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Policy for remuneration terms, staff benefits, entertainment and business travel

A common policy for remuneration terms, staff benefits, entertainment and business travel has been adopted by the boards of AP1, AP2, AP3, AP4, AP6 and AP7.

 

Guidelines for remuneration for executive management and other employees

AP3’s remuneration guidelines aim to guarantee the Fund’s ability to attract and retain skilled staff. Total remuneration should be reasonable and appropriate. Remuneration levels should be market-based and competitive without leading the market.

 

Remuneration process

The process for setting remuneration levels for AP3 is designed to ensure compliance with the government’s guidelines for AP Fund employment terms. These guidelines include decision-making procedures as well the structure and assessment of reasonable and appropriate remuneration at AP3. The general remuneration process is set forth below.

AP3’s remuneration committee, comprised of the chairman of the board and two other board members, is responsible for remuneration issues, including the remuneration and benefits of the CEO. Decisions are subject to final approval by the board. Remuneration and benefits of other senior executives are set individually by the remuneration committee based on advice from the CEO. The committee also sets the remuneration framework for other employees, as well any one-off salary adjustments based on management’s data. Decisions are subject to board approval.

The remuneration committee gathers market wage data on an annual basis to ensure that remuneration for executive management and other employees is market-based, competitive, reasonable and appropriate. The committee also monitors changes to the government’s guidelines and drafts amendments to the Fund’s remuneration policy based thereon.

Finally, the remuneration committee prepares an annual assessment of AP3’s application of the government’s guidelines and compliance with guideline’s remuneration policies.

 

Total remuneration

Total remuneration is comprised of fixed salary, incentive-based salary, pension and other benefits.

  • Fixed salaries comprise the greater part of total remuneration for AP3 employees. Fixed salary is based on market conditions and is determined in light of expertise, area of responsibility and performance. Salaries are explicit, differential and determined on an individual basis. AP3’s salary-setting criteria are based on the employee’s work capacity and commitment in relation to established targets. Interpersonal skills, drive and judgement are also taken into account. Performance is evaluated on a regular basis, with results used as the basis for annual salary review.
  • Incentive-based salaries are available to all employees with the exception of the CEO and other senior executives. Incentive-based salary is capped at two months’ salary per calendar year. Each year, the board of directors adopts guidelines for incentive-based salaries for the coming year. See the “Performance-based incentive scheme” section below. Incentive-based salary is paid only if the Fund reports a profit.
  • Pension benefits are based on the applicable collective bargaining agreement (BAO, the Employers’ Organisation of the Swedish Banking Institutions/SACO, the Swedish Confederation of Professional Associations), for all employees except the CEO. The Fund’s pension obligation is limited to the payment of an agreed premium to an insurance company that provides pension insurance. Premiums are paid only as long as the employee is employed by the Fund. For the CEO and other senior executives, pension provisions may not exceed 30 per cent of fixed salary. There are no early retirement pension agreements.
  • Other benefits are of limited value relative to total remuneration. Examples of other benefits include medical insurance, group insurance and healthcare allowance.
  • Notice of termination/Severance payments follow the provisions of the collective agreement between BAO and SACO for all employees excluding the CEO and Deputy CEO, who each have mutual notice period of six months. Upon termination of employment by AP3, the CEO and Deputy CEO are entitled to 18 months’ and 12 months’ severance pay, respectively. In the case of new employment or income from business activities, remuneration paid during the notice period and severance payments are reduced by an amount corresponding to the new income.
  • Performance-based incentive scheme

The board of directors approved a performance-based incentive scheme for 2016, modelled on government guidelines issued in April 2009 and adjusted for guidelines on remuneration in insurance and other financial entities issued by the Financial Supervisory Authority in March 2011. The programme covers all permanent employees with the exception of the CEO and other senior executives.

Employees in the Asset Management department are eligible to receive performance-based remuneration of up to two months’ salary on the fulfilment of specific agreed criteria. The criteria are based on individual performance as well as long-term and (for the Fund) sustainable results over time. Sixty per cent of variable remuneration is paid three years after the year in which it was earned.

Employees in administrative departments are eligible to receive variable remuneration of half a month’s salary, based on achievement of the Fund’s overall long-term targets.

 

Monitoring, evaluation and communication of remuneration

AP3 conducts an annual market-based salary survey to ensure that salary levels and remuneration packages are reasonable and in line with market conditions. The remuneration committee conducts an annual evaluation of AP3’s application of the government’s guidelines and compliance with the guideline’s remunerations policies.

AP3 reports remuneration to senior executives in the same manner as listed companies. Accordingly, AP3 complies with the specific regulations for reporting remuneration to senior executives that apply to listed companies and public limited liability companies. These regulations are found mainly in the Companies Act (2005:551) and the Annual Accounts Act (1995:1554).

As part of AP3’s annual report, the board of directors reports on the Fund’s compliance or non-compliance with previously adopted guidelines and the reasons for any deviations thereto. The Fund’s auditors also write and sign a statement specifying whether they deem that the guidelines applicable to that fiscal year have been complied with.

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