total financial liabilities – –
190
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Income, expense, gains and losses arising from financial assets and financial liabilities
Year ended 31 December 2020
Financial
assets at fair
value through
profit and loss
Financial
assets
measured at
amortised cost
Financial
liabilities
measured at
amortised cost Total
£’Million £’Million £’Million £’Million
Financial assets
0.4 – – 0.4
3.5 – – 3.5
– 11.8 – 11.8
(14.8) – – (14.8)
Total other receivables (14.8) 11.8 – (3.0)
– 0.8 – 0.8
Total financial assets (10.9) 12.6 – 1.7
Financial liabilities
– – (8.3) (8.3)
– – (3.3) (3.3)
Total other payables – – (3.3) (3.3)
Total financial liabilities – – (11.6) (11.6)
Financial assets
– –
– –
– 13.6 – 13.6
– –
Total other receivables (3.5) 13.6 – 10.1
– –
Total financial assets 5.2 15.4 –
Financial liabilities
– –
– –
– Other – –
Total other payables – – (3.9) (3.9)
Total financial liabilities – –
Fair value estimation
•
•
•
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
17. Financial risk continued
31 December 2020
Level 1 Level 2 Level 3 Total balance
£’Million £’Million £’Million £’Million
Financial assets
7.4 – – 7.4
1,264.8 – – 1,264.8
– – 87.4 87.4
Total financial assets 1,272.2 – 87.4 1,359.6
Financial assets
5.2 – – 5.2
– –
– –
Total financial assets –
Movement in Level 3 portfolios
Renewal income assets
2020
£’Million
85.7 72.1
16.5 17.1
– –
(14.8)
Closing balance 87.4
Credit risk
31 December 2020
AAA AA A BB Unrated Total
£’Million £’Million £’Million £’Million £’Million £’Million
– 7.4 – – – 7.4
1,264.8 – – – – 1,264.8
– 92.3 – – – 92.3
– 6.0 – – 1,104.6 1,110.6
– 44.0 210.8 0.1 – 254.9
Total 1,264.8 149.7 210.8 0.1 1,104.6 2,730.0
AAA AA A
4.1 1.1 – – – 5.2
– – – –
– – – –
– 4.7 – –
– – –
Total
192
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Contractual maturity and liquidity analysis
31 December 2020
Up to 1 year 1–5 years Over 5 years Total
£’Million £’Million £’Million £’Million
Financial assets
7.4 – – 7.4
1,264.8 – – 1,264.8
106.6 271.1 99.0 476.7
16.2 41.5 29.7 87.4
– Other 546.5 – – 546.5
Total other receivables 669 .3 312.6 128.7 1,110.6
254.9 – – 254.9
Total financial assets 2,196.4 312.6 128.7 2,6 37.7
Financial liabilities
11.0 305.2 25.6 341.8
9.1 14.9 157.9 181.9
– Other 927.5 61.9 107.0 1,096.4
Total other payables 936.6 76.8 264.9 1,278.3
Total financial liabilities 947.6 382.0 290.5 1,620.1
Financial assets
5.2 – – 5.2
– –
111.7 476.5
– Other – –
Total other receivables 524.2 302.8 140.5 967.5
– –
Total financial assets
Financial liabilities
2.1 356.6
46.5
– Other 42.3
Total other payables 824.2 88.8 124.5 1,037.5
Total financial liabilities 445.4
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FINANCIAL STATEMENTS
17. Financial risk continued
Sensitivity analysis to market risks
Unit liabilities and associated assets
Categories of financial assets and financial liabilities
Income, expense, gains and losses arising from financial assets, investment properties and financial liabilities
31 December
2020
£’Million
Financial assets and investment properties
Investment properties (44.4)
4,832.4
Total financial assets and investment properties 4,788.0
Financial liabilities
1
(3,945.3)
Total financial liabilities (3,945.3)
Fair value estimation
31 December 2020
Level 1 Level 2 Level 3 Total balance
£’Million £’Million £’Million £’Million
Financial assets and investment properties
– – 1,526.7 1,526.7
82,893.4 – 465.8 83,359.2
7,348.7 20,035.9 309.4 27,694.0
4,623.6 – 1.8 4,625.4
– 1,386.8 – 1,386.8
6,405.2 – – 6,405.2
Total financial assets and investment properties 101,270.9 21,422.7 2,303.7 124,997.3
– 93,132.7 – 93,132.7
– 749.9 – 749.9
30,919.1 – – 30,919.1
Total financial liabilities 30,919.1 93,882.6 – 124,801.7
194
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Financial assets and investment properties
– –
–
– 1.5
– –
– –
Total financial assets and investment properties
– –
– –
– –
Total financial liabilities –
•
–
–
•
•
Transfers into and out of Level 3 portfolios
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
17. Financial risk continued
2020
Investment
property
Fixed income
securities Equities CIS
£’Million £’Million £’Million £’Million
1,750.9 81.7 169.4 1.5
– – – 0.4
27.5 225.9 363.4 –
(142.0) (5.2) (123.8) (0.1)
(109.7) 7.0 56.8 –
Closing balance 1,526.7 309.4 465.8 1.8
42.8 7.6 41.7 –
(152.5) (0.6) 15.1 –
(Losses)/gains recognised in the income statement (109.7) 7.0 56.8 1.8
Investment
CIS
– –
– – –
162.7 –
– –
6.7 –
Closing balance 1.5
6.7 –
15.7 – – –
(Losses)/gains recognised in the income statement 6.7 –
Level 3 valuations
31 December 2020
Investment property classification
Office Industrial Retail and leisure All
Gross ERV (per sq ft)
1
£15.00–£96.04 £4.13–£17.50 £2.50–£105.01 £2.50–£105.01
£42.19 £9.16 £13.56 £15.20
True equivalent yield
4.2%–9.4% 3.8%–5.7% 4.0%–15.1% 3.8%–15.1%
5.4% 4.5% 7.1% 5.6%
196
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Gross ERV (per sq ft)
1
True equivalent yield
Sensitivity of Level 3 valuations
Carrying value
Effect of reasonable possible
alternative assumptions
Favourable
changes
Unfavourable
changes
Investment property significant unobservable inputs £’Million £’Million £’Million
31 December 2020 Expected rental value/Relative yield 1,526.7 1,839.5 1,27 7.4
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
17. Financial risk continued
Carrying value
Effect of reasonable possible
alternative assumptions
Favourable
changes
Unfavourable
changes
£’Million £’Million £’Million
31 December 2020 Fixed income securities 309.3 314.9 304.8
Equities 465.8 559.2 408.4
Credit risk
Contractual maturity and liquidity analysis
Sensitivity analysis to market risks
18. Capital management and allocation
•
•
•
•
Regulatory capital
•
•
198
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Entity Regulatory body and jurisdiction
31 December
2020
£’Million
129, 897.0
(128,678.4)
Solvency II net assets 1,218.6
4,756.3
(1, 357.5)
Own funds (A) 4,617.4
Standard formula SCR (B) 3,506.6
Solvency II free assets (A-B) 1,110.8
Solvency II ratio (A/B) 132%
31 December
2020
£’Million
1,218.6
(501.3)
Excess of free assets over MSB 717.3
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
199
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
FINANCIAL STATEMENTS
18. Capital management and allocation continued
IFRS capital composition
31 December
2020
£’Million
80.6
185.3
(14.8)
2.5 2.5
859.4
Shareholders’ equity 1,113.0
(0.9)
Total equity 1,112.1
19. Share capital, earnings per share and dividends
Share capital
Number of
ordinary shares
Called-up
share capital
£’Million
At 31 December 2019 534,800,626 80.2
– Exercise of options 2,542,840 0.4
At 31 December 2020 537,343,466 80.6
200
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Earnings per share
Year ended
31 December
2020
£’Million
Earnings
262.0 146.6
Million
Weighted average number of shares
533.5 531.3
5.8 2.7
Weighted average number of ordinary shares (for diluted EPS) 539.3
Pence
Earnings per share (EPS)
49.1 27.6
48.6 27.5
Dividends
Year ended
31 December
2020
Year ended
31 December
2020
Pence per share £’Million
– – 15 7.5
– –
20.00 – 107.1 –
Total dividends 20.00 107.1
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
201
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FINANCIAL STATEMENTS
20. Share-based payments
Share option schemes
•
•
•
•
Share awards
•
•
•
•
202
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Financial assumptions underlying the calculation of fair value
SAYE Plan
Share
Incentive Plan
Executive
Deferred Bonus
Executive
Performance
Share Plan
Associate
Partner Plan
Valuation model Black-Scholes Black-Scholes Black-Scholes Monte Carlo Black-Scholes
Awards in 2020
54.9 751.4 751.4 374.9/751.4
4,5
N/A
751.4 751.4 751.4 751.4 N/A
813.0 0.0 0.0 0.0 N/A
26 N/A N/A 26 N/A
6.7 0.0 0.0 6.7 N/A
0.1 N/A N/A N/A N/A
3.5 3 3 3 N/A
N/A N/A N/A 15-84 N/A
N/A N/A N/A 20.0 N/A
Awards in 2019
24 24
4.6
3.5 3 3 3
13–47
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
FINANCIAL STATEMENTS
20. Share-based payments continued
Share option schemes
Year ended
31 December
2020
Year ended
31 December
2020
Number
of options
Weighted
average
exercise price
Number
of options
Weighted
SAYE Plan
1,280,599 £8.33
583,171 £6.01
(209,121) £8.34
(253,722) £8.50
1,400,927 £7.38
3,704 £8.44
Partner Performance Share Plan
2,126,365 £0.15
– £0.15
(10,124) £0.15
(1,220,189) £0.15
896,052 £0.15
896,052 £0.15
Partner and Adviser Chartered Plan
499,389 £0.15
– – – –
– –
(184,445) £0.15
314,944 £0.15
314,944 £0.15
Associate Partner Plan
5,797,500 £10.95
– – – –
(578,750) £10.85
(12,500) £10.83 – –
5,206,250 £10.95
4,415,000 £10.83 – –
204
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Share awards
Year ended
31 December
2020
Number
of options
Number
of options
Share Incentive Plan
37.073
9,890
–
–
46,963
9,476
Executive Deferred Bonus Scheme
2,021,702
477,702
(30,618)
(667,237)
1,801,549
– –
Executive Performance Share Plan
5,691,754
3,398,502
(536,321)
(589,089)
7,964,846
599,447
Restricted Share Plan
–
– –
–
–
– –
– –
Early exercise assumptions
Allowance for performance conditions
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
205
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
FINANCIAL STATEMENTS
20. Share-based payments continued
Charge to the Consolidated Statement of Comprehensive Income
Year ended
31 December
2020
£’Million
10.6
–
Total share-based payment expense 10.6
Liabilities recognised in the Statement of Financial Position
Year ended
31 December
2020
£’Million
0.9 1.3
4.9 5.3
21. Interests in unconsolidated entities
Unconsolidated structured entities
these unit trusts.
Name of entity
Percentage of
ownership interest
Nature of
relationship
Measurement
method
Net asset value as at
31 December
2020 2020
£’Million
0.00%
unit trust 1,161.4
11.21%
unit trust
917.8
2,079.2
Associates
206
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
22. Subsidiary undertakings
Principal subsidiaries:
Entity
Company
number Registered office
Country of
incorporation
Principal
activity
Audit
exemption
* Yes
* Yes
* Yes
Yes
* Yes
* Yes
Yes
* Yes
* Yes
Yes
Yes
Yes
* Yes
* Yes
Yes
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FINANCIAL STATEMENTS
Entity
Company
number Registered office
Country of
incorporation
Principal
activity
Audit
exemption
Yes
* No
* Yes
* Yes
* Yes
Yes
* Yes
*
Investment
No
* Yes
* Yes
Yes
No
275275
No
*
Yes
No
No
* Yes
*
Yes
* Yes
No
* Yes
22. Subsidiary undertakings continued
208
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Entity
Company
number Registered office
Country of
incorporation
Principal
activity
Audit
exemption
No
*
No
*
No
* Yes
* No
* No
*
No
1511517
No
* No
No
* No
* Yes
*
Yes
*
Yes
Yes
•
•
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
22. Subsidiary undertakings continued
b.
210
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
23. Business combinations
Business acquired Principal activity % Shareholding Date of acquisition
Policy Services Group
Willson Grange businesses
Jeremy Barrett businesses
Policy Services Group
Book value
Fair value
adjustment Total
£’Million £’Million £’Million
4.3
4.1 – 4.1
Total 5.4 (0.1) 5.3
Total consideration 13.0
Goodwill 7.7
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FINANCIAL STATEMENTS
23. Business combinations continued
Willson Grange businesses
Book value
Fair value
adjustment Total
£’Million £’Million £’Million
6.3 6.6
–
Total 0.3 5.1 5.4
3.3
Total consideration 12.7
Goodwill 7.3
Jeremy Barrett businesses
Book value
Fair value
adjustment Total
£’Million £’Million £’Million
–
Total 2.0 1.5 3.5
3.1
Total consideration 3.9
Goodwill 0.4
212
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
24. Related party transactions
Transactions with key management personnel
Year ended
31 December
2020
£’Million
4.3 4.6
0.5
2.0 2.3
Total 6.8 7.3
25. Events after the reporting period
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FINANCIAL STATEMENTS
Parent Company
Financial Statements
under Financial
Reporting Standard 101
...................................... 215
...................................... 216
.................................... 217
214
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Note
As at
31 December
2020
£’Million
2 404.4
6 1,051.6
0.1
(2.2)
–
Net current assets 1,049.5
Net assets 1,453.9
Equity
3 80.6
185.3
233.2 222.6
0.1
954.7 742.6
Total shareholders’ funds 1,453.9
ANDREW CROFT CRAIG GENTLE
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
Note
Share
capital
Share
premium
Share option
reserve
Miscellaneous
reserves
Retained
earnings
Total
shareholders’
funds
£’Million £’Million £’Million £’Million £’Million £’Million
174.5 662.4
– – – – 336.2 336.2
5 – – – –
3 – – –
3 – – – 4.7
– – – –
At 31 December 2019 80.2 182.4 222.6 0.1 742.6 1, 227.9
– – – – 319.2 319.2
5 – – – – (107.1) (107.1)
3 0.4 2.9 – – – 3.3
– – 10.6 – – 10.6
At 31 December 2020 80.6 185.3 233.2 0.1 954.7 1,453.9
216
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
1. Accounting policies
Basis of preparation
Adoption of amended accounting standards
•
•
•
Adoption of new accounting standards
FRS 101 – Reduced disclosure exemptions
•
•
•
•
•
•
•
•
•
•
Going concern
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
1. Accounting policies continued
Significant accounting policies
(a) Investment return
(b) Taxation
(c) Investment in subsidiaries
(d) Receivables
(e) Amounts owed by Group undertakings
2. Investment in subsidiaries
Cost
Share
awards
Impairment
provision
Net book
value
£’Million £’Million £’Million £’Million
– –
– –
– –
At 31 December 2019 344.0 222.6 (181.8) 384.8
Share awards granted – 10.6 – 10.6
Share capital injection 9.0 – – 9.0
At 31 December 2020 353.0 233.2 (181.8) 404.4
31 December
2020
£’Million
87.6
– –
83.6 74.6
Directly held investments 171.2 162.2
166.5
62.5
0.2
3.8 3.6
0.2
Investments held due to share awards granted 233.2 222.6
Total 404.4
218
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
3. Share capital
Number of
ordinary shares
Called-up
share capital
£’Million
At 31 December 2019 534,800,626 80.2
– Exercise of options 2,542,840 0.4
At 31 December 2020 537,343,466 80.6
4. Auditors’ remuneration
5. Dividends
Year ended
31 December
2020
Year ended
31 December
2020
Pence per share £’Million
– – 15 7.5
– –
20.0 – 107.1 –
Total dividends 20.0 107.1
6. Related party transactions and balances
31 December
2020
£’Million
Amounts owed by Group undertakings
1,051.6
Total 1,051.6
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
6. Related party transactions and balances continued
7. Directors’ emoluments
8. Company information
220
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Supplementary
Information:
Consolidated Financial
Statements on a Cash
Result Basis
(unaudited)
................. 222
................. 223
................. 224
................. 225
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
221
FINANCIAL STATEMENTS
Note
Year ended
31 December
2020
£’Million
2,011.3
Investment return
6 13.5 37.6
Net income 2,024.8
(1,601.3)
Profit before tax 423.5
(98.8)
(70.0)
Total Cash result for the year 254.7
Pence
Cash result basic earnings per share III 47.7 43.2
Cash result diluted earnings per share
III 47.2
222
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
Note
Equity attributable to owners of the Parent Company
Non-
controlling
interests
Total
equity
Share
capital
Share
premium
Shares in
trust reserve
Retained
earnings
Misc.
reserves Total
£’Million £’Million £’Million £’Million £’Million £’Million £’Million £’Million
174.5 2.5
– – – – –
– – – – –
– – – –
– – – 4.7 – 4.7
– – – – –
– – 7.4 – – – –
– – – – –
– – – – –
– – – – –
– – – – –
At 31 December 2019 80.2 182.4 (16.4) 809.0 2.5 1,057.7 (0.9) 1,056.8
– – – 254.7 – 254.7 – 254.7
– – – (107.1) – (107.1) – (107.1)
0.4 2.9 – – – 3.3 – 3.3
– – (3.9) – – (3.9) – (3.9)
– – 5.5 (5.5) – – – –
– – – (8.2) – (8.2) – (8.2)
– – – 62.5 – 62.5 – 62.5
– – – (39.5) – (39.5) – (39.5)
At 31 December 2020 80.6 185.3 (14.8) 965.9 2.5 1,219.5 (0.9) 1,218.6
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
Note
31 December
2020
£’Million
Assets
174.4 166.3
0.7
1,546.2
17 7.4 5.2
17 1,264.8
17 254.9
Total assets 3,248.4
Liabilities
16 341.8
378.0 436.2
Other provisions
15 34.3
1,242.9
32.7 115.4
0.1
Total liabilities 2,029.8
Net assets 1,218.6
Shareholders’ equity
80.6
185.3
(14.8)
2.5 2.5
965.9
Shareholders’ equity 1,219.5
(0.9)
Total shareholders’ equity on a Cash Result Basis 1,218.6
Pence
Net assets per share 226.8
224
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
I. Basis of preparation
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
FINANCIAL STATEMENTS
II. Reconciliation of the IFRS Balance Sheet to the Cash Balance Sheet
Net Assets
Assets
15.6 – –
– –
– –
– –
166.3 – – 166.3
131.1 –
– –
– – – –
– –
– –
– 5.2
–
– –
–
Total assets
Liabilities
– –
– 436.2
556.6 –
614.7 – –
Other provisions – –
– –
– –
– –
115.4 – – 115.4
– –
Total liabilities
Net assets –
Adjustment 1
Adjustment 2
226
ST. JAMES’S PLACE PLC
FINANCIAL STATEMENTS
III. Earnings per share
Year ended
31 December
2020
£’Million
Earnings
254.7
Million
Weighted average number of shares
533.5 531.3
5.8 2.7
Weighted average number of ordinary shares (for diluted EPS) 539.3
Pence
Earnings per share (EPS)
47.7 43.2
47.2
STRATEGIC REPORT GOVERNANCE OTHER INFORMATION
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FINANCIAL STATEMENTS
We listen and respond
228
ST. JAMES’S PLACE PLC
OTHER INFORMATION
Other Information
..............................
................ 231
................................ 232
.......................................... 235
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
229
OTHER INFORMATION
Analysis of number of shareholders
Analysis by number of shares Holders Percentage Shares held Percentage
332
4,935 100.00% 537,343,466 100.00%
2021 financial calendar
www.sjp.co.uk.
Dividend Reinvestment Plan
Dividend mandate
Share dealing
www.computershare.trade.
Electronic communications
www.investorcentre.co.uk/ecomms.
230
ST. JAMES’S PLACE PLC
OTHER INFORMATION
How to Contact us
Registered office
www.sjp.co.uk
Chair
Chief Executive
Chief Financial Officer
Company Secretary
Customer service
Analyst enquiries
Media enquiries
Brunswick Group
Advisers
Registrars and transfer office
Computershare Investor Services PLC
www.investorcentre.co.uk/contactus
Independent auditors
PricewaterhouseCoopers LLP
Brokers
JPMorgan Cazenove Limited
Bank of America Securities Incorporated
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
OTHER INFORMATION
Within the Annual Report and Accounts various alternative performance measures (APMs)
are disclosed.
Financial position related APMs
APM Definition Why is this measure used?
Reconciliation
to the Financial
Statements
Solvency II net
assets
Total embedded
value
business.
investors.
EEV net asset
value (NAV) per
share
IFRS NAV per
share
232
ST. JAMES’S PLACE PLC
OTHER INFORMATION
Financial performance related APMs
APM Definition Why is this measure used?
Reconciliation
to the Financial
Statements
Cash result,
Operating cash
result and
Underlying cash
result
Note 3 to the
Underlying cash
basic and diluted
earnings per
share (EPS)
EEV profit
See Note 3 to the
EEV operating
profit
business.
See Note 3 to the
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
233
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
OTHER INFORMATION
APM Definition Why is this measure used?
Reconciliation
to the Financial
Statements
EEV operating
profit basic and
diluted earnings
per share (EPS)
Policyholder and
shareholder tax
Comprehensive
Profit before
shareholder tax
Comprehensive
Underlying profit
business.
Financial performance related APMs continued
234
ST. JAMES’S PLACE PLC
OTHER INFORMATION
Adviser or financial adviser
Administration platform, also Bluedoor
Capita
Chief Operating Decision Maker (CODM)
Client numbers
Client retention
Company
Deferred acquisition costs (DAC)
Deferred income (DIR)
Discretionary Fund Management (DFM)
European Embedded Value (EEV)
Executive Board
Field management team (FMT)
Financial Conduct Authority (FCA)
Financial Services Compensation Scheme (FSCS)
Funds under management (FUM)
Gestation FUM
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
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ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
OTHER INFORMATION
Gross inflows
Group
International Financial Reporting Standards (IFRS)
Investment Management Approach (IMA)
Mature FUM
Maturities
Net inflows
Paraplanner
Policyholder and shareholder tax
Prudential Regulation Authority (PRA)
Purchased value of in-force (PVIF)
Registered Individuals
Regular income withdrawals
Responsible investment (RI)
Retirement Account (RA)
Rowan Dartington (RD)
Solvency II
SS&C Technologies, Inc. (SS&C)
236
ST. JAMES’S PLACE PLC
OTHER INFORMATION
www.sjpfoundation.co.uk.
(SJPIA)
(SJPUTG)
State Street
Surrenders and part-surrenders
Vertically integrated
®
®
creative.instinctif.com
CBP003325
ST. JAMES’S PLACE PLC
www.sjp.co.uk