We exist
to shape and
support safe, robust
and well-understood
pension schemes for
the benefit of people
and society
XPS PENSIONS GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2020
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CONTENTS
What's inside...
Strategic Report
Highlights
At a Glance
Investment Case
Chairman’s Statement
Co-Chief Executives’ Review
Business Model
Market Overview
Ambition and Strategy
Financial Review
Principal Risks and Uncertainties
Responsible Business
Section 172 Statement
Non-financial Information Statement
2
4
6
8
10
14
16
18
28
32
36
46
48
WHY INVEST IN XPS?
06
OUR TECHNOLOGY
Enhancing client service
through innovation
20
BUSINESS MODEL
14
OUR ACQUISITIONS
Building capabilities
through acquisition
22
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
LEADING THE INDUSTRY
through our
pension scam
identification service
24
Look out for these
throughout the report:
Reference to another page in the
report
Reference to further reading online
Critical accounting estimates
and key judgements
Governance
Chairman’s Governance Report
Board of Directors
Executive Committee
Group Governance at a Glance
Board Responsibilities
Board Effectiveness
Nomination Committee Report
Audit and Risk Committee Report
Directors’ Remuneration Report
Directors’ Report
50
52
54
56
58
60
68
70
74
97
Online
Directors’ Responsibility Statement
100
Financial Statements
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Statement of Financial Position –
Company
Statement of Changes in Equity –
Company
Statement of Cash Flows – Company
Notes to the Financial Statements –
Company
Company Information
102
108
109
110
111
112
149
150
151
152
155
OUR CULTURE
Driving performance
through culture
26
CHAIRMAN'S GOVERNANCE REPORT
50
Keep up to date with
our latest trading news
and details of our
upcoming events
Visit us online
www.xpsgroup.com
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
1
1
HIGHLIGHTS
We are UK
pensions experts
What we do
We provide pensions actuarial,
investment consulting and
administration services to
over 1,500 pension scheme clients
in the UK, combining expertise,
insight and technology to address
the needs of both pension
trustees and sponsoring
employers.
2
2
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Key performance indicators
Revenue
£120m +9%
Number of pension scheme clients
1,500 +24%
2020
2019
120m
110m
2020
2019
1,500+
1,200+
Adjusted EBITDA1
£27.9m +2%
2020
2019
Adjusted diluted earnings per share2
9.8p +0%
27.9m
27.4m
2020
2019
FTE Employees3
1,203
2020
2019
Proposed full year dividend
6.6p +0%
1,203
2020
2019
1,066
9.8p
9.8p
6.6p
6.6p
1 Adjusted EBITDA excludes the impact of share-based payment costs, fair value adjustments of contingent
consideration, and exceptional costs, excluding the impact of IFRS 16 in 2020.
2 Adjusted diluted earnings per share from continuing operations. It is based on adjusted profit after tax,
which excludes the impact of amortisation of intangible assets, share-based payment costs, fair value
adjustment of contingent consideration, exceptional costs, and the tax impact of these items. See Note 6 in
the financial statements, and excluding the impact of IFRS 16.
3. As at year end.
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
3
3
AT A GLANCE
We believe in
a better way
Employees
1,200+
Years of providing
pensions services
40+
4
4
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Who we are
XPS Pensions Group is the largest pure
pensions consultancy in the UK. We
have benefits of scale – we have a
breadth of experience to draw on,
can invest in solutions for the good
of our clients – yet we remain agile,
able to respond quickly as the world
around our clients shifts.
As the only UK pensions specialist
listed on the London Stock Exchange
Main Market, we have the flexibility to
think and act differently.
Our locations
Our 15 locations give us
access to staff, expertise
and clients across the UK.
Locations
15
Our services
Our values
We are a fast-moving, exciting business, with an
incredible team of people exclusively focused on the UK
market, believing things can be done in a better way.
Advice and support to pension scheme trustees and
sponsoring employers across all areas of UK pension scheme
management, including actuarial advice and long-term
financial planning for schemes, through to member
communications, advice on member option exercises and
scheme benefit design.
Clear, independent advice to pension scheme trustees to
enable them to make the optimum investment decisions for
their scheme’s assets. Using financial modelling of different
mixes of asset classes, we help clients to choose the right
portfolio for their needs, to maximise returns and/or minimise
their level of risk.
Services including pensions administration, payroll services,
pension scheme accounting, scam identification, de-risking
projects and technical consultancy for a wide range of
trust-based company pension schemes, including defined
benefit (‘DB'), defined contribution (‘DC'), career average
revalued earnings (‘CARE') and hybrid schemes.
We provide SIPP and SSAS products to financial advisers
under the Xafinity brand (SIPP).
We are ambitious
We are agile
We are helpful
We are experts
We do the right thing
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
5
5
INVESTMENT CASE
Why invest in XPS?
We are focused solely
on UK pensions
01
02
Well-positioned in a long-
term market with favourable
regulatory backdrop
£2 trillion liabilities of private UK
defined benefit pension schemes.
Regulatory developments are
driving client activity and demand
for our services.
40+
Years longevity of private UK defined
benefit pension schemes
£60bn
Funds invested in UK defined
contribution schemes
Read more on page 16
1 Revenue is defined as recurring
if it was received from a client
that had been billed every
month (or every quarter)
consecutively for the previous
12 months over the period to
31 March 2020. For won and
lost clients the revenue is
defined as recurring if it meets
the above criteria for the period
they were a client.
Non-cyclical and
recurring revenues
Our services are typically provided
on the basis of an open-ended
engagement with clients and are
compliance-driven to a statutory
timetable. They are therefore required
in all parts of the economic cycle.
88%
Recurring revenue in our Pensions Actuarial
& Consulting and Pensions Investment
Consulting businesses1
Read more on page 14
03
Award-winning brand
with a strong reputation
Winners of Actuarial/Pensions
Consultancy of the Year and Third-
Party Administrator of the Year at
the UK Pension Awards in May 2019
– at the end of the first year of
creating XPS.
Net number of new client wins during the year
12
924,000
Number of members under administration
(increase of 47,000 since 1 April 2019)
6
XPS Pensions Group Annual Report 2020
Read more on page 19
Strategic Report
Governance
Financial Statements
04
Diversified and
longstanding
client base
A large and diverse client base,
built up of over 1,500 clients.
13%
Top ten clients represent 13% of revenue
Read more on page 12
05
Scalable, well-invested
technology platform
Innovative, cutting-edge technology
platform helps deliver efficient,
quality service with capacity for
organic and inorganic growth.
Investment in technology
£1.4m
2
‘Bolt on’ acquisitions – Royal London
Corporate Pensions Services and Trigon
Professional Services
Read more on page 12
06
Track record of positive
financial performance
XPS has delivered year-on-year
organic revenue growth, through
a range of macroeconomic
conditions, for the past ten years.
Revenue growth in FY 2020, 10% growth in H2
9%
11%
Average annual growth in fully diluted
adjusted EPS in the three years since IPO
in February 2017
Read more on pages 28-31
07
Experienced
management team
Drawn from recognised and blue-
chip industry participants, our
Executive Committee has extensive
experience across the UK pensions
market.
45
Years’ combined experience of Co-CEOs
146
Years’ combined experience of senior leaders
of the business (5)
Read more on pages 52-55
XPS Pensions Group Annual Report 2020
7
CHAIRMAN’S STATEMENT
I am pleased to report
on a financial year
that has seen solid
progress
Overview
I am pleased to report on a financial year that has
seen solid progress in terms of financial and
operational performance, the development of the
XPS brand and our strategic goals, in line with
our purpose of shaping and supporting safe,
robust and well-understood pension schemes for
the benefit of people and society. Our Pensions
Actuarial and Consulting business has addressed
previously reported resourcing constraints to
deliver an improved trading performance
throughout the financial year. We have now
completed the exit from the Transitional Services
Agreement entered into with the Punter Southall
Group and have continued to develop the XPS
brand, winning Actuarial/Pensions Consultancy
of the Year and Third Party Administrator of the
Year at the UK Pensions Awards in May 2019. We
have continued to deliver on our bolt-on
acquisition strategy with the purchase of RL
Corporate Pension Services Limited and
Trigon Professional Services Limited and
our National Pension Trust achieved
master trust authorisation from
the Pensions Regulator.
These highlights have
been backed up by strong
client retention and some
real successes in terms of
client wins.
The business
responded quickly to
the challenges posed
by the COVID-19 crisis
towards the end of the
financial year and this is
discussed in more detail
on pages 12 to 13.
8
XPS Pensions Group Annual Report 2020
“I am pleased to report that
financial and operational
performance has been solid and
we have continued to develop
the XPS brand and to deliver
on our strategic goals.”
Tom Cross Brown
Chairman
Strategic Report
Governance
Financial Statements
Our people
Our staff survey confirmed continued strong staff satisfaction
which is key to achieving our strategy of becoming the
pre-eminent pensions consulting and administration firm in
the UK. I would like to thank all of our colleagues for their
continued hard work, expertise and commitment in providing
this excellent service over the last year. We have appointed
Margaret Snowdon as our Employee Engagement Non-
Executive Director, you can read more about this on page 66.
Future prospects
The Board is pleased with the progress made in this financial
year. The business is so far proving to be resilient in response
to the challenges presented by the COVID-19 crisis. Whilst it is
at the time of writing unclear exactly how the pandemic will
unfold, the Group on the evidence to date should be well
placed to continue driving growth and market share gains
over the medium term, against a favourable competitor and
regulatory backdrop.
Tom Cross Brown
Chairman
24 June 2020
Dividend
The Board is proposing a final dividend of 4.3p (2019: 4.3p),
which combined with the interim dividend produces a total
dividend of 6.6p (2019: 6.6p). This payment to shareholders is
in line with our stated strategy of pursuing a progressive
dividend policy that is subject to financial discipline and
future Group results. The dividend policy is to pay out two
thirds of adjusted profit after tax, with one third of that as an
interim dividend. The Board expects to retain sufficient
capital to fund ongoing operating requirements, an
appropriate level of dividend cover and funds to invest in the
Group’s long-term growth. The final dividend will be payable
on 24 September 2020 to shareholders on the register at
28 August 2020, subject to shareholder approval.
Board and governance
As announced last year, Snehal Shah joined the Board as the
Company’s Chief Financial Officer and Executive Director
during the year. Jonathan Punter, Non-Executive Director
previously appointed due to the Punter Southall relationship
agreement, stepped down from the Board at the September
Annual General Meeting. I would like to thank Jonathan for his
contribution during his time on the Board. This year the Board
have focused on stakeholder and workforce engagement. We
have also conducted an external Board effectiveness review;
you can read more on the process and outcomes within the
Governance Report on pages 60 to 61.
Governance highlights
• We conducted our
first external Board
effectiveness review;
read more about the
process and outcomes
on pages 60 to 61.
• The Board completed an
exercise to recognise our
stakeholders and how
we engage with them,
including our employees;
read about this on pages
46 to 47 and 64 to 65.
XPS Pensions Group Annual Report 2020
9
CO-CHIEF EXECUTIVES’ REVIEW
A robust year,
delivering on
our strategy
2020 was a year of pleasing growth. Our
respected and growing reputation led to us
winning appointments with large and high-profile
schemes, which was further cemented by being
recognised as both ‘Actuarial Firm of the Year’
and ‘Administration Firm of the Year’ at the UK
Pensions Awards. For the fifth time in six years,
our Pensions Administration business ranked top
of the annual Professional Pensions Survey of
service users across the market. These awards are
a source of great pride as they are testament to
the quality of work delivered by the XPS team
and invaluable in opening up new opportunities
for the Group.
Towards the end of the year, we faced the
challenge of adapting quickly to support our staff
and clients in the new ‘locked down’ environment
resulting from the COVID-19 crisis. Our staff have
responded brilliantly to the challenges this
presented, and we discuss in more detail our
response and the potential impacts on the
outlook for the Group below.
Good performance across the Group
Our Pensions Actuarial and Consulting
business had a solid year of growth, with
revenues growing by 4% to £58.8million
following what had been a challenging
prior year in relation to resourcing and
our go-to-market approach. At the
beginning of April 2019, we appointed
Patrick McCoy to oversee bringing the
advisory practice back to growth. Due
to the actions taken during the year, we
are pleased to report that the Pensions
Actuarial and Consulting business returned to
growth in H2.
Actions taken during the year included increasing
our capacity through the recruitment of new
colleagues and streamlining our operations. The
creation of a new ‘Pensions Solutions’ team also
improved the way we generate more
commercially focused content and proactively
take ‘value add’ discretionary services to clients.
We were also delighted to win work with some
fantastic new clients, including larger pension
schemes previously served by the ‘Big 3’
providers through competitive tender processes
– a powerful endorsement of our strategy to be
the preeminent independent challenger firm.
10 XPS Pensions Group Annual Report 2020
“We were delighted with the
industry awards won at the
start of the year, and as the
year went on with our business
success, including where
we have been appointed
as the actuary to some very
large schemes.”
Paul Cuff
Co-Chief Executive
A robust year,
delivering on
our strategy
Strategic Report
Governance
Financial Statements
Revenue
£119.8m +9%
2019: £109.9m
Profit before tax
£11.4m1
0%
2019: £11.4m
Our Pensions Investment Consulting business saw
strong growth, with revenues reaching £9.6 million
(2019: £8.1 million). We now have real critical mass
in this area, and continue to benefit from the
growing need for fiduciary management oversight
arising from the CMA review. We won several such
assignments, and expect further opportunities
as deadlines for mandatory reviews and
re-tenders approach.
Our Pensions Administration services business
performed strongly during the year, with a 47,000
increase in members under administration on the
back of some strong new client wins, many of
which were transitioned to XPS in the second half.
We anticipate continued growth, notably from first
time outsourcings of some large schemes and
transfers from some competitors who have
struggled with service standards in this area.
A number of projects in the area of GMP
rectification were held back across the market as a
whole by delays from HMRC in providing critical
information. This also impacted the progress our
clients could make in the area of GMP equalisation.
Delays with HMRC continue, however we expect
these projects to start progressing gradually
during the course of our 2020/21 financial year.
Our National Pensions Trust (‘NPT’) is one of only
38 regulated master trusts under the new
authorisation regime introduced by the Pensions
Regulator with the aim of materially reducing the
number of trusts in the market (from over 85) and
ensuring those remaining are of high quality.
Having guided NPT through the authorisation
process and overseen excellent growth in assets
under management, Dave Hodges is retiring, and
we thank him for his excellent stewardship. He
leaves the NPT in a strong shape, and we will
continue to invest in this growing part of the
market.
1. Excluding the impact of IFRS 16
XPS Pensions Group Annual Report 2020
11
“We are extremely proud of
how well our staff responded
to the Covid crisis, and the
way we have continued to
support our clients and their
scheme members highly
effectively throughout.”
Ben Bramhall
Co-Chief Executive
CO-CHIEF EXECUTIVES’ REVIEW
CONTINUED
Number of pension scheme clients
1,500+ +24%
2019: 1,200+
Adjusted diluted earnings per share
9.8p1
2019: 9.8p
We are pleased with the progress of our SIPP/SSAS business,
which performed solidly against a backdrop in which activity
in the SIPP market was affected by Brexit uncertainty,
particularly in relation to property transactions.
Favourable market trends
We are approaching potentially the largest overhaul of
pension funding regulations in more than a decade, as the
Government and the Pensions Regulator work to increase
protection for members of defined benefits pension schemes
in the wake of controversies at companies such as BHS and
Carillion. As trustees navigate the implications of regulatory
change, we will continue to work closely with our clients to
help them comply with new requirements and better protect
the interests of their members, and foresee ongoing activity in
this area.
A notable development in defined benefit schemes is the
trend for trustees to transfer assets and liabilities to pension
insurers. Last year was a record year for bulk annuity
transactions, which rose to £40bn, an increase of 100% over
the preceding two years. We can add a lot of value for clients
as a broker in these transactions and are investing in our
capability. The majority of transactions are ‘buy-ins’, where
only part of the scheme is transferred, so the residual scheme
continues to need the wider services of the type we offer.
Another significant issue faced by the majority of pension
schemes relates to the resolution of GMP equalisation. As
mentioned above, delays to receiving records from HMRC
have slowed activity across the industry, but once the
information is released there will be a significant amount of
work in this area.
Progress against our strategy
Our internal initiatives and positive external market trends
helped the performance of the Pensions Actuarial and
Consulting business to improve as the year progressed, and
we were pleased to see that this business returned to growth
in H2. Client retention remained strong and we won some
pleasing new mandates in H2 in this business, including some
large schemes and against our toughest competition. The
strong organic growth in Pensions Administration was
pleasing, especially as with the step up in activity we
maintained our high service standards for clients, and
Pensions Investment Consulting had another strong year.
Our organic growth was complemented by the completion of
two bolt-on acquisitions.
In May 2019 we acquired Royal London Corporate Pensions
Services, a provider of consulting and administration services
to defined benefit clients. This doubled our presence in the
city of Edinburgh.
We also doubled our headcount in Bristol at the end of 2019
with the acquisition of Trigon Professional Services, an
1. Excluding the impact of IFRS 16
12 XPS Pensions Group Annual Report 2020
owner-managed business providing actuarial, administration,
consultancy and investment advisory services. Around 40
people transferred to XPS, and we have already been able to
introduce XPS’ wider services to Trigon clients, including
actuarial services that Trigon previously outsourced.
Our primary focus remains driving organic growth against a
market backdrop that presents a great deal of opportunity.
We continue to scan the horizon for M&A opportunities,
where these would be a strategic addition to our capabilities
and align culturally with our organisation.
Satisfied stakeholders
Client retention remained high during the year. In a wide-
ranging survey of clients we undertook earlier in the year, 94%
expressed satisfaction with XPS, with around 80% saying they
were ‘very satisfied’ or ‘delighted’ with our work, which is
highly gratifying.
Our annual staff survey was also a source of positive feedback,
with 86% of colleagues positively agreeing that XPS is a good
place to work. Last year was the first full year following the
introduction of our new corporate values. Having worked hard
to embed these throughout the business, it is great to see our
values being lived every day. We recently introduced the XPS
Values in Practice (‘VIP’) programme, new annual awards for
people and teams to keep up the momentum around our
values and culture, a key focus for the Group.
Strengthened team
We have enhanced the strength of our teams across the
business through a combination of internal promotions and
the recruitment of high-calibre talent from outside the
organisation, including from Big 3 companies in our sector.
Ben Gold was promoted to head our Investment Consulting
practice, taking over from Patrick McCoy when he moved to
the new role of Head of Advisory (spanning both the pensions
and investment businesses). External hires included new
heads of investment consulting in our Manchester and
Edinburgh offices, and a very experienced consultant to
develop our bulk annuity advice offering. We are also pleased
to welcome Sophia Singleton, our new head of Defined
Contribution consulting, who joins XPS from Aon.
COVID-19 response
From the beginning of the COVID-19 crisis which started to
emerge in the final months of our financial year, ensuring the
health and safety of our employees has been our top priority,
and alongside that there has also been a strong focus on
ensuring we can continue to provide high-quality services to
our clients.
During February, we established a dedicated COVID-19
response team, comprising senior leaders from all business
divisions and central functions. This group oversaw a transition
to a model of almost entirely remote working, with processes
re-engineered and IT systems upgraded to enable this. This
operating model was tested and developed before the full
lockdown, and was put into full effect immediately after the
lockdown was implemented by the Government.
Following the transition to a remote working model, over 98%
of our 1,203 FTE employees have been working effectively
entirely at home, with only a small number of staff still
attending offices for essential tasks such as receiving post.
In Pensions Administration, the business unit that required the
most significant changes in its operating model, the business
continued to perform well. Our Service Level Agreements for
Strategic Report
Governance
Financial Statements
client tasks remained high, and all pension payrolls continued,
with clients and pension scheme members providing positive
feedback on our continuing high service levels.
In Pensions Actuarial & Consulting and Investment Consulting,
demand for our core services remained strong as we
supported clients navigating their way through very
challenging times for pension schemes. We delivered this
advice effectively through remote working and via online
meetings.
A significant focus for management throughout this time has
been the mental health and wellbeing of our staff. We have
put in place a number of initiatives in this regard, keeping
people connected formally and informally, and we have
provided additional online support and training. We have also
supported staff with regular updates of reassurance from the
executive management team which are cascaded throughout
the business.
We would like to thank our staff for their resilience, and we are
very proud of the ‘can do’ attitude our staff have shown in
looking after each other and our clients very well at this highly
unusual time.
Stable and resilient business
We continue to see attractive opportunities for growth in
consulting as large schemes gain confidence in appointing
mid-tier advisers, and in administration where service
standards in the industry are variable and the outsourcing
trend continues.
In terms of the potential impact of COVID-19, the Group’s
underlying business remains resilient. A significant proportion
of our revenues are non-discretionary and received for
essential services, with a high degree of visibility.
In the short term, we expect demand for our discretionary
services to continue as pension trustees seek advice and
support throughout the COVID-19 crisis. This is particularly the
case in the Pensions Investment Consulting division where we
advise clients on asset allocation decisions. However, some
short-term project revenues might decline as trustees and
corporates focus solely on COVID-19 and essential regulatory
tasks, deferring other discretionary projects until the country
recovers from the COVID-19 crisis.
We expect new business opportunities to slow as processes
are put on hold. Whilst we have seen some processes
proceed, with pitch meetings being held by video conference,
volumes are significantly lower than normal in the Pensions
Actuarial & Consulting business. We also expect an increased
number of schemes to enter the PPF as a result of the wider
economic downturn in the UK.
The Group’s strong financial position, coupled with our
well-established market position, means it remains well
positioned to weather the present crisis and to continue
driving growth and market share gains over the medium term,
against a favourable competitive and regulatory backdrop.
Paul Cuff
Co-Chief Executive
24 June 2020
Ben Bramhall
Co-Chief Executive
24 June 2020
Case study
Celebrating
our values
The country moved into lockdown during
the busiest period in the payroll tax year.
This is always a challenging time, where the
Payroll Team process almost 1,000 payrolls,
multiple pension increase files and tax
year-end. However, this year they also had
to incorporate remote working and the
various challenges which arose from that,
including devising new ways to digitally
manage paperwork and processes. The
team ensured that the pensioners were paid
accurately and on time and that all targets
were met by implementing new processes,
working longer hours, as well as weekends.
The team were nominated by a number of colleagues
for the Values in Practice (‘VIP’) awards for all 5 XPS
Values. They all worked well as a team, supporting
each other and going the extra mile to ensure
pensioners were paid on time.
“The pensioners have all been paid, hopefully reducing
some of the worries during the lockdown and providing
comfort that XPS can be relied upon to pay their
pension. The team have been ‘key workers’ in this
period - a lifeline to our pensioners. We are incredibly
proud of them.”
David Watkins
Managing Director of XPS Administration
XPS Pensions Group Annual Report 2020
13
BUSINESS MODEL
We create value through our
unique business model
Our focused model, combined with
our blend of scale and long-term
capital backing, is a source of
competitive advantage that
benefits all of our stakeholders.
What we do
We are a UK-focused specialist in
pensions actuarial and investment
consulting and administration, providing
a range of services and solutions to over
1,500 pension scheme clients. We also
operate a fully authorised defined
contribution master trust, the National
Pension Trust, and provide administration
to SIPPs.
Our 1,200+ people work from 15
locations around the UK.
Revenue split
Administration
34.12%
Investments
7.39%
Other
6.86%
Divisional revenue
Pensions Actuarial
and Consulting
51.63%
Pensions Actuarial and Consulting
Administration
Investment
National Pension Trust
SIPP
Year
ended
31 March
2020
£’000
58,802
42,945
9,551
2,393
6,062
Year
ended
31 March
2019
£’000
56,735
37,942
8,121
1,444
6,098
Total – Continuing operations
119,753
109,890
14 XPS Pensions Group Annual Report 2020
Who we work with
We work with pension scheme trustees,
sponsoring employers and pension
scheme members, with schemes ranging
in size from less than £20m in assets to
multi-billion pound pension funds.
How we earn revenue
We charge fixed fees for ongoing
administration and advisory services
combined with time-based fees for
consulting advice and one-off projects.
We work with clients on the basis of
open-ended engagement letters. Many
of the services we provide are essential,
non-discretionary requirements for UK
pension schemes, required on a
repeating basis to a statutory timetable.
As such, much of our revenue is
independent of the economic cycle.
88%1 of our revenues are recurring and
we have a loyal base of clients who have
worked with us over many years.
1 Revenue is defined as recurring if it was received from a
client that had been billed every month (or every quarter)
consecutively for the previous 12 months over the period to
31 March 2020. For won and lost clients the revenue is defined
as recurring if it meets the above criteria for the period they
were a client.
What sets us apart
• Pure focus on the UK pensions market
• Expert people and empowering culture
• Scalable, proprietary technology platform
• Longstanding client relationships
• Strong, award-winning brand
Strategic Report
Governance
Financial Statements
How we create value for
our stakeholders
Clients
• Specialist insight and expertise leading
to better outcomes
94% client satisfaction1
• Quality of service and efficiency
through our technology platform
• Value for money
1. Client survey
Employees
• Stimulating working environment and
attractive career prospects
Good place to work – 86% employee
satisfaction2
• First-class training and support towards
• Competitive remuneration and benefits
professional qualifications
2. Employee engagement survey
Shareholders
• Strong cash generation and dividends
Full year dividend FY 2020 6.6p
More than £30m paid in dividends since
listing in 2017
• Track record of growth
• Non-cyclical demand for services
Stakeholders
Communities:
• Employee involvement in fundraising
• Positive impact on communities by
and volunteering
supporting local charities
Regulators and suppliers:
• Establishing open and fair relationships
• Regular engagement and
communication
How we maximise value
Clear strategy
Read about our vision, strategic priorities
and performance on page 18-19
Seizing market opportunities
Read more about the market trends on
page 16-17
Robust risk management
Read about our principal risks and how
we manage them on page 32-35
Sound governance
Read about our Board of Directors and
corporate governance from page 50-57
Shared values
Read about the values that guide
how we operate on page 63
XPS Pensions Group Annual Report 2020
15
MARKET OVERVIEW
We are an award-winning,
high-quality firm
operating in an
evolving market
We are helpful
The regulatory landscape for our clients continues
to change and we are here to help
Large DB scheme market
• There are >5,400 defined benefit schemes in the UK, with
aggregate liabilities of £2 trillion.
• All of these schemes require core compliance services from
administrators and actuaries every year.
• There are 10.1 million DB scheme members in the UK private
sector, of which 58% are yet to retire.
• Benefit payments from DB schemes expected to increase to
a peak more than five years from now.
• The present value of DB scheme liabilities is expected to rise
for each of the next 10-20 years.
Source: The Purple Book, PPF, December 2019
An evolving regulatory environment for those
running DB schemes
A new code of practice for the funding of defined benefit
schemes is being introduced. It is part of the biggest overhaul
of the funding of DB schemes for 15 years.
This new regime will increase pressure on employers to
prioritise pension obligations.
Opportunities for XPS
Favourable regulatory and market environment
We will see increasing demand for advice on de-risking
schemes and long-term journey planning driven by the new
code of practice.
A requirement to improve benefits to make allowance for the
inequality between males and females in Guaranteed
Minimum Pensions (‘GMPs’) will create a large amount of work
across the pensions industry – delays at HMRC in providing
information are clearing and volumes of work are increasing.
The 2018 Competition and Markets Authority (‘CMA') review
into investment consulting recommended mandatory
tendering of certain fiduciary appointments and this is
continuing to drive opportunities.
Large competitors face possible conflicts and distraction from
corporate activity which drives opportunities for high-quality
mid-tier firms. XPS is well positioned to benefit as the
award-winning ‘Actuarial and Consulting Firm of the Year’.
Continued administration outsourcing
Many large pension schemes continue to receive
administration services from in-house teams within their
sponsoring employer. There is an ongoing trend for
companies to outsource scheme administration to third-party
specialists such as XPS, and our administration business
stands to grow strongly from this activity.
Some clients that have outsourced in the past are seeking to
switch provider in the search for improved service standards,
and this is giving rise to further opportunities for XPS.
The opportunity is driven by a strong reputation – XPS won
the ‘Pensions Administration Firm of the Year’ in the survey
of users of these services in 2019 (winning for the fifth time in
six years).
16 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Maturing Master Trust market
There is a strong trend in Defined Contribution (‘DC')
schemes toward Master Trusts. Many pension schemes still
do not offer access to pension flexibilities under freedom
and choice, and open market options are frequently
expensive and inappropriate for members. Master Trusts
provide a solution to this problem. The new regulatory
regime requiring master trusts to obtain authorisation before
they can operate has given rise to a material reduction in the
number of providers, from over 80 to 38 today.*
Source: * The Pensions Regulator 14 May 2020
National Pension Trust (‘NPT'), our defined contribution
master trust, is fully authorised. The master trust market is
expected to grow from £12 billion in AUM (2018) to over
£200 billion by 2025 and £340 billion by 2030.**
Source: ** Master Trust and GPP Defaults Report
April 2020 – Corporate Adviser
For more information on the progress we have made
in these markets during the year, please see the
Strategy section on page 19.
Assets in NPT, an increase of £185m
£649m
924,000
Number of members whose pensions
we administer
3
Net new actuarial and investment
consulting clients with over £500m
in assets
XPS Pensions Group Annual Report 2020
17
AMBITION AND STRATEGY
We are a forward-looking, ambitious business.
We aim to become the pre-eminent independent
mid-tier pensions consulting firm – the best place for
people to work, and the best partner for our clients.
Our objective is to become the clearly differentiated
alternative to the ‘Big 3’ providers of Mercer, Willis Towers
Watson and Aon – which may become the ‘Big 2’ after the
announced merger of Willis Towers Watson and Aon. We will
remain focused purely on the UK pensions market, operating
at scale and yet agile enough to provide clients with superior
service at better value than our larger rivals.
Our strategy remains focused on achieving profitable growth.
The biggest opportunities for us are:
• Expanding services to existing defined benefit clients
• Winning new logo clients
• Administration outsourcing
• Investment consulting
• The National Pension Trust
• Mergers and acquisitions
Our strategic priorities
Progress
We created a new ‘Pensions Solutions Group’
which produces research and ideas for
solutions that will add real value for clients.
This group enables us to deliver excellent
value-added services in a streamlined and
efficient way.
We significantly upgraded Radar this year
(Radar is our comprehensive user-friendly
web-based tool, which enables real-time
monitoring of funding levels and modelling of
scenarios). The addition of ‘journey planning’
functionality is ideal for advising clients on the
new funding regime.
We won 26 new clients during the year,
with a split across all of our core service
lines of actuarial and investment consulting
and administration.
We won appointments on very large schemes
(see page 14 for an example), where winning as
either legacy firm ( Xafinity or Punter Southall)
would have been difficult. We invested in our
people to support them in activity in this area,
rolling out a ‘Leadership Development Centre’
(‘LDC') for the development of all of our
senior team.
XPS Administration has a reputation as a
leader in this market. In a recent survey of
>320 pension managers and trustees, XPS
was rated the best third party administrator,
for the fifth time in six years.
Expanding services to defined
benefit clients
Clients need support in de-risking
their defined benefit schemes. This
can be on the liability side, through
bulk member exercises, and on the
asset side, where we advise on
strategies as schemes mature and
funding levels change.
We are on the cusp of potentially the
biggest overhaul of defined benefit
funding regulations for 15 years, and
our clients will need a great deal of
support to navigate their way
through this.
GMP Equalisation continues to be on
the agenda for many clients.
Growth through winning new clients
We intend to grow by targeting new
clients, by providing innovative and
differentiated solutions at better value
for money than our competitors.
We anticipate that disruption from
corporate activity at some of our
large competitors could create
opportunities over time.
Growth through administration
outsourcing
There has been a continuing trend in
the pensions market for large
schemes to outsource administration
where it was previously done
in-house.
Our administration business has won
a number of large clients in recent
years and we aim to continue to grow
in this market.
18 XPS Pensions Group Annual Report 2020
Priorities for the year ahead
We aim to grow in this area by:
• Proactively supporting clients
through the changes in the funding
regulations;
• Continuing to bring wider solutions
to clients in a systematic way, using
Radar to demonstrate the value
that we can add;
• Delivering large transformation
projects that flow from this
demonstration of value; and
• Delivering a large number of
GMP equalisation projects in a
cost-effective efficient manner.
We aim to win new clients by:
• Exploiting the strong brand position
that XPS now has in the market,
building on the momentum that
winning industry awards in 2019
brings us.
• Systematically categorising and
pursuing external opportunities,
with our senior team empowered to
do so ever more effectively through
the LDC and follow-up activity.
We aim to grow this area by:
• Continuing to publicise the
achievements and capability of XPS
Administration, in a market where
service standards elsewhere are not
always as high as they should be.
• We will pursue opportunities in the
public sector, a new opportunity for
us, following the still relatively
recent acquisition of the Kier
Pensions Unit.
Strategic Report
Governance
Financial Statements
Our strategic priorities
Progress
Growth through investment
consulting
The CMA review into the investment
consulting market continues to
present a large opportunity for us.
We have opportunities to win
appointments in a fiduciary manager
oversight role, and this in turn
frequently leads to wider
opportunities.
We appointed a new Head of our Investment
Consulting business, Ben Gold, to succeed
Patrick McCoy who took a wider role across
our Advisory business, encompassing Pensions
Actuarial and Consulting and Pensions
Investment Consulting.
The Investment Consulting business had a very
successful year, growing at 18%. We won 13
fiduciary oversight appointments in the year,
and 23 new clients where we provide a wide
range of services.
Radar functionality improvements have also
supported growth.
Priorities for the year ahead
We aim to win new clients by
providing a service that is the antidote
to the problems identified by the
CMA.
We will deliver clear, independent
pragmatic advice, supported by
cutting edge technology. We will
bring razor-sharp execution. We will
be the investment advisers that make
things happen.
Growth through the National
Pension Trust (‘NPT')
NPT is a defined contribution vehicle
that offers members full access to
pensions flexibilities under freedom
and choice.
This market is expected to grow
significantly in future (from £12 billion
(2018) to £200 billion, in 2025
according to research – read more
in the Market Review section on
page 16).
Growth through mergers and
acquisitions
The mid-tier section of the pensions
consulting market remains highly
fragmented and ripe for consolidation.
We will continue to review
opportunities should they arise.
‘Bolt-on’ acquisitions of small
businesses that enhance our strategic
capability are also a core part of our
strategy.
NPT achieved the significant milestone during
the year of formal authorisation from the
Pensions Regulator.
We will focus on the use of NPT as
either:
• An employer’s main defined
contribution arrangement into
which contributions are paid, or
a ‘de-cumulation’ vehicle to sit
alongside an employer’s existing
arrangement where the employer’s
own arrangement does not offer
the full range of flexibilities; and
• A vehicle to receive transfers in
respect of individuals who wish to
transfer from a DB pension scheme.
There is an increasingly pressing
need for a ‘safe solution’ in this area.
We will continue to appraise M&A
opportunities during the year.
NPT had a strong year in terms of
performance, growing assets under
management by 40% to £649m. This figure
reflects the market falls caused by the
COVID-19 crisis; growth was around 15% higher
prior to this.
We completed two bolt-on acquisitions during
the year and both have been integrated into
the Group successfully.
The acquisition of the Royal London Corporate
Pensions Services brings us expertise in
serving small schemes – we anticipate these
schemes will benefit from wider XPS solutions
in the future. It also boosted our presence in
Edinburgh, doubling it to c. 70 people, which is
critical mass in an important market.
We also acquired Trigon Pensions, an
owner-managed pensions consulting and
administration firm in Bristol. This acquisition
brings the opportunity to increase the range of
services provided to Trigon clients. It also
doubles our presence in Bristol, again creating
critical mass.
XPS Pensions Group Annual Report 2020
19
STRATEGIC PRIORITY:
EXPANDING SERVICES TO
DEFINED BENEFIT CLIENTS
We give employers and trustees
real-time insight into the status of
their pension schemes, the drivers
of this and, crucially, help with
decisions about how to move
forward.
Enhancing client service
through innovation
Radar
Our proprietary modelling software, Radar, has been in
use for over two years, but it does not stand still. We
continually invest to upgrade its capabilities for us to be
able to serve clients more effectively.
This year we released a substantial upgrade, with the
addition of a ‘Journey Planning’ module. This enables
clients to model the future of their defined benefit
scheme into the future, looking at almost limitless
combinations of future scenarios to help them appraise
actions they can take to control cost and risk.
This upgrade is very much of its time. Our clients are
working through the biggest change in the regulatory
regime around the funding of defined benefit schemes,
and the new functionality improves the quality of the
conversations about how clients should respond.
We were delighted when Radar won the Actuarial Post’s
award as ‘Software of the Year’ in November 2019.
How this relates
to our values
We are
ambitious
We are
agile
We are
experts
20 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
“ Radar has been impressive,
this has helped enormously
with the valuation and
investment strategy. Fantastic
having immediate modelling
capabilities in our meetings
to address the ‘what if’
questions.”
John Smith – Chair of Trustees of
the Greene King Pension Scheme
XPS Pensions Group Annual Report 2020
21
STRATEGIC PRIORITY:
GROWTH THROUGH MERGERS
AND ACQUISITIONS
A core part of our strategy is for
growth through ‘bolt-on’ acquisitions
of businesses that can add to the
capability of the Group.
Building capabilities
through acquisition
Our strategy drives our business forward
We completed two such deals this year. First, in May 2019,
we acquired the corporate pensions business of Royal
London. This team of around 40 people based in Edinburgh
has deep expertise in serving very small defined benefit
schemes. We believe small schemes increasingly need access
to solutions that previously only large schemes had access to,
and we will be able to bring such solutions to these clients.
In October 2019, we also acquired Trigon, an owner-managed
pensions consulting and administration business in Bristol,
also with around 40 staff. Similarly, we believe that the range
of services and technology that XPS can offer will benefit the
clients of Trigon, noting particularly that Trigon has not
employed its own actuaries in recent years but instead
outsourced this work.
Both of these acquisitions doubled the size of our presence in
the cities where the businesses are located – we now have
real critical mass in important markets in Edinburgh and the
South West of England.
Edinburgh employees
66
22 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Bristol employees
72
“As we had hoped, XPS has
proven to be the perfect partner
for the Trigon business and,
since our acquisition, our clients
have not only benefitted from a
significantly enhanced and
highly professional range of
services but also from the
continuity of the personalised
and tailored approach that we
are able to offer. It has also
provided all of our staff with
the ideal opportunity to
develop their careers in a
very progressive and
supportive environment.”
David Gascoigne
Managing Director
How this relates
to our values
We are
ambitious
We are
agile
We are
experts
XPS Pensions Group Annual Report 2020
23
LEADING THE INDUSTRY
We first introduced our scam
identification service five years ago
as a direct response to concerns
from our clients about the
increasing risks to their members.
Leading the industry
through our pension
scam identification
service
Our service uses a short telephone call with the member
to help flush out the ‘Red-Flag’ warnings that are
indicative of fraudulent activity. The call is in addition
to standard due diligence, and recognises that such
Red-Flags are frequently not evident in a member’s
completed paperwork, often as a result of the scammer
taking control of this.
The service has repeatedly identified Red-Flags that
otherwise would have been missed, in up to 1-in-3
cases last year. It has been so successful that it has now
been incorporated into the industry’s Code of Good
Practice on preventing pension scams, so represents
best practice.
Although initially rolled out to schemes administered by
XPS, the service has steadily grown and now provides
protection to members of other schemes where the
third-party administrators or in-house teams are unable,
or unwilling, to provide such a service themselves. On
average, scammed members lose £91,000 of their
pension savings which can have a devastating impact
on their later life. Since the inception of our Pension
Scam Identification Service it has helped to protect
almost £1 billion of retirement savings.
As scams have changed and evolved, so too has our
service to protect members.
How this relates
to our values
We are
helpful
We are
experts
We do the
right thing
24 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Leading the industry
through our pension
scam identification
service
£1bn
of retirement savings
protected to date
Predators stalk
your pension
Our industry-leading pension
scam identification service
continues to offer a unique
service to schemes, adding
an extra layer of protection
between scheme members
and the ever increasing threat
of being scammed out of
their retirement savings.
“We have been using XPS’s
Pensions Scam Identification
Service for several years
now. In the current climate
of temptingly large transfer
values it really give us
confidence that we are
doing all we can to protect
our members from the
ever growing risk of
pension scams.”
Neil Walker
Chair of Trustees
MGM Assurance Staff Pension Plan
XPS Pensions Group Annual Report 2020
25
OUR CULTURE AND VALUES
Our culture is embedded in our
interactions with all of our
stakeholders, whose interests shape
our decision-making and business
model, and are vital to our ongoing
ability to achieve our goals.
Driving performance
through culture
Our values make us one team
We introduced our corporate values in January 2019, and
have worked hard on embedding them in everything we do.
They guide the decisions we make, big and small, on a daily
basis. They are at the heart of our performance management
and promotion processes.
Early in 2020, we introduced our ‘Values in Practice Awards’
(or ’VIP for short’). The VIP awards celebrate our staff who
truly exemplify our values. We invited nominations from staff,
and a panel drawn from all areas of the firm was convened to
judge the overall winners. With almost 90 nominations
submitted, with so many stories of people
going the extra mile for their colleagues and
staff, this was not an easy task. We shared
the stories of the winners – what they did,
and what difference it made – all around
the firm.
How this relates
to our values
Our culture, driven by our values, has yielded
benefits for our staff and clients alike. Our
core values of agility, helpfulness and always
doing the right thing were at the heart of our
successful response to the challenges posed
by the COVID-19 crisis.
We are
ambitious
We are
agile
We are
helpful
We are
experts
We do the
right thing
26 XPS Pensions Group Annual Report 2020
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Governance
Financial Statements
86%
of our staff say they think
XPS is a good company
to work for
“The support from the team has been
exceptional. They remained calm and focused
under what was a highly pressured situation,
worked very long hours, been supportive, have
listened to and understood the difficulties we
faced whilst also remaining available, responsive
and in good spirits throughout.”
Alan Wilkes
Head of Pensions - Wokingham
XPS Pensions Group Annual Report 2020
27
FINANCIAL REVIEW
A year of operational and financial progress
Group revenues +9%
It was another strong year of growth for the business, delivering 9% year on year growth in revenues and a 23%
increase in adjusted operating cash-flow (excluding the impact of IFRS 16). Furthermore, the year saw completion
of the integration of the acquired Punter Southall (‘PS') businesses early in the year and we are now off the
Transitional Services Agreement (‘TSA') for all support functions which has created a strong, scalable platform for
growth. We also completed two bolt-on acquisitions in the year – RL Corporate Pensions Services Limited and
Trigon Professional Services Limited – which contributed to growth as well as expanding the reach and capability
of the business and we have had a number of significant new client wins across the Group and have the right level
of resources in place to continue growing the business.
Significant accounting matters
IFRS 16
The Group has adopted IFRS 16 from 1 April 2019 but has adopted the modified retrospective transition method
and not restated the FY 2019 comparatives. IFRS 16 has no impact on the overall cash position of the Group. It
does, however, have an impact on the way that assets and liabilities and the income statement are presented for
the Group and the classification of cash flows. For more information on the impact of IFRS 16 see note 1.
Adjusted numbers
We continue to show ‘adjusted’ numbers in our results. The ‘adjusted’ concept ignores exceptional and non-
trading items such as the amortisation of acquired intangible assets as well as share-based payment costs.
The exceptional and non-trading items are disclosed in the notes to the financial statements. This alternative
performance measure may not be similar to those defined by other entities.
Group income statement
Revenue
Pensions Actuarial & Consulting
Pensions Administration
Pensions Investment Consulting
Total Pensions Revenue
SIPP
NPT
Total Revenue
Adj. EBITDA (1)
Depreciation and amortisation
Adj. EBIT (1)
Exceptional and non-trading items
Profit before interest and tax
Net finance expense
Profit before tax
Income tax expense
Profit after tax
FY 2020
£m
As reported
IFRS 16 adj.
£m
FY 2020
£m
Pre IFRS 16
FY 2019
£m
Change
%
Pre IFRS 16
58.8
42.9
9.6
111.3
6.1
2.4
119.8
30.4
(4.2)
26.2
(12.8)
13.4
(2.3)
11.1
(3.7)
7.4
58.8
42.9
9.6
111.3
6.1
2.4
119.8
27.9
(1.7)
26.2
(12.8)
13.4
(2.0)
11.4
(3.8)
7.6
56.8
37.5
8.1
102.4
6.1
1.4
109.9
27.4
(1.4)
26.0
(12.9)
13.1
(1.7)
11.4
(1.0)
10.4
4%
14%
19%
9%
–
71%
9%
2%
21%
1%
1%
2%
(18%)
–
n/a
(27%)
(2.5)
2.5
–
–
0.3
0.3
(0.1)
0.2
1. Adjusted measures exclude the impact of exceptional and non-trading items: acquisition-related amortisation, share-based payments,
corporate transaction costs, restructuring costs and other items considered exceptional by virtue of nature, size and incidence.
2. The Group has adopted IFRS 16 – Leases from 1 April 2019 and has not restated the prior year comparatives permitted under the
modified retrospective transition method.
28 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Revenue
Total Group revenues grew 9% year on year with the
bolt-on acquisitions of RL Corporate Pensions Services
Limited on 31 May 2019 and Trigon Professional
Services Limited on 31 October 2019 contributing 4%
of the growth.
Pensions Actuarial and Consulting is the Group’s
largest business. Excluding the impact of the bolt-on
acquisitions, the division’s revenues were modestly
down 0.7% year on year, however delivered 1% year on
year growth in the second half of the year.
Pensions Administration revenues grew 14% year on
year with a number of new client wins coming on
stream during the year as well as the two bolt-on
acquisitions. Excluding the acquisitions, revenues grew
11% year on year. Pensions Administration accounted
for 36% of the Group revenues (FY 2019: 34%).
Pensions Investment had another strong year with a
number of new client mandates. The majority of the
19% year on year growth was from existing or new
client wins. The Trigon acquisition contributed 2% of
the revenue growth.
SIPP revenues were flat year on year, impacted by
lower new SIPP sales due to Brexit uncertainty and
reduced commission on bank deposits due to cash
withdrawals from Metro Bank. NPT revenues grew 71%
with assets under management growing by £185
million in the year.
Operating costs
Total operating costs (excluding exceptional and
non-trading items) for the Group grew by 11% or £9.4
million year on year. Excluding the impact of the
bolt-on acquisitions, costs grew by 8% or £6.4 million
year on year. In FY 2019, the Group was operating
under the PS TSA which was heavily discounted, and
c. £2 million of the step up in the cost base is as a result
of operating independently of the TSA. The other main
reasons for the cost increases are a higher number of
employees (1,141 vs 1,088) excluding the acquisitions
and higher IT infrastructure costs following the
migration off the TSA and on boarding new clients,
particularly in the Pensions Administration division.
As a result, the Group’s adjusted EBITDA grew by 2%
year on year. Normalising for the £2 million discount in
the TSA in the prior year, adjusted EBITDA margin was
23%; flat YoY.
Bolt-on acquisitions
RL Corporate Pensions Services Limited
The Group acquired the entire issued share capital of
RL Corporate Pension Services Limited (‘RLCPS') from
The Royal London Mutual Insurance Society Limited
(‘Royal London’) for a cash consideration of £4.8
million.
The acquisition created intangible assets of £3.0
million, which will be amortised over ten years.
The operating results of the acquired business are
included in the income statement for the period 1 June
2019 to 31 March 2020 and amount to revenue of
£3.1 million and contribution of £1.1 million.
Trigon Professional Services Limited
On 31 October 2019, the Group acquired 100% of the
share capital of Trigon Professional Services Limited
from Trigon Pensions Holdings Limited for a total
consideration of £3.9 million, comprising of £2.8 million
in cash upon completion, and contingent cash
consideration of up to £1.1 million (currently recorded
at £0.8 million in the Statement of Financial Position).
The acquisition created intangible assets of
£2.2 million, which will be amortised over ten years.
The operating results of the acquired business are
included in the income statement for the period
1 November 2019 to 31 March 2020 and amount to
revenue of £1.0 million and contribution of £0.1 million.
Exceptional and non-trading items
Exceptional and non-trading items in the year totalled
£12.8 million (FY 2019: £12.9 million). Amortisation of
acquired intangible assets amounted to £7.1 million (FY
2019: £11.7 million). Share-based payment charges were
£2.2 million (FY 2019: £4.0 million). Restructuring costs
of £1.9 million (FY 2019: £3.1 million), corporate
transaction costs of £0.9 million (FY 2019: £0.7 million)
and other exceptional costs of £0.7 million (FY 2019:
£6.6 million credit) were also incurred in the year.
Tax credit on the exceptional and non-trading items
was £0.1 million (FY 2019: £3.2 million).
See note 6 in the financial statements for further
information on the items detailed above.
XPS Pensions Group Annual Report 2020
29
FINANCIAL REVIEW CONTINUED
Net finance costs
Net finance costs (pre IFRS 16) for the year were £2.0
million (FY 2019: £1.7 million). The increase reflected
the higher net debt in the year.
Taxation
A tax charge of £3.8 million (FY 2019: £4.2 million) was
recognised on adjusted profits (before exceptional and
non-trading items and the impact of IFRS 16) which
represents an effective tax rate of 16% (FY 2019: 17%).
The Group also recognised a tax credit of £0.1 million
(FY 2019: £4.2 million) on exceptional and non-trading
items, which resulted in an overall tax charge for the
year of £3.7 million (FY 2019: £1.0 million).
Our businesses generate considerable tax revenue for
the Government in the UK. For the year ended
31 March 2020, we paid corporation tax of £3.5 million
(FY 2019: £3.9 million); we collected employment taxes
of £19.7 million (FY 2019: £15.1 million) and VAT of £16.5
million (FY 2019: £15.8 million). Additionally, we have
paid £1.1 million (FY 2019: £1.0 million) in business rates.
The total tax contribution of the Group was therefore
£40.8 million (FY 2019: £35.8 million).
Cash flow, capital expenditure and financing
Non-GAAP cash-flow
Operating
Adjusted EBITDA
Change in net working capital
Other
Adjusted operating cash-flow
OCF conversion
Financing and tax
Net finance expense
Taxes paid
Proceeds from new loans (net of repayments)
Repayment of lease liabilities
Proceeds from issue of shares
Net cash-flow after financing
Investing
Acquisition (net of cash acquired)
Disposals
Capex
Restricted cash (NPT)
Net cash-flow after investing
Dividends paid
Exceptional items
Movement in cash
Net debt
Leverage
30 XPS Pensions Group Annual Report 2020
EPS
The Basic EPS for FY 2020 is 3.6p (FY 2019: 5.7p). The
year on year decline is mainly due to a £3.2 million tax
credit on exceptional and non-trading items in FY 2019
which reduced the overall tax charge to £1.0 million.
The tax credit is only £0.1 million in FY 2020 due to an
increase in the enacted tax rate from 17% to 19% and
the related revaluation of deferred tax liabilities on the
Group’s intangible assets.
Adjusted fully diluted EPS of 9.8p (excluding the
impact of IFRS 16) was delivered in FY 2020 (FY 2019:
9.8p).
Dividend
A final dividend of 4.3p is being proposed by the Board
(FY 2019: 4.3p). The final dividend, if approved, which
amounts to £8.8 million (FY 2019: £8.8 million), will be
paid on 24 September 2020 to those shareholders on
the register on 28 August 2020.
31 March 2020
Incl. IFRS 16
£m
31 March 2020
Excl. IFRS 16
£m
31 March 2019
Excl. IFRS 16
£m
30.4
0.6
(0.1)
30.9
102%
(1.8)
(3.5)
13.3
(2.0)
0.3
37.2
(7.5)
0.4
(3.4)
(0.3)
26.4
(13.4)
(4.1)
8.9
56.1
1.98x
27.9
0.9
(0.1)
28.7
103%
(1.6)
(3.5)
13.3
–
0.3
37.2
(7.5)
0.4
(3.4)
(0.3)
26.4
(13.4)
(4.1)
8.9
56.1
1.98x
27.4
(3.2)
(0.9)
23.3
85%
(1.7)
(3.9)
1.5
–
2.0
21.2
(4.9)
0.6
(2.6)
(1.0)
13.3
(13.2)
(4.0)
(3.9)
51.7
1.79x
Strategic Report
Governance
Financial Statements
Cash-flow including the impact of IFRS 16, shows that
operating cash flow increased by £7.6 million year on
year, primarily driven by higher EBITDA resulting from
the adoption of IFRS 16 and a positive swing in the
working capital. Other components that differ from the
pre-IFRS 16 cash flow are the net finance expense
which includes £0.2 million of lease finance expense
and repayment of lease liabilities of £2.0 million.
The like-for-like cash flow is pre IFRS 16. This shows the
adjusted operating cash flow increased by £5.4 million
driven by a £0.5 million increase in EBITDA and a £4.1
million increase in net working capital. Other items
were an outflow of £0.1 million compared to an outflow
of £0.9 million in FY 2019. Overall, this resulted in
adjusted operating cash flow conversion of 103%
compared to 85% in the prior year.
Net finance expense paid in the year was lower than
the income statement charge, largely due to accrued
interest for the fourth quarter being payable in June.
Taxes paid in the year were £0.4 million lower due to a
current year tax credit in relation to the prior year.
During the year, the Group drew down £13.3 million of
the RCF. A total of £7.6 million was paid in the year for
the acquisitions of RL Corporate Pension Services
Limited and Trigon Professional Services Limited.
Capital expenditure in the year amounted to £3.4
million (FY 2019: £2.6 million) with £1.5 million spent on
leasehold improvements and office fit-outs and the
remaining £1.9 million on IT equipment and software
enhancements.
After paying £13.4 million in dividends and £4.1 million
of exceptional costs, the Group cash balance increased
by £8.9 million year on year to close at £14.4 million.
The Group had drawn down £70.5 million of its £80
million revolving credit facility (‘RCF') at 31 March
2020, resulting in a net debt of £56.1 million, an
increase of £4.4 million year on year, driven primarily
by the £7.5 million spent on the two bolt-on
acquisitions net of cash acquired.
The existing revolving credit facility of £80 million with
HSBC and Bank of Ireland matures in December 2022.
In addition, the Group has agreed an amendment to its
revolving credit facility with its lending banks, which
provides the Group with greater financial flexibility and
increased liquidity in the form of an additional RCF of
£10 million available for a period of 12 months from
June 2020 to navigate the potential challenges posed
by the COVID-19 crisis.
Going concern
Details on the Directors continuing to adopt the going
concern basis in preparing the Financial Statements
can be found in the Viability Statement on page 35.
The Directors have confirmed that, after due
consideration, they have a reasonable expectation that
the Company and the Group have adequate resources
to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the
going concern basis in preparing the financial
statements.
Subsidiary undertakings
The subsidiary undertakings of the Group in the year
are listed in note 36 of the financial statements in the
Annual Report.
Snehal Shah
Chief Financial Officer
24 June 2020
XPS Pensions Group Annual Report 2020
31
PRINCIPAL RISKS AND UNCERTAINTIES
Managing
risk effectively
The Group recognises the need to
take risk to help its customers achieve
their objectives and achieve
commercial success – seeking to take
risk where it has the skills to exploit
that risk and can manage it within risk
tolerance. It avoids risk where it sees it
as unrewarded or it cannot be well
managed or understood.
Risk Management Framework
Board of Directors/Audit & Risk Committee
Senior Management/Risk Management Committee
Operational
Management
1st Line
Risk
Management
2nd Line
Internal
Audit
3rd Line
• Implement
governance, risk and
control frameworks
• Measure and manage
• Manage risk (within
project performance
agreed risk appetite)
• Design governance,
risk and control
framework
• Monitor adherence
• Provide timely,
to framework
balanced information
• Review framework
• Offer independent
application objectively
oversight of 1st and
2nd Lines
Control of Risks
Confirmation of
Control Effectiveness
Strategic Overview
of Controls
s
e
i
t
i
v
i
t
c
A
y
e
K
s
e
m
o
c
t
u
O
Over the last year we have continued to
develop our risk management
capabilities to improve our ability to
detect, understand and manage our
risks. Significant developments since
the last report include:
• The reorganisation of risk resources
across the Group into a single Group
level function, supporting all
businesses.
• The roll-out of standard risk reports
for the business, highlighting risks
outside of appetite and action plans
underway to manage.
• The introduction of an Executive level
Risk Management Committee to
monitor risks and the effectiveness of
the overall Risk Management
Framework.
• The formalisation of root cause
analysis techniques to review
incidents, agree and implement
control enhancements and ensure
that lessons learnt are considered
across the Group.
• The creation of a dedicated
Information Security team, including
a 24/7 Security Operations Centre
capability.
• Enhancements in the frameworks
used to manage key risks, i.e.
Information Security, Business
Continuity and Third Party
Assurance.
The Group continues to operate a
‘three lines of defence’ model which
supports the promotion of effective risk
management and seeks to prevent
risk-taking that exceeds the Group’s
appetite.
32 XPS Pensions Group Annual Report 2020
32 XPS Pensions Group Annual Report 2020
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Strategic Report
Governance
Governance
Financial Statements
Financial Statements
The Board, with the support of the Audit & Risk Committee, has identified the principal risks that could materially impact the
Group’s ability to achieve its objectives and deliver its strategy.
These include general business risks that are faced by the Group and are comparable to those that would be faced by similar
businesses operating in the pensions sector. These general business risks include:
• Political, Economic and Social – Risks created by the political, economic/financial and social environment in which we operate,
e.g. war, demographic trends, pandemics, Government influence on business, currency changes, market volatility, interest
rates, liquidity.
• Competition – Risks of change on demand side of business due to changes in customer demands or competitors, likely to
influence entire industry e.g. aggressive competitor pricing, consolidation trends, major technological innovation, substitute
technologies. These changes may not directly affect the Group but could influence the entire industry.
• Legal and Regulatory – Risks associated with the criminal and civil judicial processes and contract law e.g. not identifying
changes required by new legislation, increased litigation in a particular field, environmental impacts, industrial accidents.
The material risks and uncertainties which are either unique to the Group or apply to the pensions industry in which we operate
are detailed below. They are not set out in any priority order, nor do they include all those associated with the Group. Specific
risks that are material to XPS Group are:
The Principal Risks
Principal Risk
Description
Key Mitigations
Strategy
Risks linked to the assumptions of future
development and size of pensions market used
to develop the strategy or business model or
business portfolio, e.g. poor data, group think,
lack of diversity of opinions.
Strategic
Planning
and
Execution
Risks linked to assessing, evaluating, planning
and executing the strategy, e.g. poor budgeting
and planning, inadequate or misleading
communications, poor management of change
or projects.
The Board approves and regularly reviews the Group’s
strategy in conjunction with budgets, targeting long-term
increases in shareholder value and ensuring robust
independent challenge.
Key decisions are assessed against risk appetites for key
Group risks with a Risk Management framework in place to
identify and escalate where strategic decisions may have
unintended impacts.
The Board regularly reviews the Group’s strategy,
supported by the Executive, with responsibilities assigned
for the delivery of initiatives and provision of regular
progress updates.
Specific project management resources are used to deliver
large scale change initiatives, allowing risks to delivery of
initiatives to be clearly identified at planning stage along
with mitigations.
Errors
Risks relating to material mistakes made by staff,
including the non-compliance with established
procedures, e.g. failure to calculate benefits
correctly, not following peer review processes.
The Group recruitment process ensures only high-calibre
staff are recruited who are then supported by training
programmes, standardised documented processes and
checklists for key processes.
Theft and
Fraud
(Financial,
Physical
Assets)
Risks relating to the safeguarding of Group and
client financial and physical assets from
malicious actors e.g. stealing physical assets,
deliberate misrepresentation leading to fraud,
theft from Group or client bank accounts.
Higher risk work is identified with peer review and
additional sign off required, with regular quality audits to
confirm processes are being followed correctly.
Insurance arrangements are in place to limit the loss should
an error occur, with root cause analysis used to identify
where controls can be improved.
The Group deploys robust physical and systems access
controls, along with enforcing segregation of duties to
prevent individuals from making fraudulent payments
or transfers.
These controls are supported with staff training and
awareness and are regularly independently audited.
Insurance arrangements are in place to protect against
larger claims.
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
33
33
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
The Principal Risks
Principal Risk
Description
Key Mitigations
Information/
Cyber
Security
Risks relating to the confidentiality, integrity and
availability of information assets including IT
systems, e.g. unauthorised access or disclosure
of staff or client information, denial of access to
systems or data required, business continuity
incidents caused by equipment breakdown, fire
or flood.
Staff/Human
Resources
Risks relating to our people, e.g. compensation,
retention, succession planning, skills and
competence, management capability.
Third Party
Supplier/
Outsourcing
Risks relating to the use of third parties to
support our operations, e.g. poor due diligence
and selection processes, failure of a supplier to
follow agreed upon procedures, financial failure
of supplier resulting in inability to deliver service.
Client
Engagement
Risks relating to the provision of poor service or
advice to clients, e.g. advice that is not clear, not
understood by the client, poorly presented or
using out of date technologies, but not errors.
The Group has an Information Security Management
System (‘ISMS') in place to ensure that risks are identified
and managed effectively. This includes a range of technical
controls, a dedicated Information Security Team, and a 24/7
Security Operations Centre. These are supported by regular
independent audits and penetration tests.
All staff are provided with comprehensive policies and
guidance, with awareness of key topics reinforced with
regular training initiatives, e.g. phishing awareness.
The Group has a range of business continuity capabilities in
place to minimise impact of incidents impacting the Group’s
data, facilities or systems. These include documented plans
which are tested regularly.
The Group’s recruitment strategy is to seek professional,
experienced and qualified staff utilising robust staff
recruitment and selection processes. This is supported by
comprehensive training, development and performance
management processes, with longer term incentives in
place to aid retention.
Regular key staff reviews ensure succession planning is kept
up to date and remains appropriate.
Staffing requirements are considered as part of strategy and
budgeting process to ensure alignment with business plans.
The Group has a formal selection process that ensures due
diligence is carried out, which is proportionate to the risk of
the potential failure of the third party.
The approvals and signing framework also ensures contracts
include key risks relating to services provided and risks
identified are managed and accepted prior to agreements
being signed. This is supported by ongoing monitoring of
key third parties, including SLAs and financial status.
Where there is a reliance on a single supplier, contingency
plans are in place to protect against failure.
The Group client engagement process ensures that
expectations are matched to Group capabilities. Regular
ongoing dialogue with clients ensures that the services
provided meet their requirements and continue to be
appropriate to their specific needs.
Client surveys are used to gather feedback and identify
trends and insights.
Business
Conduct and
Reputation
Risks
Risks that could lead to a breach of acceptable
conduct or ethics and/or impact the Group’s
brand, image or reputation, failure to ensure
services are appropriate for client’s needs,
discrimination, poor response to a Cyber
Incident or client complaint.
The Group’s Mission, Vision and Values clearly set out the
tone from the top, highlighting to all staff the conduct and
ethics that are expected of them at all times. This is
supported by a recruitment strategy that seeks
professional, experienced and qualified staff who fit with
Groups values.
Due diligence of third parties considers supply chain risks,
ensuring that only suppliers that comply with their legal
obligations are selected.
The Group has an Incident Management processes in place
to ensure that it is able to effectively respond to significant
events that could impact its brand or reputation, which is
regularly tested.
34 XPS Pensions Group Annual Report 2020
34 XPS Pensions Group Annual Report 2020
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Pandemic Risk – COVID 19 – This is an emerging risk that the
Group is exposed to due to the potential interruption of
operations because of the absence of significant numbers of
staff or falls in general economic activity. The Group’s
operational resilience has been retained during the current
epidemic, utilising its existing business continuity framework
to rapidly roll out the ability for staff to work from home. To
date, the Group has not identified any significant impact on
staff or activity levels and is managing this emerging risk and
its impact via the COVID-19 Response team; comprising senior
leaders from all business divisions and central functions.
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Group, including
those that would threaten its business model, future
performance, solvency or liquidity. The principal risks are
those listed above.
The Directors confirm in the Directors’ Responsibility
Statement in the Annual Report that they consider that the
Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s position, performance,
business model and strategy. This Report has been approved
by the Board and signed by order of the Board:
Paul Cuff
Co-Chief Executive
24 June 2020
Ben Bramhall
Co-Chief Executive
24 June 2020
Viability Statement
The Group’s business activities, together with the factors likely to affect its future development, performance and position are
set out in the reports referred to in the Overview section on page 97 of this Directors’ Report.
The Directors have assessed the long-term prospects of the Group based upon business plans and upon cash flow projections
for the three-year period ending 31 March 2023. The three-year period was chosen as it is considered the longest time frame
over which any reasonable view can be formed. The forecasts and cash flow projections being used to assess going concern
have been comprehensively stress-tested by using simulation techniques involving sensitivity analysis. It should be noted that
the Group has limited forward visibility and consequently there is a high degree of uncertainty in respect of future outcomes.
In forming their opinion, the Directors have performed a robust assessment of the principal risks and uncertainties facing the
Group as set out on pages 32 to 35. In addition, Note 2 on page 122 of the accounts includes the Group’s objectives, policies and
processes for managing its capital; its financial risk management objectives and its exposure to credit risk, liquidity risk and
market risk. The Directors have also considered what impact Brexit may have on the Group, and have concluded that it is not
expected to have a significant impact on the Group’s activities.
The Group had £14 million of cash at 31 March 2020 and a £80 million committed financing facility until December 2022.
Further details of the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described
within the Financial Statements and notes.
As a part of the scenario modelling outlined above, the Directors have also considered the impact of COVID-19 on the liquidity
of the Group and the Group’s banking covenants. The Directors have been in discussion with their bankers and have agreed
terms to relax the banking covenants applicable to the Group for a period of time, and additionally, further lending is available if
the Group requires additional funds.
The Group has a strong balance sheet, access to financial resources and long-term growth prospects. As a consequence, the
Directors believe that the Group is well placed to manage its business risks successfully.
Even in the worst case scenarios considered plausible by the Directors, the cost reduction actions available to the Group, the
reduction of non-essential capital expenditure and management of working capital are expected to be effective and sufficient to
ensure the continued viability of the Group.
After making enquiries, the Directors have formed a judgement, at the time of approving the Financial Statements, that there is
a reasonable expectation that the Group has adequate resources to continue in operational existence and meet its liabilities as
they fall due over the three-year assessment period. For this reason, the Directors continue to adopt the going concern basis in
preparing the financial statements. At the same time, the Directors also considered the appropriateness of adopting the going
concern basis of accounting in preparing the financial statements and the Directors’ identification of any material uncertainties
to the Group and the Parent Company’s ability to continue to do so over a period of at least 12 months from the date of approval
of the financial statements.
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
35
35
RESPONSIBLE BUSINESS
We are committed to
managing our business
in an ethical and responsible
way and recognise acting
with integrity, honesty
and respect for others
is critical for success
As a progressive company we
acknowledge our responsibility
to shareholders, clients, suppliers,
our employees and the wider
community in which we operate
to work responsibly. Our approach
to corporate responsibility helps
us manage our business more
efficiently, mitigates risk and
supports the communities in
which we operate, for the
benefit of all our stakeholders.
Corporate responsibility governance
We are committed to upholding sound corporate governance
principles and embedding a culture of doing the right thing.
Responsibility for maintaining our culture, including oversight
of our plans for the key areas of corporate responsibility
identified below, is a focus of the Executive Board (see page
54 in the Governance section) with oversight by the full Board.
Our focus during the year has been on the following areas:
• To evolve our approach to corporate responsibility
and develop a new long-term plan for the future by
completing a materiality study and the Business in
the Community (‘BITC') Community Tracker Survey;
• To take a long-term sustainable view, and measure
and evidence the value of what we do, looking to
continuously improve;
• To ensure our culture and policies enable our
employees to thrive, as they are our most important
asset;
• To support our corporate charity; and
• To continue to progress our ESG and responsible
investment activities.
In addition, we allocate the day-to-day responsibilities
in relation to corporate responsibility as follows:
• The Group General Counsel has functional responsibility
for governance, ethics and business conduct;
• The Group HR Director leads initiatives focused on
our employees including culture, diversity, inclusion
and employee engagement;
• The Chief Operating Officer has responsibility for
health, safety, the environment and charity and
community activity.
Group support is provided to ensure we fulfil our
requirements outlined in our corporate responsibility policy.
Office heads and senior management take responsibility for
implementing Group policies and procedures locally.
36 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
£7,500
Fundraised by Staff for the Mental
Health Foundation
Focus areas
During the year we undertook a materiality study to identify
the most material non-financial issues for the business and
establish a framework for our CR activities going forward.
The desktop study included a review of our stakeholders,
a sustainability benchmarking exercise with other companies
in our sector, media analysis and regulatory changes within
the non-financial reporting space. Outcomes of the study
were presented to a materiality working group for
prioritisation. This group comprised experts from different
parts of the business, chosen for their specialised knowledge
of different stakeholder groups and subject matter. They
reviewed the material topics, prioritising them for the
business, and grouped these into the three key areas
outlined below. These three areas/pillars will inform our
approach to corporate responsibility and serve as the
framework for developing our corporate responsibility
activities/long-term plan.
Our main areas of focus are governance, including ethics
and business conduct, our people, their wellbeing and the
environment in which they live and work, and finally
working with others, both stakeholders and the community.
We have action plans for all of the focus areas for 2020 and
we are progressing.
Working
responsibly
Valuing our
employees
Business ethics
and values
Robust governance
Promoting awareness
of responsible
investment
Data privacy
Healthy and sustainable
workplace
Diversity and inclusion
Employee engagement
Employee wellbeing
and benefits
Talent attraction and
development
Working
with others
Community
involvement
Broader stakeholder
engagement
See page 38 for more detail
See page 40 for more detail
See page 44 for more detail
XPS Pensions Group Annual Report 2020
37
RESPONSIBLE BUSINESS CONTINUED
Working
responsibly
Doing the right thing is extremely
important to us. We are
committed to acting in an ethical
and responsible way and have
established a strong framework
centred on our values which
guides all our activities across the
business. This is supported by
robust governance policies and
practices to ensure we maintain
the highest standards of ethical
behaviour.
Building the foundations of a
responsible business
Business ethics and values
All XPS employees have access to
our Business Code of Ethics,
which is based on laws and values
that we expect all our employees
to adhere to in relation to areas
including harassment and
bullying, treating customers fairly,
diversity and inclusion, financial
crime and dealing with vulnerable
customers.
Our Corporate Values also make it clear that doing the
right thing is embedded in our interactions with all our
stakeholders, whose interests shape our decision-
making and business model.
We have a zero-tolerance approach to bribery and
corruption. XPS has formal anti-bribery and corruption
policies, supported by a whistleblowing process and,
where necessary, proportionate and independent
investigation and follow-up of any matters reported.
The Board has responsibility for oversight of the
Group’s anti-bribery and financial crime policies and
carries out a review of their adequacy annually.
48
Leadership Development Centre
attendees in 2019
38 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Relevant employees are provided with annual
training with regards to a variety of regulatory
issues. These include training on (as appropriate)
financial crime issues, bribery and corruption,
insider trading, modern slavery, data protection,
data breaches, and data security. These are
delivered via online training programmes, the
completion of which is mandatory. Completion
levels vary according to the annual renewal dates
but are consistently around 98%.
Line managers are responsible for ensuring
compliance with our policies and they are
supported by both the Group’s Compliance team
and the HR team.
Promoting awareness of
responsible investment
We advise pension schemes on
suitable investment strategies
to meet their short, medium
and long-term objectives.
As part of this, we work with our clients to
incorporate their specific requirements on
responsible and sustainable investing. Responsible
investing is becoming an increasing focus of
regulatory scrutiny and we believe that integrating
environmental, social and governance (‘ESG')
factors into the investment process is not only an
essential part of risk management but also leads
to better-informed investment decisions. We
consider the stewardship of underlying
investments including proxy voting and
engagement to be of fundamental importance. To
reflect this view, we fully incorporate ESG criteria
within our research and require that the funds we
recommend to our clients include an appropriate
minimum level of ESG integration and stewardship
within their investment process. During our
2019/20 financial year, XPS has engaged with a
large number of managers on their ESG practices
and has evidence of this activity promoting wider
improvements in the fund management industry.
Furthermore, we have introduced a ‘Sustainable’
designation to funds that satisfy a demanding set
of sustainability-related criteria to enable clients to
satisfy their specific objectives. Taking a
sustainable approach to investing is of growing
importance for our clients and we believe that
companies behaving in a sustainable manner
generate stable, long-term investment returns for
investors.
Finally, at our annual conferences in 2019, ESG
featured heavily with a dedicated session
promoting its importance and highlighting the
influence pension schemes have, along with
practical steps they can take to achieve
sustainable long-term returns.
Data privacy
XPS works with large volumes
of data that must be protected,
while providing clients and
scheme members ease of
access.
Data is one of our most valuable assets and we
must ensure that the information we hold is
accurate, secure and managed appropriately.
Following the merger in 2018, we took the
opportunity to implement new governance
structures to ensure accountability and
transparency to protect all stakeholders. We have
a culture of compliance through a clear policy and
control framework, which applies consistent
standards for data protection across all of our
business units and the variety of systems and
record keeping arrangements we use for the
delivery of our products and services. This policy
applies to all staff and contractors, all of whom
receive compulsory training.
XPS Pensions Group Annual Report 2020
39
RESPONSIBLE BUSINESS CONTINUED
Valuing our
employees
We strongly believe that our
employees are key to the business
and as such we aim to create a
supportive environment where our
people can thrive. We want to make
sure our employees feel engaged,
empowered and satisfied in their
work and we are committed to
creating a healthy workplace
with opportunities for future
development.
Creating a safe workplace
where our people
can thrive
Culture and values
We look to retain our talent
for the long term and have
a supportive and inclusive
culture.
In January 2019 we relaunched our corporate
values to ensure colleagues share a set of beliefs
to guide behaviours. Nine months after the launch,
in the employee engagement survey 97% agreed
they were aware of the Company values (0%
disagreed) and 86% agreed that they understood
how the Company values apply to their role. We
have Values Champions in each office who
undertake local recognition activity with
colleagues.
This year we have also launched our first ‘XPS
Values In Practice’ awards (‘VIP awards’). These
awards, which will be annual, are a celebration of
our Values, making people feel appreciated and
well-respected, as well as inspiring others.
Employees are able to nominate their colleagues
and we had over 80 nominations across the five
categories. (See page 26.)
XPS is also a finalist in the UK Employee
Experience Awards for our work on embedding
the corporate values in the business.
14.6%
of staff with more than
ten years’ service
40 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Our focus for 2020
• Continue to roll out training to
enable managers to operate in a
more agile environment, helping us
attract and retain greater diversity
because of flexible working
arrangements.
• Extend our focus beyond gender
diversity, including our recruitment
and training policies.
• Further enhance our employee
development proposition for all
employees through greater and
more flexible access to
development.
• Improve our office environments
and the IT infrastructure.
• Provide mental health training and
launch a wellbeing hub on the
intranet.
• Produce a gender pay gap report
and include an annual plan for
reducing the gap.
The environment
The Group is committed to the protection of the environment, not just from its
direct activities on site but through our use of sustainable resources, carbon
management related to business travel and preventing pollution through reducing
and eliminating sources of pollution. The Group seeks to influence all parties in the
life cycle of its services, and create an environmentally friendly ethos amongst its
staff, contractors and suppliers.
The Group has over the last year been reviewing its activities and operations in
order to identify and evaluate environmental aspects and impacts, initially
concentrating on the area where it believes it can have the largest impact: energy
usage. This work has supported the development of an Environmental Management
System (‘EMS') that is due to be certified to ISO14001 by the end of 2020. Specific
initiatives included the introduction of a new travel policy that encouraged staff to
consider if other more environmental friendly options were available and a review of
where more energy-efficient lighting might be an option.
These initiatives are supported by the Group’s Audit, Risk and Compliance
Committee, with the Head of Risk responsible for their delivery.
Annual greenhouse gas emissions and energy use data for the period 1 April 2019 to
31 March 2020:
Fiscal year 2019–2020
Current reporting
year 2019–2020
Comparison reporting
year 2018–2019
Total scope 1 emissions (tCO2e)
Total scope 2 emissions (tCO2e)
Total scope 1 + scope 2 emissions (tCO2e)
Energy consumption used to calculate
above emissions (kWh)
Revenue (£m)
Emissions intensity (tCO2e/£m)
Notes:
1.
2.
3.
267.4
547.7
815.0
3,329,067
119.75
6.81
115.8
428.8
544.6
–
109.89
4.96
tCO2e = Tonnes of CO2 equivalent.
All activities are UK-based.
Conversion to carbon rates used current Department for Education, Food and Rural Affairs
(‘DEFRA') factors.
Calculations were carried out by Pilio Ltd, using a methodology in line with ISAE 3410.
4.
Emission figures for 2019-2020 are higher than the comparison reporting year for a
number of factors. These include larger numbers of staff, increased number of
offices in scope and more detailed data available after the completion of the
property transitional service agreement with Punter Southall Group.
XPS Pensions Group Annual Report 2020
41
RESPONSIBLE BUSINESS CONTINUED
Diversity and inclusion
We believe that a diverse and inclusive
culture is important to the success of our
business. Having people from a wide variety
of backgrounds, and with a range of
experiences and skills, will help us better
understand and meet the needs of clients,
making our business stronger and driving
continued growth and innovation.
As a business we have reviewed our HR policies and
our recruitment policies and practices to attract a
more diverse range of candidates. For example, we
have an agile working policy which provides flexible
working arrangements to employees with caring
responsibilities, enhanced maternity, paternity and
adoption leave benefits.
We have also engaged an external consultancy,
Diversity Matters, to help us shape our diversity
policies, practices and initiatives going forward. We
now have a plan to progress for 2020/21 which
includes setting up employee networks, arranging
events and raising awareness, rolling out anti-bias
training as well as improving how we measure the
effectiveness of our diversity and inclusion policies.
We have signed up to become a Stonewall Diversity
Champion and a member of the Valuable 500 and as
such we are committed to putting disability inclusion
on the business agenda. We will be working in
partnership with both organisations in 2020.
We also celebrated International Women’s Day on
6 March with a series of events and communications
which raised awareness and celebrated women’s
achievements and inspired staff. We have a
programme to undertake similar events for other
groups to highlight the value of diversity and
inclusion.
Finally, we have been involved with Science,
Technology, Engineering and Mathematics (‘STEM')
career fairs and activities such as the ‘Count Me In’
event with the Institute and Faculty of Actuaries. We
hosted a Midlands Women in Pensions event and
spoke on the gender pension gap at the ‘Lean In’
conference in Leeds.
During the financial year we have increased gender
diversity on our Board of Directors significantly –
as at 31 March 2019 it was 12.5%; now it is 28.5%
and we now have a majority of female staff in the
Group as a whole.
42 XPS Pensions Group Annual Report 2020
639
2
12
625
Gender split data
Group total: 1,269
Board total: 7
Partners total: 71
Other employees total: 1,191
Female
Male
630
5
59
566
Strategic Report
Governance
Financial Statements
Employee engagement
We have a calendar of regular
communication with employees
which includes weekly electronic
newsletters from the businesses,
videos and webinars. Additionally in
February 2020, we launched the new
XPS intranet to provide a valuable
resource of information which
supports us in creating one culture.
Significant business performance communications are
managed through a mixture of face-to-face meetings and
webinars. In addition, different parts of the business adopt
their own local engagement events throughout the year to
supplement the corporate messages and reflect the business
in the locality. These give all employees the opportunity to
give their views on relevant matters.
This is over and above our annual employment engagement
survey, which captures the views of our employees across a
range of themes and seeks their views on how they feel about
working for XPS Pensions Group. Our engagement survey,
which took place in September, attracted an 87% response
rate (2019: 83%). The engagement results are shared openly
across the business and Office Heads work with their teams
to discuss the results and together create and implement
action plans to address their teams’ feedback. At Group level,
plans include more communication on career progression,
recognition and reward and more sharing of information
between business units using new channels of
communication including the new XPS intranet.
In 2019 we held our first Employee Engagement Group with
the purpose of providing an ‘employee voice’ to the Board. It
is a forum for employees to share ideas and concerns with the
Board in a consultative manner and the Group is chaired by
one of our Non-Executive Directors, Margaret Snowdon OBE.
We encourage everyone to share their views, and to feel
empowered to make decisions for the good of the business
and our stakeholders. The key areas of focus of the group are
Company culture and values, reward and remuneration of
Executive Directors, corporate social responsibility and the
employee engagement survey.
For further detail refer to the Relations with Stakeholders
section of the Corporate Governance Report on page 66.
Employee wellbeing and benefits
We provide a comprehensive formal and informal support
structure for employees which includes private medical,
permanent health insurance, critical illness and life cover for
all employees. We also provide an employee assistance
programme, access to a second opinion referral service and
counselling.
86%
of staff agreed/strongly agreed
that XPS is a good company to
work for (only 2% disagree)
In 2019, we partnered with the Mental Health Foundation and
trained half of our business on how to identify signs of mental
health issues amongst staff and to signpost where to find
support. We will extend mental health training in 2020. In
addition, we provided monthly communication on mental
health topics on subjects such as resilience, loneliness and
dealing with stress, and we are looking to develop these
further with the impact of COVID-19. Underpinning all of this
is our belief in a healthy, supportive working culture, where
everyone is comfortable to raise issues and problems.
In 2019, XPS Administration was awarded silver level
accreditation by Investors in People. The administration
business has been accredited since 2015 and this is a
testament to our continued dedication to providing a
first-rate working environment for our employees.
We increased our communication with employees during
COVID-19. Staff had concerns ranging from business impact,
the health and safety of themselves and their colleagues and
wanting to know what the Company was doing across all
offices. From setting up a Covid hub on the intranet with
information, to regular video conferencing, sharing personal
stories and CEO weekly podcasts, we communicated on a
range of subjects. The feedback to the Employee
Engagement Group was very positive.
Talent attraction and development
Building on our long-standing culture
of providing a great place for people
to develop their careers, in 2019 we
have continued with rolling out our
two-day Leadership Development
Training Course and invested in more
structured development programmes
to accelerate the progression of our
most talented employees at all levels.
During the year we delivered over 4,000 hours of training
across a wide range of professional and technical courses.
We offered a broad range of development opportunities for
all employees covering personal and team development
through a range of delivery methods including a mentoring
scheme such as Actuarial Mentoring Programme (known as
‘AMP') designed to improve diversity within the actuarial
profession and the 30% Club mentoring scheme for staff from
across the business. Our professional training included our
leadership development programme and consultant and
management development, as well as courses on minute-
taking, time management, and professional writing and
presentation skills. Technical training included Pensions
Management Institute courses and in-house actuarial training.
We also provided training to our finance, systems and
marketing staff.
In addition, we provided support for employees studying for
professional qualifications, and a range of bespoke technical
programmes exist across all areas of our business. Employees
are supported in developing their careers by their line
managers, through regular meetings as well as an annual
Personal Development Review process.
XPS continues to provide a Performance Share Plan for
key employees.
XPS Pensions Group Annual Report 2020
43
RESPONSIBLE BUSINESS CONTINUED
Working
with others
We are committed to delivering
positive outcomes for all our
stakeholders including customers,
employees, investors and communities.
We engage with our stakeholders to
understand their needs and work
together to meet their expectations.
Working with local communities
enables us to support social and
economic development in the
places where we operate.
Working with others
to create value
for all stakeholders
Community involvement
Giving back to society and our
local communities is important to
us, and we encourage employee
involvement in fundraising and
volunteering.
We launched our first annual corporate charity partnership
in April 2019 with the Mental Health Foundation (‘MHF').
XPS employees raised £7,500 for MHF through fundraising
activities in 2019 and XPS matched this with an additional
£7,500 donation. In addition, MHF became part of our
Wellbeing Programme, by providing the necessary
education, training and tools required to offer support to
staff towards reducing the stigma and discrimination
around mental health in the workplace.
Local offices also support charities in their areas to ensure
they have a positive impact on their local community.
These include Zoe’s Place, Neighbourly Middlesbrough,
Teesside Hospice, Strathcarron Hospice and Julian Trust
and Next Link, two Bristol charities supporting domestic
abuse victims and their families.
In addition, we provide volunteers for fundraising events,
meeting rooms for local community projects when available,
and we offer reduced fees for charity sector clients.
63
Members of the Women’s Network
44 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Case study
On 10 October 2019, XPS
supported the Mental
Health Foundation with
profile raising for World
Mental Health Day.
XPS colleagues assisted with
increasing awareness as part of a
press event in Trafalgar Square
creating a human green ribbon,
made of over 100 supporters
holding green umbrellas. The aim
was to raise the profile of suicide
prevention.
Key Stakeholders
• Clients
• Employees/Contractors
• Shareholders
• Regulators
• Suppliers
• Communities
£7,500
Amount raised by XPS
employees for MHF
Stakeholder engagement
We have a wide variety of
stakeholders, without whom
our business wouldn’t exist.
We have mapped our stakeholders and developed
a matrix to identify those where we have a legal,
commercial or moral responsibility – such as our
clients, staff, shareholders, suppliers, regulators
and our local communities. We also value others
such as the media who can highlight new
opportunities for us or identify areas where we
need to change.
We need to engage effectively with each of these
stakeholders in order to understand their key
issues and how well we are meeting their
expectations. We survey both clients and staff and
use focus groups and formal procedures to reach
out to key contacts in each stakeholder group. We
establish indicators to measure the coverage and
quality of our engagement, and we report back to
the relevant stakeholders on the results and
actions taken as a result of our engagement.
For more information on stakeholder engagement,
what we do and what we are planning to do next,
go to page 64.
XPS Pensions Group Annual Report 2020
45
SECTION 172 STATEMENT
Engaging with our stakeholders
As a company we have completed an exercise to determine who our key
stakeholders are, the ways in which we can best engage with them and the
issues that are most relevant to them. As a result, Directors regularly consider
the interests of stakeholders, the Company’s impact on the community, the
environment and the Company’s reputation when making decisions. In this
context, acting in good faith and fairly, the Directors consider what is most
likely to promote the success of the Company for its members in the long
term. The Board will regularly review the Company’s key stakeholders and
the engagement strategy with each of them.
S172 statement
A director of a company must act in the way they consider, in good faith, would most likely promote the long-term success of the
company for the benefits of its members as a whole, taking into account the factors as listed in section 172 of the Companies Act
2006. The Directors are fully aware of their responsibilities to promote the success of the Company in accordance with section
172 of the Companies Act 2006.
The Company’s engagement strategy and how feedback from stakeholders influences the Board agenda and decision-making is
set out within the below table. Further details can be found within the Governance report on pages 64 to 65.
The Board has enhanced its methods of engagement with the workforce and appointed Margaret Snowdon, OBE as the
designated Employee Engagement Non-Executive Director who chairs the Employee Engagement Group. You can read more
about the employee engagement strategy on page 66.
We aim to work responsibly with our stakeholders and develop strong business relationships with them, including our suppliers.
You can read more about the Group’s approach to bribery and corruption on page 38.
You can read about the Group’s principal risks and key mitigations, including those in relation to clients, employees and suppliers,
on pages 32 to 35.
How feedback influences the Board agenda
and decision-making
Client impact is at the centre of the business
and Board decisions give significant consideration
to this.
Stakeholder
Board / Company engagement strategy
• The Company engages with clients through an
annual client satisfaction survey, of which the
Board reviews the results. The Board receives a
monthly management report on newly won clients
and clients at risk.
• The Company holds an Annual Client Conference
and Annual Client Drinks reception, which are
attended by Board members.
• The Company and the Directors also participate in
industry and client forums.
• The Company prides itself on its excellent client
care programme and continues to provide clients
with training seminars and publications.
Clients
Employees/
Contractors
The Company
details the
employee
engagement
strategy on
page 66
of the
Governance
report.
• Employee engagement has been enhanced
significantly during the year with the appointment
of Margaret Snowdon, OBE as the designated
Employee Engagement Non-Executive Director.
Margaret is chair of the Employee Engagement
Group (‘EEG’), attends the Diversity, Equality and
Inclusion Group (‘DEIG’) and speaks at Partners
meetings. The Board receives updates after each
EEG and DEIG meeting.
The Employee Engagement Survey is used to
identify and drive changes across the Group and
adapt, improve and evolve Company culture. This
year the survey results have led focus on:
• Clearer guidance around remuneration (including
bonus, exceptional performance awards and total
reward);
• Clearer guidance around performance reviews and
career progression; and
• Employees complete an annual Employee
• Improved communication between departments.
Engagement Survey, the results of which are
analysed in detail, shared with the Board of
Directors and an action plan agreed.
• Board meetings are held at different offices
throughout the year, and the Non-Executive
Directors host informal Q&A / networking
sessions with employees, giving them the
opportunity to raise any matters or ask any
questions they desire.
• An external and anonymous whistleblowing
hotline is available to employees 24/7. Any reports
can be escalated to the Board as required.
A firm-wide plan was presented to the Board, and
local action plans are in place as a result of the survey.
The Employee Engagement Group was consulted on
the updated Directors Remuneration Policy and no
issues were raised.
The acquisitions of Royal London Corporate Pension
Services and Trigon Professional Services welcomed
new employees to the Group. The smooth integration
was paramount.
46 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
During the AGM, roadshows and meetings, the Board
members will listen and respond to views and will
give feedback to the business as necessary.
The Board receives updates on investor perception
through the Executive Directors and the Company’s
brokers. This influences decision-making at Board
level. This year the Board and the Remuneration
Committee have engaged with shareholders in detail
regarding the updated Directors Remuneration
Policy and the bolt-on acquisitions.
Margaret Snowdon, OBE is Non-Executive Director
of the Pensions Regulator and regularly updates the
Board on industry developments.
Discussion with regulators influences the Company’s
regulatory strategy and approach and business
planning.
This year the Company engaged significantly with
the Pensions Regulator to achieve approval of the
National Pensions Trust.
XPS is committed to sourcing products ethically and
sustainably, and establishing long-term, open and fair
relationships with our suppliers.
Shareholders
• The Board of Directors engages with Company
shareholders in many ways and has increased its
engagement during the year. Engagement
methods include meetings with investors and
results roadshows hosted by the Executive
Directors, regular calls with investors and analysts
through the Company’s brokers and proxy
advisers and at the Company’s Annual General
Meeting.
• The Board has appointed Sarah Ing as the
Shareholder Engagement Champion. Sarah
attends the Company’s results presentations to
the analysts and shareholders. Sarah often meets
or speaks to shareholders or prospective
investors.
Regulators
• The Company works with the regulators by
responding to requests, consultations, submitting
returns as required and attending industry
meetings.
Suppliers
• This year the Company has increased and
enhanced its engagement with suppliers through
the appointment of a designated procurement
team and an external company who engage with
and carry out due diligence on suppliers.
• An annual review of existing suppliers, who
provide services that are deemed as higher risk
(i.e. process large amounts of our data or have
access to our offices), is completed in addition to
quarterly performance reviews with key suppliers.
• The Board annually approves the XPS Modern
Slavery Statement.
• Our supplier Code of Conduct communicates
what we expect from our suppliers.
Communities,
Charities and
Environment
• XPS has partnered with the Mental Health
Foundation, voted for by employees as the charity
of choice in both 2019 and 2020.
The Board receives updates on Corporate Social
Responsibility biannually.
• Local offices fundraise for local charities.
• The Company annually reviews energy and
greenhouse gas impacts on the environment; and
energy-saving opportunities and the resulting
ability to reduce greenhouse gas emissions.
• An annual Energy Savings Opportunities Scheme
(‘ESOS') verification report is completed.
During the year, the Board reviewed the Company’s
materiality assessment report, which assessed the
numerous potential environmental, social and
governance issues that could affect the business.
After discussion, they agreed the priorities most
relevant for the Company and stakeholders.
Read more
about the
Company’s
engagement
and
commitment
on pages 40
to 45.
XPS Pensions Group Annual Report 2020
47
NON-FINANCIAL INFORMATION STATEMENT
Non-financial information statement
Reporting requirement
Policies and standards
which govern our approach
Information necessary to understand our business
and its impact, policy due diligence and outcomes
Environmental matters
Environmental policy1
Employees
Recruitment and Selection Policy
Diversity and Inclusion
Flexible Working Policy1
Harassment and Bullying Prevention Policy1
Grievance Policy1
Health and Safety Policy1
Agile Working Guidelines Policy1
Family Friendly Policy1
Sabbatical Policy1
Helping the transition to a sustainable
low-carbon economy, see page 41
Reflecting the needs of our stakeholders:
Colleagues, see pages 40-44
Diversity, see pages 42 & 69
Respect for human rights
Data Privacy Policy
Reflecting the needs of our stakeholders:
Suppliers, see pages 45 & 64-66
Social matters
CSR Policy1
Modern Slavery
Information and Cyber Security Policy1
Vulnerable Customer Policy1
Bribery and Gifts Policy1
Whistleblowing Policy1
Financial Crime Policy1
Anti-corruption and
anti-bribery
Description of principal risks
and impact of business activity
Description of our
business model
Non-financial key
performance indicators
Reflecting the needs of our stakeholders:
Clients, see pages 36-45
Reflecting the needs of our stakeholders:
Clients, see pages 38
Reflecting the needs of our stakeholders:
Colleagues, see pages 40-43
Helping the transition to a sustainable low-
carbon economy: Risk management, see page 41
Risk overview 2019 themes, see page 32
Our principal risks, see page 33
Our business model, see pages 14-15
Operating responsibly for our stakeholders,
see pages 36-45
1 Certain Group policies and internal standards and guidelines are not published externally.
2 The policies mentioned above form part of the Group’s Policy Framework which is founded on key risk management principles. The policies which
underpin the principles define mandatory requirements for risk management. Robust processes and controls to identify and report policy outcomes
are in place and were followed in 2019.
Strategic report sign off
This Strategic Report is set out on pages 2 to 47
and is approved by the Board of Directors and
signed on its behalf.
Paul Cuff
Co-Chief Executive
24 June 2020
Ben Bramhall
Co-Chief Executive
24 June 2020
48 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Corporate
Governance
Governance
Chairman’s Governance Report
Board of Directors
Executive Committee
Group Governance at a Glance
Board Responsibilities
Board Effectiveness
Nomination Committee Report
Audit and Risk Committee Report
Directors’ Remuneration Report
Directors’ Report
50
52
54
56
58
60
68
70
74
97
Directors’ Responsibility Statement
100
XPS Pensions Group Annual Report 2020
49
CHAIRMAN’S GOVERNANCE REPORT
We believe that an
agile, honest and open
culture is key to personal
and business development
Corporate Governance Code
and stakeholder engagement
This is the first year that the revised Corporate Governance
Code has applied to XPS Pensions Group. A particular focus
for the Board has been stakeholder engagement. We have
discussed and agreed our engagement strategy as a Board.
Each Non-Executive Director was appointed to take
responsibility for a particular area of the business and the
related stakeholders within that area. Margaret Snowdon,
OBE has been appointed as our Employee Engagement
Champion, Sarah Ing as our Shareholder Engagement
Champion, Alan Bannatyne as our Risk Management
Champion and I have been appointed as Corporate
Governance/Strategy Champion.
As a Board we believe that an agile, honest and open culture
is key to both personal and business development. As such,
we have been keen to understand how the Company’s values
have embedded in the organisation and have sought to
actively engage with the workforce in different ways. As
Employee Engagement Champion, Margaret has chaired the
Diversity, Equality and Inclusion Working Group and we have
initiated a series of Employee and Non-Executive Director
sessions which follow Board meetings in different offices.
Feedback has been positive and you can read more about
employee engagement on page 66 and the results of the
employee engagement survey on page 40.
I am pleased to introduce the
Governance report for 2019/20
“The external Board evaluation process gave us
all a valuable opportunity to reflect on how we
operate as a Board, what we do well and what
we can improve upon. The final report contains
some useful recommendations and helpful
insights which we are looking forward to
implementing.”
Tom Cross Brown
Chairman
50 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Statement of compliance with
the UK Corporate Governance Code
In 2019, the Company has applied the Principles and
complied with the Provisions of the UK Corporate
Governance Code 2018 as they apply to it as a ‘smaller
company’ (defined in the Code as being a company
below the FTSE 350). The Code is publicly
available at www.frc.org.uk.
Further information on how the Company has applied
the five overarching categories of Principles can be found
on the following pages –
(i) Board Leadership and Company Purpose:
pages 52 to 53 and 14 to 15,
(ii) Division of Responsibilities: pages 58 to 59,
(iii) Composition, Succession and Evaluation:
pages 57, 60. 61 and 69,
(iv) Audit, Risk and Internal Control:
pages 70 to 73,
(v) Remuneration: pages 74 to 96.
Board composition and effectiveness
As announced on 26 July 2019, Jonathan Punter retired from
the Board with effect from 12 September 2019. Jonathan was
appointed pursuant to a Relationship Agreement with Punter
Southall Group Limited (‘PSGL') entered into on the
completion of the Company’s acquisition of PSGL and its
subsidiaries on 11 January 2018.
As previously reported, we welcomed Sarah Ing (Non-
Executive Director) and Snehal Shah (Chief Financial Officer)
to the Board at the start of the financial year and I am pleased
to report that both appointments have enhanced the Board’s
skills and expertise. These new appointments have put our
new induction programme to the test and you can read Sarah
and Snehal’s thoughts on their induction and their time on the
Board so far on page 62.
The Board has undertaken its first external board
effectiveness review which gave Board members the
opportunity to assess and feedback on all aspects of
corporate governance. The process involved individual
interviews with each Board member and Board and
Committee meeting observation followed by separate
feedback sessions with Alan, our Senior Independent Director
and myself. The final report was presented to the Board and
we have developed an action plan to implement the various
recommendations made in the report. You will find further
detail on pages 60 to 61.
In the report that follows, we have included a description of
how the Company has applied the main principles of the 2018
Code, and complied with all its relevant provisions,
throughout the financial year.
Tom Cross Brown
Chairman
24 June 2020
XPS Pensions Group Annual Report 2020
51
BOARD OF DIRECTORS
The Board is composed of seven members, consisting of the Chairman,
three Executive Directors and three independent Non-Executive Directors.
Tom Cross Brown
Independent
Non-Executive Chairman
Appointed: January 2017
Key strengths:
• Mergers & acquisitions,
strategy, financial
reporting, listed company
experience, investor
relations and corporate
governance are noted as
Tom’s key skills
Key experience:
• CEO of ABN AMRO Asset
Manager until 2003
• 21 years at Lazard
Brothers & Co. until 1997,
CEO 1994 – 1997
• Non-Executive Chairman
of Pearl Assurance plc
2005 – 2009
• Non-Executive Chairman
of Just Retirement Group
2006 – 2016
• Non-Executive Director of
Artemis Alpha Trust plc
2006 – 2018
• Non-Executive member of
management committee
Artemis Investment
Management LLP 2006
– 2018
Current external listed
company directorships /
key appointments:
• None
Paul Cuff
Co-Chief Executive Officer
Appointed: October 2016
Ben Bramhall
Co-Chief Executive Officer
Appointed: April 2014
Snehal Shah
Chief Financial Officer
Appointed: July 2019
Key strengths:
• Qualified actuary with 20+
years of experience in the
pensions industry
Key strengths:
• Qualified actuary with 20+
years of experience in the
pensions industry
• Responsible for raising
profile of XPS in the
market, generating new
business and the Group
strategy with regard to
acquisitions and
investment
• Mergers & acquisitions,
strategy, pensions industry
and investor relations are
noted as Paul’s key skills
Key experience:
• Partner at KPMG 2008 –
2016
• Head of KPMG London
pensions team prior to
joining XPS
Current external listed
company directorships /
key appointments:
• None
• Responsible for day-to-
day operations of the
business including
provision of services to
XPS existing clients,
revenue generation and
the Group’s people
agenda
• Mergers & acquisitions,
strategy, pensions
industry, risk
management, workforce
engagement, investor
relations, business
development and
operational management
are noted as Ben’s key
skills
Key experience:
• Eight years at KPMG
Current external listed
company directorships /
key appointments:
• None
Key strengths:
• Chartered accountant with
over 20 years of experience
• Mergers & acquisitions,
post deal integration,
strategy, risk management,
financial reporting, listed
company experience,
investor relations,
corporate governance and
operational management
are noted as Snehal’s key
skills
Key experience:
• Ten years with PwC
• Senior finance roles
including Group Financial
Controller, Head of Investor
Relations and Finance
Director for Integration at
Ladbrokes plc 2009 – 2017
• Interim Director (Finance &
Corporate Governance) at
Parkdean Resorts Ltd and
Interim Director of Finance
& Investor Relations at
Countrywide plc 2017 –
2019
Current external listed
company directorships /
key appointments:
• None
Committee membership / Board and Committee attendance
Member
Board
Audit & Risk Committee
Remuneration Committee
Nomination Committee
Tom Cross Brown
Independent
Non-Executive
Chairman
9/9
6/6
2/2
Paul Cuff
Co-Chief Executive
Officer
Ben Bramhall
Co-Chief Executive
Officer
Snehal Shah
Chief Financial
Officer
Alan Bannatyne
Senior Independent
Non-Executive
Director
Sarah Ing
Independent
Non-Executive
Director
Margaret Snowdon
Mike Ainslie
Jonathan Punter
OBE
Independent
Chief Financial Officer
Non-Executive Director
Tenure: October 2015 –
Tenure: January 2017 –
Non-Executive Director
June 2019
September 2019
9/9
9/9
5/61
3/32
3/33
1. Snehal Shah was appointed Chief Financial Officer on 9 July 2019. Snehal was absent at the September 2019 Board and Committee meetings due to hospitalisation.
2. Mike Ainslie left the business on 27 June 2019.
3. Jonathan Punter stepped down from the Board on 12 September 2019.
52 XPS Pensions Group Annual Report 2020
9/9
5/5
6/6
2/2
9/9
5/5
6/6
2/2
9/9
5/5
6/6
2/2
Chair of Committee
Strategic Report
Governance
Financial Statements
Former Board Members
that served during the year
under review
Mike Ainslie
Chief Financial Officer
Tenure: October 2015 –
June 2019
Mike Ainslie is a Chartered
Accountant who spent 18 years
in Corporate Banking working
for a US Bank. Mike then worked
for ten years as CFO or COO for
a number of fast growing
companies owned by private
equity or other investment firms.
As CFO of XPS Pensions Group,
Mike was responsible for the
finance, legal and compliance
functions. Mike left the business
on 27 June 2019.
Jonathan Punter
Non-Executive Director
Tenure: January 2017 –
September 2019
Jonathan Punter is CEO of
Punter Southall Group, which
sold Punter Southall Holdings
Limited and its subsidiaries to
XPS Pensions Group in January
2017. He has 40 years of
experience in the actuarial
profession. Jonathan was also a
Non-Executive Director of the
River & Mercantile Group.
Jonathan stepped down from
the Board at the Company’s
AGM in September 2019.
Jonathan continues to work with
the business as a consultant.
Alan Bannatyne
Senior Independent
Non-Executive Director
Appointed: January 2017
Sarah Ing
Independent
Non-Executive Director
Appointed: May 2019
Margaret Snowdon OBE
Independent
Non-Executive Director
Appointed: January 2017
Key strengths:
• Chartered accountant
• Recent and relevant
financial experience
• Strategy, risk
management, financial
reporting, listed
company experience,
investor relations and
corporate governance
are noted as Alan’s key
skills
Key experience:
• Qualified with Deloitte &
Touche
• Previous Commercial
Manager of Primecom
and Financial Director of
Foresight – both
subsidiaries of Primedia
• Group Financial
Controller of Robert
Walters plc 2002 – 2007
Current external listed
company directorships /
key appointments:
• Chief Financial Officer of
Robert Walters plc since
March 2007
Key strengths:
• Chartered accountant
• 30 years’ experience in
financial services
including audit,
corporate finance,
investment banking and
asset management
• Mergers & acquisitions,
financial reporting,
investor relations and risk
management are noted
as Sarah’s key skills
Key experience:
• Previously a top-rated
equity research analyst
covering the UK general
financial services sector
and also founded and ran
a hedge fund investment
management business
Current external listed
company directorships /
key appointments:
• Non-Executive Director
of CMC Markets plc since
September 2017 where
she chairs the Group Risk
Committee
Key strengths:
• 40 years’ experience in
Pensions industry
• Mergers & acquisitions,
strategy, risk
management, workforce
engagement, pensions
industry, corporate
governance, business
development and
operational management
are noted as Margaret’s
key skills
Key experience:
• Partner and Director level
positions with leading
employee benefit
consultancies
• Margaret was appointed
an OBE in 2010 and has
received many awards
for her contribution to
pensions
Current external listed
company directorships /
key appointments:
• Non-Executive Director of
The Pensions Regulator
• Non-Executive member
of Phoenix Group With
Profits Committee
• Advisory Board Member
of Moneyhub Financial
Technology Limited
• Chair of Pension Scams
Industry Group
Committee membership / Board and Committee attendance
Member
Board
Audit & Risk Committee
Remuneration Committee
Nomination Committee
9/9
6/6
2/2
Tom Cross Brown
Paul Cuff
Co-Chief Executive
Officer
Ben Bramhall
Co-Chief Executive
Officer
Snehal Shah
Chief Financial
Officer
Independent
Non-Executive
Chairman
Alan Bannatyne
Senior Independent
Non-Executive
Director
Sarah Ing
Independent
Non-Executive
Director
Margaret Snowdon
OBE
Independent
Non-Executive Director
Mike Ainslie
Chief Financial Officer
Tenure: October 2015 –
June 2019
Jonathan Punter
Non-Executive Director
Tenure: January 2017 –
September 2019
9/9
9/9
5/61
9/9
5/5
6/6
2/2
9/9
5/5
6/6
2/2
9/9
5/5
6/6
2/2
3/32
3/33
1. Snehal Shah was appointed Chief Financial Officer on 9 July 2019. Snehal was absent at the September 2019 Board and Committee meetings due to hospitalisation.
2. Mike Ainslie left the business on 27 June 2019.
3. Jonathan Punter stepped down from the Board on 12 September 2019.
Chair of Committee
XPS Pensions Group Annual Report 2020
53
EXECUTIVE COMMITTEE
The Co-Chief Executive Officers operate a
Group Executive Committee to support them
in the performance of their duties, including the
development and implementation of strategy
and the day-to-day operational management
of the business. The Committee is comprised of
the Executive Directors and the following
members:
54 XPS Pensions Group Annual Report 2020
54 XPS Pensions Group Annual Report 2020
Zoe Adlam
General Counsel and
Company Secretary
Responsibilities: Zoe is
responsible for ensuring that the
legal and compliance needs of
the Group are met.
Key experience:
• Significant in-house experience
as corporate adviser and
company secretary;
• Whilst in private practice
advised on corporate and
financial transactions.
Jonathan Bernstein
Chief Operating Officer
Responsibilities: Jonathan is
responsible for the central
functions of XPS including HR, IT,
Marketing, Risk and Property, as
well as more general operational
matters across the Group.
Jonathan is also involved with
major client relationships and
holds Scheme Actuary
appointments.
Key experience:
• Extensive experience of
operational management;
• Senior actuary with over
30 years’ experience in the
pensions industry including
Chief Actuary at Mercer.
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Wayne Segers
Head of Pensions Solutions
Responsibilities: Wayne is
responsible for ensuring that the
Company proactively responds
to emerging issues, develops
market-leading services and
provides value to pension clients.
Key experience:
• Experienced in pension
strategy, cost and risk
management;
• Director at KPMG where
he established the Pension
Restructuring Advisory
practice.
Rachel Gillion
HR Director
Responsibilities: Rachel is
responsible for the HR function.
Key experience:
• Significant experience in
developing and implementing
HR and people strategies;
• Managed multiple projects,
for example, TUPE, M&A and
reward programmes.
David Watkins
Managing Director of
Administration
Responsibilities: David is Managing
Director of XPS Administration.
David has led the development
of the Administration business,
building a strong and highly
capable senior team and business
which now administers pensions
for over 920,000 pension scheme
members from across the network
of offices in the UK.
Key experience:
• Over 30 years’ experience within
the pensions administration
sector;
• Notable success in growing client
base and revenue, the consistent
delivery of services and the
subsequent creation
of an offering focused on
high-quality administration and
member/client experience.
John Batting
Senior Actuary
Responsibilities: John is a
Scheme Actuary with over
40 years of experience in the
actuarial profession, providing
pensions and investment advice
to both trustees and sponsoring
employers, and has acted as
an expert witness on pension
matters.
Key experience:
• CEO of Punter Southall Ltd
between 2004 and 2018;
• One of the four founders of
BGJ & Co Limited, an actuarial
consulting business which was
established in 1993 and
subsequently merged with
the Punter Southall businesses
in 2002.
Patrick McCoy
Head of Advisory
Responsibilities: Patrick leads
the XPS Advisory business which
comprises pensions (actuarial),
investment and covenant. Patrick
continues to advise clients from
£100 million to £5 billion on the
full range of investment issues
and is known for explaining
complex issues clearly, helping
clients make effective investment
decisions.
Key experience:
• Led the XPS Investment
business;
• Partner at KPMG where he
built and led the Investment
Advisory practice.
XPS Pensions Group Annual Report 2020
XPS Pensions Group Annual Report 2020
55
55
GROUP GOVERNANCE AT A GLANCE
Board composition
Director skills and experience
Independence
Non-executive tenure
Number of Directors identified
with core or secondary skill
25%
Risk management
43%
Financial reporting
57%
75%
Workforce engagement
Execs
Non-execs
< 3 years
> 3 years
Pensions industry
Prior FTSE experience
4
Age
Gender
Investor relations
Marketing
3
29%
14%
29%
Corporate Governance
57%
Business development
71%
Operational management
61+
51-60
41-50
Female
Male
Environmental and social sustainability
2
7
6
6
6
6
5
5
5
5
Non-executive gender
50%
50%
Female
Male
56 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Board composition and independence
The Board is composed of seven members, consisting of the
Chairman, three Executive Directors and three independent
Non-Executive Directors.
The Company complies with the provisions of the Code for
smaller companies below the FTSE 350 which requires the
composition of the board of directors of a UK listed company
to include at least two independent Non-Executive Directors
(excluding the Chairman). The Board concluded that Tom
Cross Brown met the independence criteria set out in the
Code on his appointment as Chairman.
The Board considers that Non-Executive Directors Alan
Bannatyne, Margaret Snowdon, OBE and Sarah Ing are each
independent of management in character, judgement and
opinion and are free from relationships or circumstances that
could affect their judgement. One of the Non-Executive
Directors, Alan Bannatyne, acts as the Senior Independent
Director. All Directors continue to devote sufficient time to
their roles.
Jonathan Punter stepped down as a Non-Executive Director
on 12 September 2019. Jonathan was appointed by Punter
Southall Group Limited (‘PSGL') under the relationship
agreement entered into between the Company and PSGL,
which entitles PSGL to appoint one nominee director to the
Board, for so long as PSGL holds a beneficial interest, directly
or indirectly, in 10% or more of the aggregate voting rights in
the Company from time to time. PSGL has not nominated a
replacement Director of the Board and the Company is not
aware of PSGL having any intention of doing so. Jonathan
Punter was considered non-independent within the meaning
of the Code, due to the relationship agreement.
The Board benefits from the wide experience of its Non-
Executive Directors. Biographical details of all Board
members are given on pages 52 to 53.
Board committees
The Board operates in accordance with the Company’s
Articles of Association and has an Audit and Risk Committee,
a Remuneration Committee and a Nomination Committee
with formally delegated duties, authorities and reporting
responsibilities, to assist it with the direction and control of
the Group. From time to time, separate committees may be
set up by the Board to consider specific issues when the need
arises. Written terms of reference for each Committee are
subject to annual review and periodic updating to reflect any
changes in legislation, regulation or best practice. The terms
of reference for the three main Board Committees are
available on the Company’s website at www.xpsgroup.com.
The Company complies with the Code provision that a UK
listed company’s Remuneration and Audit Committees
should comprise at least three independent Non-Executive
Directors and that the Nomination Committee should
comprise a majority of independent Directors. Tom Cross
Brown chairs the Nomination Committee, Alan Bannatyne
chairs the Audit and Risk Committee and Margaret Snowdon,
OBE chairs the Remuneration Committee. The Company
Chairman is not a member of the Audit and Risk Committee,
in compliance with the Code. Each Chair reports on the
business of their previous Committee meeting at the next
scheduled Board meeting.
The Audit and Risk Committee’s role is to assist the Board in
discharging its oversight responsibilities by reviewing and
monitoring the following: the integrity of the financial
information provided to shareholders; the effectiveness of the
Company’s system of internal controls and risk management;
the external audit process and auditors; and the processes for
compliance with laws, regulations and ethical codes of
practice. Further details are given in the Audit and Risk
Committee report on pages 70 to 73.
The role of the Remuneration Committee is to assist the
Board to fulfil its responsibility to shareholders to ensure that
remuneration policy and practices of the Company reward
fairly and responsibly, with a clear link to corporate and
individual performance, having regard to statutory and
regulatory requirements. The Committee recommends the
policy the Board should adopt on executive remuneration
and, within the terms of the Directors’ Remuneration Policy
approved by shareholders at the AGM in September 2017,
determines and agrees with the Board the levels of
remuneration for each of the Executive Directors, the
Company Chairman and designated senior management
below Board level. Further details are given in the
Remuneration Report on pages 74 to 96. The Directors’
Remuneration Policy has been reviewed, updated and will be
tabled for approval by shareholders at the Company’s AGM in
September 2020; you can find the policy on pages 79 to 86.
The role of the Nomination Committee is to undertake an
annual review of succession planning and ensure that the
membership, composition and diversity of the Board and its
Committees, including the balance of skills, remain
appropriate. The Committee also reviews the outcome of the
annual Board effectiveness review to determine any changes
required. Further details are given in the Nomination
Committee report on pages 68 to 69.
XPS Pensions Group Annual Report 2020
57
BOARD RESPONSIBILITIES
Board responsibilities
The Board is focused on providing entrepreneurial leadership
to the Group. It is responsible for directing and controlling the
Group and has overall authority for the effective and prudent
management and conduct of the Group’s business and the
Group’s strategy and development. The Board monitors
performance, and is responsible for ensuring that appropriate
financial and human resources are in place for the Group to
meet its objectives, and takes the lead in setting and
embedding the Company’s culture, values and standards. The
Board is also responsible for ensuring the maintenance of a
sound system of internal control and risk management
(including financial, operational and compliance controls, and
for reviewing the overall effectiveness of systems in place),
and for the approval of any changes to the capital, corporate
or management structure of the Group. There is a formal
schedule of matters reserved for Board approval which is
subject to annual review and published on the Company’s
website: www.xpsgroup.com.
The matters reserved for the Board include:
• The Group’s long-term
objectives, business
strategy and risk appetite;
internal control and risk
management;
• The Group’s system of
• The Company’s policies,
values and standards;
• Annual business plans,
budgets and forecasts;
• Extension of the Group’s
activities into new business
or geographic areas;
• Changes in capital structure
and any form of fundraising
or asset securitisation;
• Major changes to the
corporate structure,
including material
acquisitions and disposals;
• Interim and annual financial
statements and dividend
policy;
• Material guarantees,
indemnities and letters of
comfort;
• Contracts which are
material strategically or by
reason of size or duration;
• Calling of shareholder
meetings and related
documentation;
• Changes to the
membership of the Board
and its Committees;
• Remuneration policy for
the Directors and senior
executives;
• Introduction of new share
incentive plans or major
changes to existing plans;
and
• The Company’s overall
corporate governance
arrangements.
There is a clear division of key responsibilities between the
Chairman and the Co-CEOs.
58 XPS Pensions Group Annual Report 2020
BOARD DIVISION OF RESPONSIBILITIES
Tom Cross Brown
Chairman
• Leads the Board and manages the
effective leadership and governance of the
Board
• Provides direction and focus on business
strategy, performance, value creation and
accountability
• Ensures the Board establishes a strategy
that facilitates the entrepreneurial
development of the Company and
promotes the long-term sustainable
success of the Company’s approach
• Ensures clear structure for effective
operation of the Board and its Committees
• Sets Board agenda and ensures sufficient
time is allocated to promote effective
debate to support sound decision-making
• Ensures the Board receives precise, timely
and clear information
• Encourages Directors to contribute fully to
Board discussions, ensuring sufficient
challenge of major proposals
• Meets with the Non-Executive Directors
independently of the Executive Directors
• Leads the process for evaluating the
performance and development needs of
the Board, its Committees and individual
Directors
• Leads the Board succession planning
process and chairs the Nomination
Committee
• Acts as a sounding board for the Co-CEOs
on important business issues
• Ensures the Board sets the risk appetite it
is willing to take in the implementation of
strategy
• Ensures effective communication with
shareholders to ensure that the Board
understands their views on governance
and performance against the strategy
• Ensures effective communication with
other key stakeholders
Strategic Report
Governance
Financial Statements
Co-Chief Executive Officers
• The Co-CEOs have worked together for over 20 years, having both started
their careers as trainee actuaries at Punter Southall, before spending many
years in the same team at KPMG
• Their long friendship and history of working together, and their
complementary skill sets, make the Co-CEO arrangement a success
• The Co-CEOs report to the Chairman and the Board and are responsible for
jointly leading the Group’s business and managing it in accordance with the
business plan approved by the Board, the Board’s overall risk appetite, the
Group policies approved by the Board and its delegated authorities, and all
applicable laws and regulations
• The Co-CEOs recommend budgets and forecasts for Board approval, lead
the investor relations programme and maintain a dialogue with the Chairman
on significant business developments and strategy issues
• Both Co-CEOs have leadership roles on large clients
Paul Cuff
Co-Chief Executive Officer
• Primarily responsible for raising the
profile of the Group in the market
and generating new business, both
in traditional service areas and in
the development of new services
as the market evolves
• Develops the Group’s strategy with
regard to M&A opportunities and
technology investment
Ben Bramhall
Co-Chief Executive Officer
• Primarily responsible for the
day-to-day operation of the
business, covering the provision
of services to existing clients,
revenue generation and the
Group’s people strategy
• Develops the Group’s internal
strategy to pursue large
opportunities within the market
Alan Bannatyne
Senior Independent
Non-Executive Director
• Acts as a sounding board for the
Chairman and other Directors
• Leads the annual review of the
Chairman’s performance
• Leads the Non-Executive Directors
meetings without the Chairman
present
• Acts as an additional point of
contact for shareholders, if they
have concerns that contact
through the normal channels have
failed to resolve or for which such
contact is inappropriate
• Chairman of the Audit and Risk
Committee
XPS Pensions Group Annual Report 2020
59
Board evaluation
The Board acknowledges that the Code requires regular
external board evaluations (as a company below FTSE 350)
and has conducted an external board evaluation in 2020,
facilitated by Ceradas Limited (‘Ceredas’). A request for
proposal was circulated to various external Board evaluators.
Proposals were reviewed by the Chairman and Company
Secretary and the Board agreed the appointment of Ceradas
as an independent adviser. Ceredas has no other connections
to the Company. The evaluation process is set out on page 61.
Outcome
The overall outcome of the evaluation process was
encouraging. Whilst the Board was encouraged by several of
the findings set out in the final report, it recognised that there
were areas on which further action would be helpful. An
action plan was agreed by the Board and progress will be
tracked against this regularly throughout the year and
progress will be assessed as part of the Board evaluation
process next year.
The following actions were identified to further improve the
effectiveness of the Board:
• Developing protocols to ensure consistency between
Board reports, to facilitate Board discussion and
decision-making;
• Further reporting to support the Board’s discussions about
strategic priorities and post-acqusition appraisals;
• Further development of the Board and Audit and Risk
Committee’s annual and ongoing overviews of internal
controls and associated procedures;
• Enhancing the Board’s approach to understanding the
views of shareholders by developing current
communication channels and ensuring informal shareholder
feedback is shared with the full Board.
Review of Chairman’s performance
The Non-Executive Directors, in addition to their role of
constructively challenging and facilitating the development
of the Group’s strategy, met to evaluate the performance of
the Chairman in May 2020, led by the Senior Independent
Director. The Senior Independent Director also engaged
with the Executive Directors separately for their feedback,
in addition to his meeting with Ceradas to discuss the
feedback from the external evaluation. The results of that
process were communicated by the Senior Independent
Director to the Board at its meeting in May 2020.
BOARD EFFECTIVENESS
Board operation and meetings
Decisions on operational matters are delegated by the Board
to the Executive Directors, consistent with the schedule of
matters reserved for Board approval. In advance of scheduled
Board meetings, each Director receives documentation
providing updates on Group strategy, finances, operations and
business development. The Board meets at least seven times
a year and at other times as and when necessary. The Board
considers business strategy quarterly and at least once a year
the Board will hold a strategy session to discuss and review
business strategy. The Directors are expected to attend all
meetings of the Board and any Committees of which they are
members, and to devote sufficient time to the Company’s
affairs to fulfil their duties as Directors. Non-Executive
Directors each need to commit a minimum of 28 days service
per year to the Company. The Board are satisfied that each
Non-Executive Director commits sufficient time to the
Company. Non-Executive Directors remain in regular contact
with the Chairman, whether in face-to-face meetings or by
telephone, to discuss matters relating to the Company and
have met several times during the year without the Executive
Directors present.
If a Director is unable to attend a meeting, they will still receive
Board papers before the meeting and they are encouraged to
submit any comments to the Chairman to ensure that their
views are recorded and taken into account during the meeting.
The Director will also receive the minutes and matters arising
in the usual way in order to ensure that they are fully informed.
The Board is ultimately responsible for the effectiveness and
monitoring of the Group’s system of internal controls. The
Audit and Risk Committee’s role is to assist the Board with its
oversight responsibility by reviewing and monitoring the
Company’s system of internal controls. It met five times in the
financial year and at its meeting in June 2020 considered the
internal controls assurance framework used during the
financial year, concluding that it was sound and appropriate
for the business.
Directors are reminded at the commencement of each
meeting to notify the Board of any conflicts of interest. Any
actual or potential conflicts of Directors with the interests of
the Company that arise must be disclosed for consideration
and, if appropriate, authorisation by the Board in accordance
with the Company’s Articles of Association. The Board may
authorise conflicts and potential conflicts, as long as the
potentially conflicted Director is not counted in the meeting
quorum and does not vote on the resolution to authorise.
Directors are required to notify the Group Chairman when a
conflict or potential conflict does arise in order that Board
authorisation can be considered. If the Board determines that
a conflict or potential conflict can be authorised, it may
impose additional conditions on the Director concerned.
A formal induction programme has been developed and
tailored for any new directors joining the Board. The
Chairman, with the support of the Company Secretary,
ensures that the development and ongoing training needs of
individual Directors and the Board as a whole are reviewed
and agreed following the annual performance evaluation of
the Board, its Committees and individual Directors.
Directors may seek independent professional advice at the
Company’s expense where they consider it appropriate in
relation to their duties. All Directors have access to the advice
and services of the Company Secretary.
60 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
2020 external evaluation process
Briefing meetings with
the Chairman and
Company Secretary, to
understand the context
and priorities of the
evaluation and to agree
on an aide memoire for
the individual Board
member meetings
Detailed document
review, including the
Company’s Board
agendas, papers,
minutes and previous
internal evaluation
outcomes
One-to-one meetings
with each Board
member, concentrating
on questions contained
in the pre-circulated
aide memoire
Observation of a Board,
Remuneration
Committee and Audit
and Risk Committee
meeting to further
understand Board
dynamics
Meeting with the Senior
Independent Director to
discuss feedback on the
Chairman from other
Board members
Feedback meeting
with the Chairman
Board Evaluation
Report circulated to
all Board members
Presentation
of findings/
recommendations by
Ceradas at the May
Board meeting
Action Plan agreed
2019 evaluation outcomes and progress
The 2019 evaluation identified the following areas for improvement, which have been improved as follows:
Actions from 2019
Improvements
1. To increase the amount of discussion time together,
outside of formal Board meetings, devoted to business
strategy
The Company has implemented quarterly strategy sessions,
in addition to the annual strategy day
2. To increase the time spent in formal Board meeting
discussions on current business issues and challenges
The Board is briefed on business issues by the Co-CEOs
within each meeting, in addition to the Head of Advisory
and the Managing Director of Administration who attend
each Board meeting to discuss business issues within their
businesses. The Head of SIPP and the Head of NPT also
regularly update the Board on their business areas and
issues within at Board meetings
3. To fit more frequent legal, compliance and accounting
updates from external advisers into the Board and
Committees’ annual programme of meetings, in order to
enhance Board members’ knowledge of future changes
affecting the governance of the Group
The Board receives briefings from external advisers in
at least three Board meetings per year. In FY2019/20
topics have included Director’s duties and share dealing,
bid defence and white collar crime in pensions
XPS Pensions Group Annual Report 2020
61
REFLECTIONS ON JOINING THE XPS BOARD OF DIRECTORS
Snehal Shah
Chief Financial Officer, appointed July 2019
Sarah Ing
Independent Non-Executive Director,
appointed May 2019
Q. How have you found your first year as a member
of the Board?
A. It has been a challenging yet thoroughly rewarding and
enjoyable first year. The XPS team is very talented and
highly motivated and it has been an honour to represent
the team on the Board. The Board is very collegiate,
supportive and I have learnt a great deal from the highly
experienced Non-Executive Directors.
Q. Can you describe your Board induction
programme?
A. Prior to my official start date, I had several meetings with
the Chief Executive Officers who brought me up to speed
with the Board processes and priorities. I was provided a
comprehensive pack of information from previous Board
meetings that helped me hit the ground running. I met
with the Senior Independent Director (also the chair of the
Audit and Risk Committee) to understand the financial,
audit and risk matters on the Board’s agenda. I met with
the General Counsel and the external auditors as part of
my own due diligence. I received training on Director
duties from the Company’s external lawyers.
Q. How would you describe the culture at XPS?
A. It is very rare to find a company where you can see its
core values in action every day in all locations. XPS’s
culture is embodied in our people who are all genuine,
friendly, empathetic and helpful.
Q. What are your governance-related objectives for
the coming year?
A. XPS has gone through rapid change over the last three
years from listing as Xafinity plc in 2017, doubling in size
through the transformational deal with PSG through to
three bolt-on acquisitions in 18 months. Governance and
processes have continued to evolve with the rapid
change. With ESG high on the agenda for investors, I want
to ensure that XPS continues to be at the forefront of well
governed listed organisations which will ultimately help
enhance shareholder value.
Q. How have you found your first year as a member
of the Board?
A. I have thoroughly enjoyed my first year on the Board of
XPS, meeting a wide range of exceptional and motivated
people across all divisions of the business. It has been an
exciting year with both challenges and opportunities and I
am delighted to be able to contribute towards a promising
future for XPS.
Q. Can you describe the process you went through to
be appointed?
A. I was approached by a head hunter to see if I was
interested in joining XPS and their list of potential
candidates for the role of Non-Executive Director. I was
shortlisted and then interviewed first by the Chairman and
then by the Senior Independent Non-Executive Director
and Non-Executive Director. The interviews covered my
background and experience within financial services as
well as discussion about XPS and the history, structure
and culture of the Company. I then met with the Co-Chief
Executive Officers. I was delighted to be invited to join the
Board.
Q. Can you tell us about your induction programme?
A. During my induction programme I met with the Chairman
and the Company Secretary to discuss Board-specific
matters, processes and procedures. I met with the
Co-Chief Executive Officers to discuss the Company’s
culture, values and wider Company matters. I also met
with the then Chief Financial Officer, Chief Operating
Officer and Head of Risk. I met with the Company’s
external auditors prior to my appointment as part of my
own due diligence.
I was provided with access to previous meeting minutes,
Board packs and relevant governance documents to
familiarise myself with. I also completed face-to-face
Director duties training with the Company’s external
lawyers.
Q. What will you be focusing on as the Shareholder
Engagement Champion?
A. This year XPS is updating its Director’s Remuneration
Policy (further detail can be found on pages 79 to 86, for
which shareholder approval will be sought at the Annual
General Meeting in September. Shareholder engagement
in relation to this is vital and will be a focus for myself and
my fellow Board members. Further to contact with
shareholders, I also engage with the broker community to
actively encourage wider coverage of XPS.
62 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Embedding culture
The Board recognises the importance of its role in setting the
tone of the Company’s culture, championing the behaviours
the Company expects to see and embedding these
throughout the Company. In addition to the Board, the
Executive Committee upholds the Company’s values and
ensure that the importance of compliance and integrity is
recognised at all levels throughout the Company. Corporate
Social Responsibility and corporate culture are discussed with
employees at Employee Engagement Group meetings.
Our people are fundamental to every aspect of our strategy
and are committed to delivering the best for our clients. In
January 2019 we rolled out our Purpose, Missions and Values
across the Group. As part of this, the Co-CEOs visited all 15
offices and spoke personally about what the values meant to
them and gave employees opportunity to reflect on what the
values meant to them. At XPS, our values are embedded in
everything we do and we refer to them regularly in employee
communications, team meetings, recruitment and new
business activities with clients and prospective clients. We
also this year launched the XPS – Values In Practice Awards,
recognising employees and teams who have demonstrated
the Company’s values in an exceptional way. We also
recognise employees through Exceptional Performance
Awards quarterly, which are awarded to a number of
employees for their exceptional performance and
demonstration of Company values.
This year, we created a new section within our Employee
Engagement Survey in relation to our values. Results were
very positive and 97% of employees agreed that they were
aware of the Company values as follows:
A
H
E
A
D
We are ambitious
We are helpful
We are experts
We are agile
We do the right thing
As a Company, we plan to regularly review and audit our
values and culture and appreciate the importance of this
developing as the business develops. The Board has
committed to auditing the Company’s culture in 2021.
Non-Executive Champions
The Chairman and Non-Executive Directors have this year
been appointed as ‘Champions’ for different areas as follows:
Tom Cross Brown
Governance / Strategy Champion
• Chairs the annual Company strategy day
• Regularly engages with the Company’s
management regarding strategy
• Works closely with the Company
Secretary to ensure the highest standards
of governance are upheld
Sarah Ing
Shareholder Engagement Champion
• Attends results presentations
• Regularly engages with Company brokers
regarding shareholder views, which Sarah
brings to Board meetings and decision-
making
Margaret Snowdon, OBE
Employee Engagement Champion
• Chairs the Employee Engagement Group
• Attends meetings of the Diversity,
Equality and Inclusion Group
Alan Bannatyne
Risk Management Champion
• Chairman of the Audit and Risk
Committee
• Works closely with Head of Risk to
oversee Group risks
XPS Pensions Group Annual Report 2020
63
Engaging with our stakeholders
As a Company we have completed an exercise to determine
who our stakeholders are, the key stakeholders and the
ways in which we engage with them and consider their
views during decision-making.
Further details of how the Company and the Board engage
with employees are set out on page 66 and within our
section 172 statement on pages 46 to 47.
Key stakeholders
Suppliers
Clients
Brokers /
Analysts
Certification
Bodies
Governance
Bodies
Employees /
Contractors
Insurers
Scheme
Members
Business
Partners
Trade
Bodies /
Professional
Bodies
Regulators
Bank /
Financiers
Media
Government
Authorities
Community,
Charities and
Environment
Shareholders
64 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Clients
At XPS, everything we do is ultimately for the benefit of our
clients. We engage with clients through annual client
satisfaction surveys to ensure we understand their views and
priorities. We also host an annual client conference and
participate in industry and client forums.
Shareholders
Our shareholders’ views are very important to us and as such
we engage with shareholders regularly through various
forums, including results roadshows, the Annual General
Meeting, and calls and meetings between the Chairman and
Non-Executive Directors and shareholders. Sarah Ing,
Non-Executive Director, is appointed the Company’s
Shareholder Engagement Champion.
Regulators
The Group has two FCA regulated entities, a TPR authorised
master trust and our Group is listed on the main market of the
London Stock Exchange. Having good relationships with
regulators helps us to address issues before they become a
potential concern. We engage with regulators by responding
to consultations, regulatory requests, industry meetings and
Margaret Snowdon, OBE is a Non-Executive Director of the
Pensions Regulator and keeps the Board updated on industry
developments.
Suppliers
We have a stable list of suppliers. We have newly appointed a
procurement team and an external company to liaise with our
suppliers and confirm they effectively manage the risks within
their own supply chains, including those in relation to modern
slavery. We complete quarterly performance reviews with our
key suppliers and conduct an annual review of suppliers to
provide services that are deemed as higher risk.
Communities, Charities and Environment
We have over 1,200 staff in 15 office locations across the UK.
Our position in local communities that provide an invaluable
source of clients, employees and suppliers is vitally important.
We also hold various employee-led charity events throughout
the year, including bake sales, dress down days and food
bank collections. For the second year running we are
partnered with the Mental Health Foundation, the charity
employees have chosen, as our main charity partner.
Employees / Contractors
As a leading pensions specialist, our people ultimately make
the difference in delivering high-quality services to clients
and driving innovation. This is why attracting the best people
and investing to further develop their skills are among our
highest priorities. Our employees reflect the key values of the
Group in being agile, helpful, expert, and ambitious and doing
the right thing. Ensuring we have the right people with the
right skills means we must develop our people, offer
attractive reward and retention benefits, invest in employees’
learning and development and have appropriate policies in
place to protect our employees and their interests.
You can find further information on how we engage and
consider the views of our key stakeholders within our
Directors’ section 172 statement on pages 46 to 47.
Annual General Meeting
The Company’s Annual General Meeting (‘AGM’) will take
place at 12pm on Tuesday 8 September 2020 at the Group’s
Reading office. At the time of publication, Government
guidance prohibits group gatherings and mandates a policy
of social distancing due to the risk of COVID-19. Therefore,
the AGM will be a closed meeting convened with the
minimum quorum of shareholders as stated in the Company’s
Articles of Association. XPS intends to facilitate the quorum
of shareholders for this meeting. All other shareholders
should not attempt to attend the AGM in person, in order to
protect fellow shareholders and our staff, and will not be
permitted admission if they attempt to do so.
The AGM notice setting out the resolutions to be proposed at
the meeting and including explanatory notes, together with
this Annual Report and Accounts, will be available on the
Company’s website (www.xpsgroup.com) and distributed to
shareholders who have elected to receive hard copies of
shareholder information at least 20 working days prior to the
date of the meeting. Voting at the AGM will be conducted by
way of a poll and the results will be announced through the
London Stock Exchange Regulatory News Service and made
available on the Company’s website. All Board members are
expected to attend the meeting and the Chair of each of the
Board’s Committees will be present to answer any questions
put to them by shareholders.
XPS Pensions Group Annual Report 2020
65
Employee engagement
As a Company we pride ourselves on effective employee
engagement. We engage with employees in various ways
including:
• Designated Employee Engagement Non-Executive
Director
Margaret Snowdon, OBE is appointed as the Company’s
designated Employee Engagement Non-Executive Director.
Margaret has extensive experience in people management
and volunteers within the pensions charity sector.
• Employee Engagement Group
The Employee Engagement Group is made up of members
across all 15 locations, employees at all levels and a diversity
of roles within the Group including roles within Pensions,
Administration and the central functions. The Group meets
regularly, has clearly defined terms of reference and clear
objectives. The Group is chaired by Margaret Snowdon,
OBE who reports back to the Board after every Employee
Engagement Group meeting and acts as the ‘employee
voice’ at Board meetings.
• Annual Employee Engagement Survey
The Company distributes an Employee Engagement Survey
annually, communicates the results with employees and
conducts an extensive review of the results with a view to
identifying and driving changes across the Group as well as
improving and evolving Company culture.
Office Heads review the local office results with the HR
team, individual teams consider their results and the Board
considers the results as a whole. The Employee
Engagement Group agrees an action plan and progress on
this is reported regularly to employees.
This year the survey results have led to focus on:
1. Clearer guidance around employee remuneration
(including bonus, exceptional performance awards
and total reward);
2. Clearer guidance around performance reviews and
career progression; and
3. Improved communication between departments.
• Diversity, Equality and Inclusion Group (‘DEIG')
The Company has an established Diversity, Equality and
Inclusion Group. Margaret Snowdon, OBE attends each
meeting of the group and updates the Board after each
meeting. The DEIG has sub-groups focusing on areas such
as disability, support for parents, gender/ethnicity, LGBT+
etc. The DEIG has reviewed and input into new HR policies
across the Group, the employee promotions and awards
process and recruitment best practice guide. The DEIG has
developed unconscious bias diversity training, organised
International Women’s Day activities across the Group,
reviewed the employee survey results from a gender split
perspective and held or contributed to various XPS and
industry events regarding diversity.
• Non-Executive Director and employee engagement
sessions
During the financial year, the Non-Executive Directors
hosted the first informal networking session in the XPS
London office. Employees were invited to come along to
meet the Non-Executive Directors and to ask them any
questions they had. Both employees and Non-Executive
Directors felt that this session was very valuable.
Unfortunately, we were forced to cancel the second
planned networking session in the Guildford office as a
result of the COVID-19 pandemic but the sessions will
resume as soon as possible.
• Whistleblowing hotline
As a Company we appreciate the importance of employees
being able to voice concerns. We have in place an external
independent whistleblowing hotline. The hotline is operated
by Expolink and is available 24 hours a day 7 days a week
for employees to anonymously report any concerns they
are not able to raise with their manager or HR. The service
also facilitates an online form option instead of making a
telephone call, should employees feel they are unable to do
so. The service is completely anonymous and reports are
dealt with appropriately internally. Employees are made
aware of this service upon joining the Company, posters are
displayed in communal areas of each office and managers
are encouraged to remind their offices and teams of the
service.
You can read more about responsibility to our people
within the Strategic Report on pages 42 to 45.
66 XPS Pensions Group Annual Report 2020
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Governance
Financial Statements
Q&A ON EMPLOYEE ENGAGEMENT
Margaret Snowdon, OBE
Non-Executive Director, appointed January 2017
Q. What prompted you to take on the role of Non-
Executive Director for Employee Engagement?
A. I suggested an Employee Engagement Group would be a
great way for the Board to hear from employees directly
and to tell them about Board thinking and to share
employee views with the Board.
Q. What relevant experience do you bring to the
role?
A. I am Chair of the Remuneration Committee of the XPS
Board and also lead on people matters at the Pensions
Regulator. I attend the Diversity, Equality and Inclusion
Group as well. Everything I do in this industry is about
delivering fair outcomes and that applies to staff as well
as customers. I have also managed people for nearly
40 years.
Q. How have you engaged with employees during
the year?
A. I chair the XPS Employee Engagement Group, attend the
Diversity and Equality Inclusion Group meetings, and
attend XPS conferences and other events regularly. I have
also met employees at the Non-Executive and Employee
Engagement sessions and had useful and interesting
discussions with employees.
Q. What have you learnt from the engagement
process?
A. What has struck me most is the willingness of people to
get involved, even when they are very busy with their day
jobs. The Group will develop over time and we will always
focus on matters that are relevant to staff at the time. It is
important that it is kept current and that we are also seen
to listen to what staff have to say, especially on reward
and culture.
Q. How do you report your findings to the Board?
A. Employee Engagement is a regular agenda item. We had
the Chair of the Diversity and Equality Inclusion Group
come along and present directly to the Board too. We are
listening.
Q. Has the Board taken any action as a result of the
employee feedback received?
A. Yes, we are very focused on ensuring we have the right
culture and that what we intend actually happens.
Q. Have you encountered any challenges in the role?
A. As always, time is a challenge, especially for a Non-
Executive Director who is not present in the offices every
day, but this stuff is important for the overall wellbeing of
the business and staff.
Q. What are your priorities for 2020?
A. We have three key priorities: ensuring staff understand
our executive remuneration policy and can help us ensure
it is balanced; reviewing the employee engagement
survey and focusing on areas we need to change; and
ensuring all of our actions match the culture we have set
out.
XPS Pensions Group Annual Report 2020
67
Dear Shareholder,
I am pleased to present the report of the Nomination
Committee for the year-ended 31 March 2020. The
Committee has met twice during the 2019/20 financial year
and all meetings were attended by all members of the
Committee. The Committee intends to continue to meet at
least twice annually with additional meetings as required.
The Nomination Committee assists the Board in determining
the composition and make-up of the Board, including its
skills, knowledge, experience and diversity. It is responsible
for developing and maintaining a formal, rigorous and
transparent procedure for identifying appropriate candidates
for Board appointments and making recommendations to the
Board. The Committee is also responsible for keeping under
review the leadership needs of the Group, both Executive and
Non-Executive, and for ensuring that succession planning
focuses on the continued ability of the Group to deliver its
strategic goals and compete effectively. The constitution and
terms of reference of the Committee are reviewed annually.
Membership of the Committee
The members of the Committee are myself, Alan Bannatyne,
Margaret Snowdon, OBE and Sarah Ing.
The Executive Directors are invited to each meeting and other
members of the management team as the agenda dictates.
Board changes
During the year, Snehal Shah succeeded Mike Ainslie as
CFO of the Company and Sarah Ing joined the Board as an
Independent Non-Executive Director. As detailed within the
2019 Annual Report, Russell Reynolds was engaged to assist
with the candidate search for both roles. Russell Reynolds
does not have any other connection with the Company or any
of the individual Directors. You can read Sarah Ing’s
comments on the appointment process on page 62.
Jonathan Punter stepped down from the Board on
12 September 2019. Jonathan was previously appointed a
Non-Executive Director by Punter Southall Group Limited
who have not appointed a replacement Director to the Board.
The Committee reviewed the size of the Board, the balance
between Executive and Non-Executive Directors and the
diversity of the Board; and is satisfied with the composition
and balance of skills, experience, independence and
knowledge of the Board and each Committee.
NOMINATION COMMITTEE REPORT
Delivering our
strategic goals
and competing
effectively
The Nomination Committee continues
to assist the Board in determining the
composition and make-up of the Board
and in developing succession plans to
ensure the continued ability of the Group
to deliver its strategic goals and to
compete effectively.
Membership and attendance
Chair
Tom Cross Brown
Committee members
Alan Bannatyne
Sarah Ing
Margaret Snowdon, OBE
Attending by invitation
Co-CEOs
CFO
2/2
2/2
2/2
2/2
68 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Board effectiveness evaluation
An external Board effectiveness evaluation was completed by
Ceradas during the financial year, including detailed
document review, face-to-face interviews with each Board
member and Board and Committee observation. Further
details can be found on pages 60 to 61.
Succession planning
During the year, the Nomination Committee reviewed
detailed succession plans covering all key executive roles
including those of the Executive Directors. The Committee is
satisfied that the contingency and talent management plans
in place for senior executive positions are appropriate, and
has agreed that the Group’s succession planning should be
kept under review and further developed over time to cover
the Chairman and Non-Executive Director roles.
Induction programme and training
A formal tailored induction for Non-Executive Directors is in
place supported by a programme of training, to further their
knowledge of the Group, its business, culture, operations,
employees and governance and to ensure awareness of their
regulatory duties and obligations as a director of a UK
premium listed company. Further information is provided by
interviews with Sarah Ing and Snehal Shah on page 62.
Diversity, equality and inclusion
The Company has an established Diversity, Equality and
Inclusion Group, championed by Non-Executive Director
Margaret Snowdon, OBE and chaired by a senior female
within the Group. The DEIG has made great progress and had
a significant impact across the business, and is a key channel
of communication and engagement for employees.
The Company acknowledges that there remains a gender pay
gap within the business which reflects a higher proportion of
males in higher paid roles than females. Whilst this is partly a
challenge of the UK industry in which the Company operates,
with a male-dominated actuarial profession, the Board
believes it has a responsibility to promote change, both within
the XPS Group and the industry more generally. We are
pleased to report that the Company’s gender pay gap has
reduced within the last year. We have completed an in-depth
analysis into our gender pay gap, allowing us to consider
where we need to concentrate our efforts to reduce the gap
further. During the year, we have implemented an Agile
Working policy, allowing all employees and managers to
consider adjustments to working arrangements in
conjunction with other XPS policies. During the year we have
also employed a number of senior females and the Company
continues to participate in a mentoring programme in
conjunction with Women Ahead, aimed at retaining and
developing female actuaries and other female professionals
through ongoing career advice and support. We have also
joined the Valuable 500, you can read more about this on
page 42.
“Succession of the Board and
senior leadership remains the
key priority for the Nomination
Committee.”
Tom Cross Brown
Chair of the Nomination Committee
The Board believes that no individual should be discriminated
against, whether for reasons of gender, ethnicity or other
grounds that restrict social inclusion, and this extends to
Board appointments which it considers should be made on
merit and on the basis of ensuring an appropriate balance of
skills and experience within the Board. The Company’s Board
diversity improved during the year, however, the Board
recognises that greater diversity, in the widest sense of
diversity of race, experience and approach, can generate a
more diverse perspective on issues which, in turn, has the
ability to benefit Board effectiveness through improved
discussions and better decisions.
You can find information regarding the Company’s gender
balance, including senior management, on page 42 in the
Responsible Business section.
Tom Cross Brown
Chair of the Nomination Committee
24 June 2020
XPS Pensions Group Annual Report 2020
69
AUDIT AND RISK COMMITTEE REPORT
Delivering
independent
oversight
The Audit and Risk Committee continues
to provide oversight of the Group’s
financial reporting procedures and
internal control framework, and acts
as a source of independent oversight.
5/5
5/5
5/5
Membership and attendance
Chair
Alan Bannatyne
Committee members
Sarah Ing
Margaret Snowdon OBE
Attending by invitation
CEOs
CFO
COO
Head of Risk
General Counsel
70 XPS Pensions Group Annual Report 2020
Dear Shareholder,
I am pleased to present the report of the Audit and Risk
Committee for the year ended 31 March 2020. The
Committee met five times during the 2019/20 financial year
and intends to continue to meet at least three times annually.
All meetings were attended by all members of the
Committee.
Membership of the Committee
The members of the Committee are myself, Sarah Ing and
Margaret Snowdon, OBE. The Board is satisfied that the Audit
and Risk Committee as a whole has competence relevant to
the sector in which the Company operates and that I and
Sarah Ing have recent relevant financial experience as can be
seen in our biographies included on pages 52 to 53 of the
Annual Report.
The Executive Directors are invited to each meeting as well as
the Chief Operating Officer, Head of Risk, General Counsel,
the Financial Controller and other members of the
management team as the agenda dictates.
Auditor
The Committee is responsible for making recommendations
to the Board regarding the appointment of its external
auditors and their remuneration. BDO LLP has been the
Group’s Auditor since 2014. The Group Audit Partner is
required to rotate after a maximum of five years; the current
audit partner, Simon Brooker, was appointed in September
2018.
The Committee is responsible for making recommendations
on the independence of the Company’s Auditor, BDO LLP. In
addition, the Auditor has internal processes, which include
peer reviews, to ensure that independence is maintained. The
Committee will review the level of audit fees and non-audit
fees on an ongoing basis. See Note 5 to the Financial
Statements on page 123.
The Committee has reviewed the approach to the annual
audit at a meeting that the Auditor attended ahead of the
start of fieldwork. The Auditor then attended a further
Committee meeting at the completion stage of the audit to
present their findings. There is an open line of communication
between the Chair of the Audit and Risk Committee and the
audit engagement partner. The Committee assessed the
effectiveness of the external audit process by obtaining
feedback from parties involved in the process, including
management and the external auditor.
Based on this feedback and its own ongoing assessment, the
Committee remains satisfied with the efficiency and
effectiveness of the audit.
After due and careful consideration, the Committee remains
satisfied with the effectiveness and independence of BDO
LLP and has recommended to the Board that BDO LLP be
reappointed as the Company’s Auditor.
Strategic Report
Governance
Financial Statements
Significant accounting matters considered during the year
Matters considered
Action
Revenue recognition, accrued income and trade receivables
Depending on the income stream and the nature of the
engagement, the Group recognises revenue on either time
cost incurred, fixed fee or rateably over the period of
providing the relevant services. Billing is mainly in arrears and
occurs monthly or quarterly.
Carrying value of goodwill and intangible assets
The Group has significant intangible assets on the balance
sheet in the form of goodwill, customer relationships, brands
and software. The intangible assets have to be reviewed for
impairment at least annually or if there are any indicators of
impairment.
Impact of IFRS 16 – Leases
The Group has adopted IFRS 16 using the modified
retrospective approach from 1 April 2019 but has not restated
the prior year comparatives.
The Committee reviewed the approach to revenue recognition
including the process for accrued and deferred revenue. The
Committee receives regular updates on ageing of accrued
revenue and trade receivables. The Committee has also
considered the conclusions reached by BDO as part of their
audit of this area and is satisfied that management has
adopted appropriate processes and controls over revenue
recognition, accrued revenue and trade receivables.
The carrying value of all indefinite lived assets are tested for
impairment annually. In reaching their conclusion that the
treatment adopted is appropriate, the Committee has
reviewed the forecasts, key assumptions and methodology
adopted by management. BDO’s findings have also been
considered by the Committee in reaching its conclusions over
the appropriateness of the treatment within the financial
statements.
The Committee received accounting papers prepared by
management showing the impact of IFRS 16 on the balance
sheet, income statement and disclosures. The Committee
reviewed the key assumptions used in the application of IFRS
16 as well as the disclosures in the Annual Report. The
Committee has also considered BDO’s findings and it is
satisfied that the significant judgements and estimates and
related disclosures given within the accounts are sufficient to
gain a proper understanding of the methodology of
accounting for leases across the Group.
Presentation and disclosure of exceptional and non-trading items
The Group classifies certain items in the income statement
as exceptional/non-trading to allow a clearer understanding
of the underlying trading performance of the business.
Exceptional and non-trading items in the year totalled
£12.8 million (2019: £12.9 million). For more details, see
Note 6 to the Financial Statements on page 124.
As part of their assessment that the treatment of exceptional/
non-trading items in the financial statements is appropriate,
consistent with the Group’s accounting policies and with the
guidance issued by the FRC, the Committee has considered
each of the items treated as exceptional/non-trading and
challenged, where necessary, the treatment adopted by
management. The Committee has also considered the
conclusions reached by BDO as part of its audit in this area
and is satisfied.
Business combinations
During the year, the Group acquired the entire share capital
of RL Corporate Pension Services Limited for cash
consideration of £4.8 million and of Trigon Professional
Services Limited for an initial payment of £2.8 million,
and up to £1.1 million in contingent consideration.
The Committee has reviewed management’s assessment of
the fair value of the assets and liabilities acquired and
resulting goodwill from the acquisitions. The Committee has
reviewed the disclosures in respect of the acquisitions and
considers the accounting and disclosures to be adequate.
XPS Pensions Group Annual Report 2020
71
AUDIT AND RISK COMMITTEE REPORT CONTINUED
“The updated risk management
framework rolled out during the year
has been supported by a strong culture,
active engagement from staff and clear
direction from Executive Management.”
Alan Bannatyne
Chair of the Audit and Risk Committee
Internal Audit
An Internal Audit function has been provided, using a
co-sourcing agreement with PwC since 2017. It offers
independent oversight of operational and risk management
activities, with audit reports and relevant findings presented
to the Committee. This year it focussed on the Investment
Management business and no significant control weaknesses
were identified. The Internal Audit programme is supported
by a number of regular assurance activities which are carried
out by the Risk and Compliance teams, which look at the
design and effectiveness of internal controls for key
processes.
Annual Report review
A final draft of the Annual Report is reviewed by the
Committee prior to consideration by the Board and the
Committee considered whether the 2020 Annual Report was
fair, balanced and understandable and whether it provided
the necessary information for shareholders to assess the
Group’s performance, business model and strategy. The
Committee was satisfied that, taken as a whole, the Annual
Report is fair, balanced and understandable and provides the
necessary information.
Risk
XPS Group have continued to enhance our risk management
framework. This is supported by a strong culture, active
engagement from staff and a clear direction from Executive
Management.
The rollout of the updated risk management framework is
now complete and supports a common approach across all
businesses and support functions in the Group. This includes
a clear articulation of the key risks, the appetite the Group has
for each of these and the controls that are in place to manage
these risks within their stated appetites.
The framework embraces the whole spectrum of activities
and measures addressing risk (identification, evaluation,
treatment, reporting and monitoring) which, taken together,
support the achievement of the organisation’s objectives. The
underlying processes and control procedures are regularly
reviewed and amended to reflect the findings of the process,
including improvements in operational administration,
regulatory compliance and legislative changes.
A new reporting framework has been deployed as part of this
work which provides Executive Management with regular
updates on our overall risk profile and detailed reports on
risks that may require action to keep within appetite. This
framework includes information on relevant Key Risk
Indicators as well as summarising root-cause analysis reviews
for incidents and errors.
The Risk Management Committee continues to meet on a
regular basis to discuss risks and issues as well as ensuring
that the framework is meeting the needs of the Group’s
stakeholders. This committee also acts as the mechanism by
which risks reported at business level can be considered in
the context of the Group and whether escalation is required.
Risk resources within the business have also been
reorganised, with a central team created to support all
businesses within the Group and ensure best practices are
applied consistently. Part of the responsibilities of this new
team is to integrate the existing external assurance activities
72 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
carried out across the Group into the audit plans to be
approved by Executive Management. These assurance
activities include certifications to ISO 9001 and ISO 27001,
AAF 01/06, IIP and the IoA Quality Assurance Scheme
(‘QAS').
The Audit and Risk Committee regularly reviews the wider
internal control processes and enlists external support to
review and test when it is deemed necessary. Recognising
the importance of the protection of data assets and business
resilience, the Committee considers these specific risks at
each of its meetings, along with the development of the
frameworks to effectively manage them.
We are pleased to note that our Risk Management
frameworks have proved effective in allowing the Group to
successfully react to the recent Coronavirus pandemic,
allowing us to continue to provide our services and manage
the new and changing risk environment.
Whistleblowing
The Group has a clear, formalised Whistleblowing Policy and
procedure available to all staff in order to raise concerns
about perceived wrongdoing, non-compliance with our own
standards, regulatory requirements and/or the law. This
policy was reviewed this year. We have a confidential helpline,
run by a third party, Expolink, in order that staff can report
any concerns or perceived shortcomings within our
operations without fear of sanction or disadvantage. The
helpline is promoted through the intranet and posters.
Incidents are reported and then reviewed by the Board at the
next available meeting or sooner if appropriate. The Group’s
Audit and Risk Committee reviews the policy and process
annually to ensure they remain fit for purpose.
Alan Bannatyne
Chair of the Audit and Risk Committee
24 June 2020
XPS Pensions Group Annual Report 2020
73
DIRECTORS’ REMUNERATION REPORT
Remuneration
at a glance
Our remuneration principles
The overall remuneration policy is designed to promote the long-term success of the Group whilst ensuring it does not
support inappropriate risk-taking. The Remuneration Committee has developed the Directors’ Remuneration Policy with the
following principles in mind:
Aligned with colleagues – by striving for a consistent approach to reward for the Executive Directors and
Senior Management. This is evidenced with fixed and variable pay strategies being aligned e.g the bonus
arrangement and performance share plan (“PSP") applies to both.
Aligned with shareholders – in order to motivate Executive Directors and incentivise the delivery of
sustained performance over the long term, and to promote alignment with shareholders’ interests.
Aligned with clients – the continued strategy to become the pre-eminent pensions consulting and
administration firm in the UK at the same time as achieving sustainable growth through investing in client
services, technology and staff demonstrates the commitment to provide an agile, high-quality and
market-leading service that puts client satisfaction at the heart of the business.
Aligned with financial performance – to motivate Executive Directors and support the delivery of the
Group’s financial and strategic business targets.
Competitive – remuneration packages are reviewed annually and benchmarked by reference to the
external market. This allows us to attract and retain highly talented people, who know that good
performance will be rewarded.
Designed to encourage retention – deferred variable remuneration does not give rise to any immediate
entitlement. PSP awards normally require the participant to be employed continuously by the Group until
at least the third anniversary of grant in order to vest in full.
££ £
£
£ £
74 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Our Executive Directors’ remuneration at a glance
Our current remuneration structure
2020
2021 2022
2023
2024
Key features of
the policy
How we implemented the
policy
Broadly aligned with the pay
budget for other employees
No salary increment since
2018
>The maximum opportunity is
150% of salary and potentially
payable in cash and deferred
shares. Malus and clawback
provisions apply.
> Bonus is payable subject to the
achievement of performance
conditions (financial and personal
objectives) which will be set by the
Remuneration Committee. Malus
and clawback provisions apply.
> Maximum ‘normal’ grant level is
150% of salary.
Malus and clawback provisions
apply.
> Aligned with long-term business
strategy to become the pre-
eminent pensions consulting and
administration firm in the UK and
delivery of shareholder value due
to strong cash generation and
non-cyclical demand for services.
The Co-CEO’s were
awarded 45% of salary and
the CFO was awarded
33.75% of salary, as
determined by the
Remuneration Committee.
2019 bonuses were paid
on financial performance
as well as personal
objectives (detailed on
pages 89 to 90).
The February 2017 PSP
award is subject to
underlying EPS
performance and relative
TSR performance to
31 March 2020. The overall
payout for the award is
equal to 40.3% of
maximum.
Salary and
benefits
Cash bonus
Fixed Pay
Short-term
variable pay
Financial/functional
and personal
objectives set with
reference to business
plans approved by
the Board
XPS
Performance
Share Plan
(‘PSP’)
Long-term
variable pay
Stretching
performance
conditions measured
over a three-year
period with a further
two-year post
-performance holding
period.
Performance
conditions based
upon adjusted
earnings per share /
TSR to comparator
group.
Share ownership
guidelines
Share
ownership
guidelines
> Significant share ownership guidelines for all Executive
Directors as follows;
No maximum but no less than 200% of salary for all Executive
Directors.
Remuneration at a glance: pay outcomes for the year
2019/20 Fixed remuneration
Base salary
Co-CEOs
£288,000
CFO
£202,207
Pension
Co-CEOs
6% of salary
CFO
6% of salary
These pension contributions are in line with the average contribution levels across the Group.
Annual bonus
The financial element of these bonuses is based on Group Profit Before Tax (‘PBT'). The reported Group Adjusted PBT for
2019/20 would normally have resulted in a bonus payment of 42% of the maximum for this element of the bonus. When
combined with the performance against strategic objectives, this would have led to bonuses of 50% of the maximum. However,
following discussions with the Executive Directors, the Remuneration Committee agreed that the level of bonus payable be
reduced from 50% of maximum to 30% of maximum. This has resulted in the bonus outturn for the Executive Directors being
aligned with that for other members of staff. Details of financial and personal objectives can be found on pages 89 to 91.
£m
Group Adj. PBT (75% of potential)
Threshold
(£0,00)
23,400
Target
(£0,00)
24,886
Maximum
(£0,00)
25,621
Actual
(£0,00)
24,100
Payout
(% of this
element)
42%
XPS Pensions Group Annual Report 2020
75
DIRECTORS’ REMUNERATION REPORT CONTINUED
Delivering
fair and
reasonable
remuneration
The Remuneration Committee continues
to ensure a robust link between
strategy, reward and performance
whilst remaining committed to fairness
and transparency.
Margaret Snowdon, OBE
Chair of the Remuneration Committee
6/6
6/6
6/6
6/6
Membership and attendance
Chair
Margaret Snowdon
Committee members
Tom Cross Brown
Alan Bannatyne
Sarah Ing
Attending by invitation
Co-CEOs
CFO
COO
HR Director
76 XPS Pensions Group Annual Report 2020
Dear Shareholder,
XPS Pensions Group has continued to make good progress
against the strategy the Board has agreed. During the year
ended 31 March 2020, we have completed the exit from the
Transitional Services Agreement with Punter Southall Group,
continued to develop the XPS brand, continued to expand the
Group with the acquisitions of RL Corporate Pension Services
Limited and Trigon Professional Services Limited and won
awards for Pensions Actuarial Firm of the Year and Third Party
Administrator of the Year at the UK Pensions Awards 2019. We
have also achieved some very encouraging new business wins.
The Group achieved a creditable financial performance in
the year and delivered profitable revenue growth, a healthy
operating margin and strong cash generation. Revenue grew
by 9% with Adjusted Diluted Earnings Per Share remaining
constant with the prior year. This builds on growth in Adjusted
Diluted Earnings Per Share since XPS was floated on the
London Stock Exchange in 2017 of 35%.
Board and Committee changes
During the year, Mike Ainslie stepped down from the Board and
his appointment as Chief Financial Officer. Snehal Shah was
appointed Executive Director and Chief Financial Officer,
effective July 2019. Sarah Ing was appointed to the Board as an
Independent Non-Executive Director effective May 2019.
Remuneration/fee arrangements for both new Directors are set
out within this report. Upon appointment, Sarah Ing also joined
the Remuneration Committee. The Committee is now formed of
Tom Cross Brown, Alan Bannatyne, Sarah Ing and myself.
Engaging with our stakeholders
Shareholders
At last year’s Annual General Meeting held on 12 September
2019, the Remuneration Committee was pleased that
shareholders approved the Remuneration Report with 99.96%
of votes for, an increase from 79.99% the prior year. We are
grateful for the ongoing shareholder engagement and
constructive feedback allowing us to ensure we are able to
reflect the views of shareholders in the decisions that the
Remuneration Committee makes.
Employees
The Employee Engagement Group, chaired by myself as
Designated Employee Engagement Non-Executive Director,
considers Executive Director Remuneration, taking account of
employee views. The Employee Engagement Group was set up
with the purpose of providing an ‘employee voice’ to the Board
by raising any matters or issues highlighted by employees. It is
a forum for employees to share ideas and concerns with the
Board in a consultative manner and is not a decision-making
group. One area of focus for the Employee Engagement Group
is reward and remuneration of Executive Directors; members
are asked to provide feedback on the Directors’ Remuneration
Policy and their remuneration arrangements. This improves
engagement between the Board and Group employees.
“Seeing the Remuneration Committee engage in
open discussion with the Employee Engagement
Group on the proposed Policy has been beneficial in
increasing my confidence in our internal processes
and my motivation to work for a company which
values the opinions of their employees from all
locations and at all levels of seniority.”
Abigail Watts – Consultant
Member of the Employee Engagement Group
Strategic Report
Governance
Financial Statements
Directors’ Remuneration Policy
The current Directors’ Remuneration Policy was approved by shareholders at the 2017 AGM and therefore is due for renewal
which will be sought at the 2020 AGM. Due to the ongoing COVID-19 pandemic, the Company has been unable to hold
meetings with shareholders to fully consult on the updated policy as would have been preferred. Therefore the Company has
updated the policy to satisfy the Corporate Governance Code 2018 required changes and intends to seek approval for an
updated Directors Remuneration Policy again at the Company’s 2021 AGM.
The proposed Directors’ Remuneration Policy can be found on pages 79 to 85. The Committee has considered the factors set
out in Provision 40 of the Corporate Governance Code 2018. Remuneration is designed to be relatively simple and fully
disclosed in the Directors’ Remuneration Report. The size of potential awards under the annual bonus and the PSP is capped
and not considered excessive in the context of wider market practice. In line with the Code, when determining variable pay
outcomes the Committee will look at performance in the round, including from a risk perspective, to ensure that pay-outs are
reflective of overall performance and the shareholder experience. We set targets under the incentive schemes which are
designed to be challenging but achievable and which do not encourage inappropriate risk-taking. All variable pay awards are
also subject to malus and clawback. We believe that the strong governance culture across the Group is reflected by the rigour
with which executive remuneration is considered by the Committee.
Remuneration of the Executive Directors for 2020/21
The table below summarises our intended approach to the remuneration of the Executive Directors for 2020/2021.
Component of remuneration
Summary of approach
Base salary and benefits
Pension
Annual bonus
Long-term incentives
All-employee share plans
Share ownership guidelines
Base salary and benefits are reviewed annually on 1 April in light of a number of
factors, including the approach to salary reviews more generally across the Group.
Annual salary reviews have been deferred until 1 October 2020, due to the ongoing
COVID-19 pandemic. The base salaries of the Co-Chief Executive Officers have not
been increased for the 2020/21 financial year and therefore remain:
Ben Bramhall – £288,000
Paul Cuff – £288,000
On 1 October 2020. The base salary for the Chief Financial Officer will be increased
by 2% and will be therefore:
Snehal Shah – £243,270
Defined contribution/cash supplements of 6% are paid and are aligned with the
levels available for employees.
Payable subject to the achievement of challenging financial/strategic/personal
performance conditions. Malus clawback provisions apply. Maximum bonus
opportunity from the Executive Directors potentially payable in cash and deferred
shares:
Ben Bramhall – 150% of salary
Paul Cuff – 150% of salary
Snehal Shah – 112.5% of salary
Provided via a Performance Share Plan (‘PSP’). Annual awards over shares made
that vest subject to stretching performance conditions generally measured over a
three-year period. Maximum ‘normal‘ grant level is 150% of salary. Malus and
clawback provisions apply.
Executive Directors are entitled to participate in all of the Company’s employee
share plans, including the Share Save Plan, on the same terms as other employees.
Executive Directors are subject to a minimum shareholding requirement of 200%
of salary with a requirement to maintain a shareholding post cessation of
employment being introduced.
XPS Pensions Group Annual Report 2020
77
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual bonus payments for 2019/20
The financial element of these bonuses is based on Group Profit Before Tax (‘PBT'). The reported Group Adjusted PBT for
2019/20 would normally have resulted in a bonus payment of 42% of the maximum for this element of the bonus. When
combined with the performance against strategic objectives, this would have led to bonuses of 50% of the maximum. However,
following discussions with the Executive Directors, the Remuneration Committee agreed that the level of bonus payable be
reduced from 50% of maximum to 30% of maximum. This has resulted in the bonus outturn for the Executive Directors being
aligned with that for other members of staff.
On this basis, the bonus outturn for 2019/20 for the Executive Directors is as follows:
Executive Director
Ben Bramhall
Paul Cuff
Snehal Shah
% of
salary
45%
45%
33.75%
% of
bonus
maximum
30%
30%
30%
Vesting outcomes for the 2017 PSP awards
The February 2017 PSP award is subject to underlying EPS performance and relative TSR performance to 31 March 2020. The
overall pay-out for the award is equal to 40.3% of maximum.
The Committee considers that the Remuneration Policy operated as intended during 2019/20 and that remuneration outcomes
are consistent with the Group performance and appropriately reflect performance delivered for our shareholders over the
respective periods. Other than that mentioned above, the Committee felt that no discretion needed to be applied for these
remuneration outcomes.
Updated share arrangements for employees
The Remuneration Committee has considered updated share arrangements for all employees across the Group, excluding the
Executive Directors. The Company will grant deferred Restricted Stock Units (‘RSUs’) under the Company’s existing
Performance Share Plan (‘PSP’). The awards will have a three-year vesting period, dependent upon remaining in employment
with the Company, and no underlying performance conditions attached. The award levels have been correspondingly reduced.
The Company believes these arrangements will be viewed as valuable by staff, in comparison to the current arrangements,
acting as an effective tool for retention and attraction of the best talent whilst maintaining a direct link to the Company’s share
price.
Other activities to note
The Remuneration Committee reviewed the Group’s gender pay gap analyses and action plans. I have also played an active role
throughout the year on the Group’s Diversity, Equality and Inclusion Working Group, in addition to chairing the Employee
Engagement Group.
I trust that you find this report to be informative and transparent and I hope to receive your support for the Directors’
Remuneration Policy and Report at the AGM. I am keen to encourage ongoing open dialogue with our shareholders regarding
executive remuneration and welcome all engagement.:
Margaret Snowdon, OBE
Chair of the Remuneration Committee
24 June 2020
78 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Directors’ Remuneration Policy 2020
This Remuneration Policy, which has been approved by the Board, contains the material required to be set out in the Directors’
Remuneration Report for the purposes of Part 4 of The Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013, which amended The Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (‘the DRR Regulations’).
The Directors’ Remuneration Policy as set out in this section of the Directors’ Remuneration Report will take effect for all
payments made to Directors with effect from the conclusion of the forthcoming AGM (in place of the current policy approved at
the 2017 AGM). The new policy is very similar to the current one, save for the following minor changes to the way it is operated
for Executives:
• Pension provision is capped at 6% of salary, rather than 8% permitted under the previous policy;
• Remuneration Committee ability to adjust the PSP outturn has been incorporated (this ability was already in place for the
annual bonus);
• Clawback and malus provisions applied to the annual bonus and PSP have been updated; and
• Post-cessation share ownership guideline is being introduced.
Element and purpose
Policy and operation
Maximum
Performance measures
Base salary
The core element of
pay, reflecting the
individual’s position
within the Company
and experience
The base salary of each Executive
Director takes into account the
performance of each individual
and is set at an appropriate level
to secure and retain the talent
needed to deliver the Group’s
strategic objectives. Salaries are
reviewed annually on 1 April and
are influenced by: information
from relevant comparator groups
(referencing the Group’s
competitors and public
companies in other industries);
the performance of each
individual Executive Director; and
average increases for employees
across the Group as a whole.
Benefits in kind
To provide market-
competitive benefits
valued by recipients
Pension
To provide
retirement benefits
Benefits currently include
permanent health insurance, life
insurance, private medical
insurance and car allowance and
may also include other benefits in
the future. In certain limited
circumstances, relocation
allowances may be necessary.
All benefits are subject to annual
review to ensure they remain in
line with market practice.
Executive Directors participating
in the pension plan benefit from
matching annual Group
contributions of 6% of base
salary. Executive Directors are
entitled to take all or part of their
pension contributions as a cash
allowance.
n/a
Annual increases will not exceed
7.5% + RPI or the average
increase of employees across the
Group in any given year,
whichever is higher. The level of
increase may deviate from this
maximum in the case of special
circumstances for example,
increases in responsibilities or
promotion. As an example, this
may occur if the market
capitalisation of the Company
increases as the shares are
‘re-rated’ by investors such that
the comparator group changes.
In this scenario, the Board would
consider the increase and the
performance of the Company.
Other elements of remuneration
may also change. In these cases,
any exceptional increase will not
exceed 20% of salary a year.
Benefits (excluding any relocation
allowances) may be provided up
to an aggregate value of normally
£30,000 for each Executive
Director (indexed to inflation).
n/a
The maximum employer’s
contribution (or cash
supplement) is 6% of salary.
n/a
Executive Directors’ employer’s
contribution levels are aligned to
the contribution levels for the
majority of the workforce.
XPS Pensions Group Annual Report 2020
79
Element and purpose
Policy and operation
Maximum
Performance measures
Annual bonus
To motivate
Executive Directors
and support the
delivery of the
Group’s financial
and strategic
business target over
a one-year
operating cycle
Annual bonus plan levels and the
appropriateness of measures are
reviewed annually to ensure they
continue to support our strategy.
Once set, performance measures
and targets will generally remain
unchanged for the year, except to
reflect events (e.g. corporate
acquisitions, other major
transactions) where the
Committee considers it to be
necessary in its opinion to make
appropriate adjustments.
The Remuneration Committee
retains the flexibility to pay
annual bonus outcomes in cash
and/or deferred shares (which
may allow for dividend roll-up).
Clawback and malus provision
apply as explained in more detail
in the notes to this Policy table.
Performance
Share Plan
To motivate
Executive Directors
and incentivise the
delivery of
sustained
performance over
the long term, and
to promote
alignment with
shareholders’
interests
Awards under the PSP may be
granted as nil/nominal cost
options which vest to the extent
performance conditions are
satisfied over a period normally
of at least three years.
Awards will vest at the end of the
specified vesting period at the
discretion of the Remuneration
Committee and are subject to a
further holding period of two
years (or such shorter period so
that the period from the date of
grant until the end of the holding
period will be equal to five years).
The PSP rules allow that the
number of shares (or the cash
equivalent) subject to vested PSP
awards may be increased to
reflect the value of dividends that
would have been paid in respect
of any record dates falling
between the grant of awards and
the expiry of any vesting period.
Clawback and malus provisions
applied are explained in more
detail in the notes to this Policy
table.
80 XPS Pensions Group Annual Report 2020
The maximum annual bonus
opportunity is 150% of base
salary. For 2020/21, the maximum
opportunity will be 150% of base
salary for the Co-CEOs and
112.5% of salary for the other
Executive Directors.
The market value of shares to be
awarded to Executive Directors in
respect of any year will normally
be up to 150% of base salary, with
awards of a maximum of 200%
allowable in exceptional
circumstances.
Bonuses will be payable subject
to the achievement of
performance conditions which
will be set by the Remuneration
Committee.
The targets may be financial and/
or personal and strategic. The
intended weighting of these
measures is not less than 60%
financial. Where a sliding scale of
targets is used, attaining the
threshold level of performance
for any measure will not typically
produce a payout of more than
20% of the maximum portion of
overall annual bonus attributable
to that measure, with a sliding
scale to full payout for maximum
performance. Bonus payments
will also be subject to the
Committee considering that the
proposed bonus amounts,
calculated by reference to
performance against the targets,
appropriately reflect the
Company’s overall performance
and shareholders’ experience. If
the Committee does not believe
this to be the case, it retains the
discretion to adjust the bonus
outturn accordingly.
The Remuneration Committee
may impose such conditions as it
considers appropriate which
must be satisfied before any
award will vest.
All awards made to Executive
Directors will be subject to
performance conditions which
measure performance over a
period normally no less than
three years.
No more than 25% of awards vest
for attaining the threshold level of
performance.
Formulaic outcome of all PSP
performance measures will also
be subject to the Committee
considering that the proposed
levels, calculated by reference to
performance against the targets,
appropriately reflect the
Company’s overall performance
and shareholders’ experience. If
the Committee does not believe
this to be the case, it retains the
discretion to adjust the PSP
outturn accordingly.
DIRECTORS’ REMUNERATION REPORT CONTINUED Strategic Report
Governance
Financial Statements
Element and purpose
Policy and operation
Maximum
Performance measures
No maximum level but not less
than 200% of base salary for any
Executive Director.
n/a
Share ownership
guidelines
To promote
stewardship and to
further align the
interests of
Executive Directors
with those of
shareholders
The share ownership guidelines
encourage Executive Directors to
build or maintain (as appropriate)
a shareholding in the Company.
If any Executive Director does not
meet the guideline, they will be
expected to retain up to 50% of
the net of tax number of shares
vesting under any of the
Company’s discretionary share
incentive arrangements
(including any deferred bonus
shares) until the guideline is met.
From the 2020 AGM, Executive
Directors will be required to
maintain a shareholding in the
Company for a two-year period
after stepping down from that
position, being in the first year,
the lesser of the guideline level or
the Executive Directors’ actual
relevant shareholding at leaving
and reducing to 50% of this
requirement in the second year.
For the purpose of this
requirement, the Executive
Directors’ actual relevant
shareholding will include shares
vesting under any of the
Company’s discretionary share
incentive arrangements
(including any deferred bonus
shares) from awards granted
after the date the policy was
adopted but excludes shares
acquired and the release of
shares under share incentive
plans where the grant occurred
prior to the adoption of the
policy. The Committee will retain
the discretion to remove the
holding requirement if it is
deemed to be inappropriate.
All-employee share
plans
To facilitate and
encourage share
ownership by staff,
thereby allowing
everyone to share in
the long-term
success of the
Company and align
interests with those
of shareholders
The Executive Directors will be
entitled to participate in all of the
Company’s employee share plans,
including the Share Save Plan, on
the same terms as other
employees.
The maximum participation levels
for all-employee share plans will
be the limits for such plans set by
HMRC from time to time.
However the Company may
impose lower limits on a scheme-
by-scheme basis.
Consistent with normal practice,
such awards would not be
subject to performance
conditions.
These all-employee share plans
are established under HMRC
tax-advantaged regimes and
follow the usual form for such
plans.
XPS Pensions Group Annual Report 2020
81
Element and purpose
Policy and operation
Maximum
Performance measures
n/a
The aggregate fees and any
benefits of the Chairman and
Non-Executive Directors will not
exceed the limit from time to
time prescribed within the
Company’s Articles of
Association for such fees
currently £500,000 p.a. in
aggregate.
Any increases in fee levels made
will be appropriately disclosed.
Chairman and
Non-Executive
Directors’ fees
To enable the
Company to recruit
and retain Company
Chairs and Non-
Executive Directors
of the highest
calibre, at the
appropriate cost
The fees paid to the Chairman
and Non-Executive Directors aim
to be competitive with other
listed companies of equivalent
size and complexity.
The fees payable to the Non-
Executive Directors are
determined by the Board, with
the Chairman’s fees determined
by the Committee. No Director
participates in decisions
regarding their own fees.
The Chairman and Non-
Executive Directors do not
participate in any new cash or
share incentive plans.
The Chairman and Non-
Executive Directors are entitled
to benefits relating to travel and
office support and such other
benefits as may be considered
appropriate.
The Chairman is paid a single fee
for the role, although he will be
entitled to an additional fee if he
is required to perform any
specific and additional services.
Non-Executive Directors receive
a base fee for the role. Additional
fees are paid for acting as Senior
Independent Director or for
Chairman of the Audit,
Remuneration or other Board
Committees or to the
Designated Employee
Engagement NED to reflect the
additional time commitment.
They will be entitled to an
additional fee if they are required
to perform any specific and
additional services..
82 XPS Pensions Group Annual Report 2020
DIRECTORS’ REMUNERATION REPORT CONTINUED Strategic Report
Governance
Financial Statements
Notes to the Policy table
1. Stating maxima for each element of the Remuneration Policy
The Regulations and related investor guidance encourage companies to disclose a cap within which each element of the
Directors’ Remuneration Policy will operate. Where maximum amounts for elements of remuneration have been set within
the Policy, these will operate simply as caps and are not indicative of any aspiration.
2. Travel and hospitality
While the Committee does not consider it to form part of benefits in the normal usage of that term, it has been advised that
corporate hospitality, whether paid for by the Company or another, and business travel for Directors (and in exceptional
circumstances their families) may technically come within the applicable rules, and so the Committee expressly reserves the
right for the Committee to authorise such activities.
3. Past obligations
In addition to the above elements of remuneration, any commitment made prior to, but due to be fulfilled after, the approval
and implementation of this Remuneration Policy will be honoured.
4. Malus/clawback
The Committee may apply malus (being the ability to withhold or reduce a payment/vesting) and clawback (the ability to
reclaim some or all of a payment/vesting) to an award under the annual bonus or PSP where there are circumstances which
would justify such action. The relevant circumstances where these powers of recovery may operate include:
• the Company materially misstated its financial results for any reason and that misstatement would result or resulted either
directly or indirectly in an award being granted or vesting to a greater extent than would have been the case had that
misstatement not been made;
• the extent to which any performance target and/or any other condition was satisfied was based on an error, or on
inaccurate or misleading information or assumptions which resulted either directly or indirectly in an award being granted
or vesting to a greater extent than would have been the case had that error not been made;
• circumstances arose (or continued to arise) during the vesting period (including any holding period) of an award which
would have warranted the summary dismissal of the participant; or
• there is a sufficiently significant impact on the reputation of the Company (including a Company failure) to justify the
operation of malus or clawback.
Normally, clawback can operate for up to two years following the vesting of an award.
5. Performance conditions
The performance-related elements of remuneration take into account the Group’s risk policies and systems, and are designed
to align the senior executives’ interests with those of shareholders. The Committee reviews the metrics used and targets set
for the Group Executive Directors and senior management (not just the Executive Directors) every year, in order to ensure
that they are aligned with the Group’s strategy and to ensure an appropriate level of consistency.
6. Differences between the Policy in respect of Remuneration for Directors and the Policy on remuneration for other staff
While the appropriate benchmarks vary by role, the Company seeks to apply the philosophy behind this policy across the
Company as a whole. Where the Group’s pay policy for Directors differs from its pay policies for groups of staff, this reflects
the appropriate market rate position and/or typical practice for the relevant roles. The Company takes into account pay
levels, bonus opportunity and share awards applied across the Group as a whole when setting the Executive Directors’
Remuneration Policy.
7. Committee discretions
The Committee will operate the annual bonus plan and PSP according to their respective rules and the above Remuneration
Policy table. The Committee retains discretion, consistent with market practice, in a number or respects, in relation to the
operation and administration of these plans. This discretion includes, but is not limited to, the following:
• The selection of participants;
• The timing of grant of awards;
• The size of an award/bonus opportunity subject to the maximum limits set out in the Remuneration Policy table and the
rules of the relevant plan;
• The determination of performance against targets and resultant vesting/pay-outs;
• Discretion required when dealing with a change of control or restructuring of the Company;
• Determination of the treatment of leavers based on the rules of the relevant plan and the appropriate treatment chosen;
• Adjustments required in certain circumstances (e.g. rights issue, corporate restructuring events and special dividends); and
• The annual review of performance measures, weightings and targets from year to year.
In addition, while performance measures and targets used in the annual bonus plan and PSP will generally remain unaltered, if
events occur which the Committee determines would make a different or amended target a fairer measure of performance,
such amended or different targets can be set provided they are not materially more or less difficult to satisfy, having regard to
the event in question.
Any use of the above discretion would, where relevant, be explained in the Annual Report on Directors’ Remuneration and may,
where appropriate and practicable, be the subject of consultation with the Company’s major shareholders.
The Committee may make minor amendments to the Remuneration Policy set out above for regulatory, exchange control,
tax or administrative purposes or to take account of a change in legislation, without obtaining shareholder approval for
that amendment.
XPS Pensions Group Annual Report 2020
83
Remuneration Policy on recruitment
The Company’s recruitment remuneration policy aims to give the Committee sufficient flexibility to secure the appointment and
promotion of high-calibre executives to strengthen the management team and secure the skill sets to deliver our strategic aims.
In terms of the principles for setting a package for a new Executive Director, the starting point for the Committee will be to
apply the Remuneration Policy for Executive Directors as set out above and structure a package in accordance with that Policy.
Consistent with the DRR Regulations, any caps contained within the policy for fixed pay do not apply to new recruits, although
the Committee would not envisage exceeding these caps in practice unless absolutely necessary.
The annual bonus plan and PSP, including the maximum award levels, will operate as detailed in the general Remuneration
Policy in relation to any newly-appointed Executive Director. For an internal appointment, any variable pay element awarded in
respect of the prior role may either continue on its original terms or be adjusted to reflect the new appointment as appropriate.
For both external and internal appointments, the Committee may agree that the Company will meet certain relocation expenses
as it considers appropriate.
For external candidates, it may be necessary to make additional awards in connection with the recruitment to buyout awards
forfeited by the individual on leaving a previous employer. Any recruitment-related awards which are not buyouts will be subject
to the limits of the annual bonus plan and PSP as stated in the general policy. Details of any recruitment-related awards will be
appropriately disclosed.
For any buyouts the Company will not pay more than is necessary in the view of the Committee and will be limited in value to
what the Committee considers to be a fair estimate of the value of the awards foregone. The Committee will in all cases seek, in
the first instance, to deliver any such awards under the terms of the existing annual bonus plan and PSP. It may, however, be
necessary in some cases to make buyout awards on terms that are more bespoke than the existing annual bonus plan and PSP.
All buyouts, whether under the annual bonus plan, PSP or otherwise, will take due account of the service obligations and
performance requirements for any remuneration relinquished by the individual when leaving a previous employer. The
Committee will seek, where it is practicable to do so, to make buyouts subject to what are, in its opinion, comparable
requirements in respect of service and performance. However, the Committee may choose to relax this requirement in certain
cases, such as where the service and/or performance requirements are materially completed, or where such factors are, in the
view of the Committee, reflected in some other way, such as a significant discount to the face value of the awards forfeited, and
where the Committee considers it to be in the interests of shareholders.
Service contracts
Executive Directors
Ben Bramhall and Paul Cuff entered into a service agreement with the Company that was effective upon Admission and dated
16 February 2017. Snehal Shah entered into a service agreement with the Company that was effective 28 May 2019, the date of
his employment beginning, although Snehal was not appointed as Chief Financial Officer until FCA approval was received on
9 July 2019. The policy is that each Executive Director’s service agreement should be of indefinite duration, subject to
termination by the Company or the individual on no more than 12 months’ notice.
The service agreements of all Executive Directors, which are available for inspection at the Company’s registered office, comply
with this policy:
• The Executive Directors’ service agreements are terminable by either party on not less than nine months’ written notice for
the Co-CEO, six months for CFO or immediately upon payment in lieu of notice, and contain a garden leave clause;
• In each case any payment in lieu of notice will be calculated by reference to base salary and contractual benefits only, and will
not include any entitlement to bonus.
Chairman and Non-Executive Directors
The appointments of Tom Cross Brown, Alan Bannatyne and Margaret Snowdon are subject to the terms of letters of
appointment agreed between each of them and the Company dated 24 January 2017 and the appointment of Sarah Ing is
subject to the terms of a letter of appointment dated 19 March 2019. They are not entitled to receive any compensation on
termination of their appointment (other than payment in respect of a notice period where notice is served) and are not entitled
to participate in the Company’s share plans, bonus arrangements or pension schemes. They are entitled to be reimbursed all
reasonable out-of-pocket expenses incurred in the proper performance of their duties.
Their appointment may be terminated at any time upon three months’ written notice by either party and with immediate effect
in certain circumstances. The appointment may also be terminated pursuant to the Articles or as otherwise required by law.
They are subject to retirement by rotation every three years under the Articles but intend to retire and submit themselves for
re-election by shareholders each year at the annual general meeting.
84 XPS Pensions Group Annual Report 2020
DIRECTORS’ REMUNERATION REPORT CONTINUED Strategic Report
Governance
Financial Statements
Remuneration Policy on termination
The Committee will consider treatments on a termination having regard to all of the relevant facts and circumstances available
at that time. This policy applies both to any negotiations linked to notice periods on a termination and any treatments that the
Committee may choose to apply under the discretions available to it under the terms of the annual bonus plan and PSP. The
potential treatments on termination under these plans are as follows:
Annual bonus plan
If an Executive Director resigns or is dismissed for cause before the bonus payment date, the right to receive any bonus normally
lapses (unless the Committee determines otherwise). If an Executive Director ceases employment before the bonus date
because of death, injury, ill health, disability or any other reason determined by the Committee, such bonus will be payable as
the Committee in its absolute discretion determines taking into account the circumstances for leaving, time in employment and
performance. Similar treatment will apply in the event of a change in control of the Company.
Performance Share Plan (‘PSP')
The Committee’s Policy is in accordance with the rules of the Performance Share Plan 2017. If, during the performance or vesting
period, a participant:
• resigns or is dismissed for cause, awards will normally lapse in full; and
• ceases to be employed due to death, ill health, injury or disability, retirement with the agreement of the participant’s employer,
redundancy, the sale or transfer of the participant’s employing company or business out of the Group (other than on change
of control), or for other reasons specifically approved by the Committee, the award will vest immediately to the extent that the
Committee determines. The Committee will determine the extent to which an award will vest taking into account the extent to
which the performance conditions have been met and, where appropriate, the period that has expired to the date of
cessation.
If a participant ceases employment during the holding period, performance-vested awards will normally be retained and vest as
normal at the end of the holding period (unless the Committee exercises its discretion to allow awards to vest early on cessation
in suitable cases).
The all-staff Share Save scheme provides treatments for leavers in line with HMRC rules for such plans.
The Company has the power to enter into settlement agreements with Directors and to pay compensation to settle potential
legal claims. In addition, and consistent with market practice, in the event of the termination of an Executive Director, the
Company may make a contribution towards that individual’s legal fees and fees for outplacement services as part of a
negotiated settlement. Any such fees will be disclosed as part of the detail of termination arrangements.
External appointments
The Company’s policy on external appointments permits an Executive Director, subject to the approval of the Chairman, to
serve as a Non-Executive director for normally no more than one other organisation where this does not conflict with the
individual’s duties to the Company. When an Executive Director takes such a role, they may be entitled to retain any fees which
they earn from that appointment.
Statement of consideration of employment conditions elsewhere in the Company
The Committee receives regular updates on overall pay and conditions in the Company which enables it to take the wider
workforce remuneration into account when setting the policy for executive remuneration. Whilst the Committee does not
consult directly with employees as part of the process for reviewing executive pay, the Committee does receive insights from
the broader employee population via an employee engagement group. Accordingly, the Committee confirms that the new
Policy has been designed with due regard to the policy for remuneration of employees across the Group.
The Remuneration Policy for other employees is based on broadly consistent principles as described above. Annual salary
reviews across the Company take into account Company performance, relevant pay and market conditions and salary levels for
similar roles in comparable companies.
Other members of senior management participate in similar annual bonus arrangements to the Executive Directors, although
award sizes vary by organisational level. Share incentive awards may also be granted to a broader population than the Executive
Directors although the award sizes and terms of the awards vary. The Company operates discretionary bonus schemes for
eligible groups of employees under which a bonus is payable subject to the achievement of appropriate targets. All eligible
employees may participate in the Company’s Share Save scheme on identical terms.
Statement of consideration of shareholders’ views
The Committee considers shareholder views received during the year and at each AGM, as well as guidance from shareholder
representative bodies more broadly, when determining the remuneration policy and its implementation. The Committee seeks
to build an active and productive dialogue with investors on developments on the remuneration aspects of corporate
governance generally and it will consult with major shareholders in advance of any material change to the structure and/or
operation of the policy and will seek formal shareholder approval for any such change if required.
XPS Pensions Group Annual Report 2020
85
Illustrations of application of the Directors’ Remuneration Policy
The charts below show how the Remuneration Policy set out above will be applied for Executive Directors in the financial year
2020/21 based on three performance scenarios and using the assumptions below.
Minimum
Target
• Consists of base salary, benefits and pension;
• Base salary is the salary to be paid in the 2020/21 financial year;
• Benefits measured as benefits paid in the year ended 31 March 2020; and
• Pension measured as the defined contribution or cash allowance in lieu of Company contributions
of 6%
Based on what the Executive Director would receive if performance were in line with expectations or on
target (excluding share price appreciation and dividends):
• Annual bonus: consists of the on-target bonus (67% of maximum opportunity used for illustrative
purposes);
• PSP: consists of the threshold level of vesting (25% vesting) under the PSP
Maximum
Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
• Annual bonus: consists of maximum bonus of 150% of salary for the Co-CEOs and 112.5% of salary for
the CFO
• PSP: consists of the face value of awards (150% of base salary for Co-CEOs and 125% of base salary
for the CFO) under the PSP
Maximum with
50%
share price growth
As the Maximum scenario plus the value resulting from a share price growth of
50% in relation to the PSP award
Ben Bramhall – Co-Chief Executive
Paul Cuff – Co-Chief Executive
£1,600
£1,400
£1,200
£1,000
£800
£600
£400
Share price growth
Performance share plan
Annual bonus
Total fixed pay
£1,180
£1,396
15%
£712
15%
41%
£316
37%
31%
37%
31%
£200
100%
44%
26%
23%
£1,396
15%
£1,180
37%
31%
37%
31%
£712
15%
41%
£316
100%
44%
26%
23%
£0
£1,000
£800
£600
£400
£200
£0
Minimum
In line with
expectation
Maximum
Maximum with
share price growth
Minimum
In line with
expectation
Maximum
Maximum with
share price growth
Snehal Shah – Chief Financial Officer
£849
37%
37%
26%
£527
15%
41%
44%
Share price growth
Performance share plan
Annual bonus
Total fixed pay
£998
15%
31%
31%
23%
In line with
expectation
Maximum
Maximum with
share price growth
£268
100%
Minimum
86 XPS Pensions Group Annual Report 2020
DIRECTORS’ REMUNERATION REPORT CONTINUED
Strategic Report
Governance
Financial Statements
ANNUAL REPORT ON REMUNERATION
Remuneration Committee membership
The Remuneration Committee is chaired by Margaret Snowdon OBE, who is an Independent Non-Executive Director. Tom Cross
Brown, Alan Bannatyne and Sarah Ing are also members of the Committee. Sarah Ing joined the Committee with effect from her
appointment date of 17 May 2019. The Committee meets at least twice a year and at such other times as the Chair of the
Committee shall require or as the Board may direct. The Committee met six times during the year. All members attended every
Committee meeting throughout the year; the attendance table can be found on pages 52 to 53.
Other individuals, such as the Co-Chief Executive Officers, the Chief Financial Officer, the Chief Operating Officer, the HR
Director and external professional advisers, may be invited to attend for all or part of any meeting as and when appropriate and
necessary.
The purpose of the Committee is to establish a formal and transparent procedure for developing policy on remuneration in
accordance with the Code and to set the remuneration of the Chairman and selected individuals with due account taken of all
relevant factors such as individual and Group performance as well as remuneration payable by companies of a comparable size
and complexity.
The Committee has formal terms of reference which can be viewed on the Company’s website: www.xpsgroup.com
Advisers
FIT Remuneration Consultants LLP (‘FIT'), signatories to the Remuneration Consultants Group’s Code of Conduct, were
appointed by the Committee in 2017 following a Request for Proposal. FIT has been retained to provide advice to the Committee
on matters relating to executive remuneration. FIT provided no other services to the Company and, accordingly, the Committee
was satisfied that the advice provided by FIT was objective and independent. FIT’s fees in respect of the 2019/20 financial year
were £78,472 (2018/19: £88,492). FIT’s fees are charged on the basis of the firm’s standard terms of business for advice
provided.
Service contracts
The Executive Directors service contracts are of indefinite duration. Tom Cross Brown, Alan Bannatyne and Margaret Snowdon’s
current 3 year appointment terms expire on 23 January 2023. Sarah Ing’s current three-year appointment term expires on 6 May
2022.
The following (audited) section provides details of how the Directors were paid during the financial year to 31 March 2020.
Director
Executive Directors
Ben Bramhall
Paul Cuff
Mike Ainslie(2)
Snehal Shah(3)
Jonathan Bernstein
John Batting
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Salary/fees
£
Taxable
benefits(6)
£
Bonus(7)
£
Long-term
incentives(8)
£
Pension(9)
£
Total
remuneration
£
288,000
288,000
288,000
288,000
63,000
252,000
202,207
–
–
252,000
–
258,370
10,850
11,206
10,850
11,206
2,476
10,301
8,601
–
–
10,981
–
3,521
129,600
51,840
129,600
51,840
–
34,020
67,078
–
–
34,020
–
34,880
142,823
–
142,823
–
37,472
–
–
-
–
–
–
–
20,793(1)
11,757
20,793(1)
11,757
2,812
11,248
13,009
–
–
20,088
–
33,907
592,066
362,803
592,066
362,803
105,760
307,569
290,895
–
–
317,089
–
330,678
XPS Pensions Group Annual Report 2020
87
Non-Executive Directors
Tom Cross Brown –
Chair of Board &
Chair of Nomination
Committee
Alan Bannatyne –
Chair of Audit & Risk
Committee & Senior
Independent Director
Margaret Snowdon –
Chair of Remuneration
Committee & Designated
Employee Engagement
NED
Sarah Ing(4)
Jonathan Punter (5)
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
120,000
120,000
75,000
75,000
67,500(10)
65,000
53,199
–
27,143
60,000
1,184,049
1,658,370
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120,000
120,000
75,000
75,000
67,500
65,000
53,199
–
27,143
60,000
32,777
47,215
326,278
206,600
323,118
–
57,407
88,757
1,923,629
2,000,942
1 Pension values for Ben Bramhall and Paul Cuff include backdated shortfall in pension contribution. The shortfall was in respect to associated increase in
pension contributions following the annual salary increase in April 2018 and reflect what they were entitled to receive in pension contributions. The
aggregate pension contribution received for 2019 and 2020 equates to 6% of salary over the two-year period.
2 Mike Ainslie retired from the Board of Directors on 30 June 2019.
3 Snehal Shah joined the Company on 28 May 2019.
4 Sarah Ing joined the Company on 17 May 2019.
5 Jonathan Punter retired from the Board of Directors on 12 September 2019.
6 Each of the Executive Directors is entitled to a range of benefits, comprising permanent health insurance, life insurance, private medical insurance and
car allowance. The Non-Executive Directors do not receive other benefits.
7 No element of annual bonus was deferred in respect of bonuses shown.
8 The outturn for the February 2017 PSP which vests in June 2020 is expected to be 40.3% and the vesting share price has been estimated at 136.7 pence,
based on the three-month average share price ending 31 March 2020. The grant share price for the award was 139 pence and accordingly the relevant
figures are reflective of a decrease of 1.6% in the Company’s share price comparing the award price to the vesting price. Details of the performance
measures and targets applicable to the 2017 PSP are set out on page 92.
9 Pension values shown all relate either to pension contributions or to cash allowances in lieu of pension.
10 Margaret Snowdon received an additional £5,000 fee for the role of Employee Engagement Non-Executive Director.
88 XPS Pensions Group Annual Report 2020
DIRECTORS’ REMUNERATION REPORT CONTINUED Strategic Report
Governance
Financial Statements
2019/20 annual bonus (audited)
The Executive Directors’ annual bonus targets were set at the beginning of the financial year. The financial targets which
account for 75% of the annual bonus were set based on Group PBT. The Group PBT targets set are shown below. The threshold
target required an increase in operational performance from the prior year and the whole performance range was set above the
prior year’s range once the impact of exiting from the discounted Transitional Services Agreement, which led to an increase of
approximately £2 million in 2019/20 costs, is incorporated (consistent with the adjustment to the cost base of the Group that
was made when assessing the 2018/19 annual bonus as reported last year). For example, the threshold bonus target was 5%
higher than the prior year after allowance for this adjustment, and the maximum bonus target was 15% above the prior year.
£m
Threshold
(£0,00)
Target
(£0,00)
Maximum
(£0,00)
Actual
(£0,00)
Group Adj. PBT (75% of potential)
£23,400
£24,886
£25,621
£24,100
Payout
(% of this
element)
42%
The personal performance goals which account for 25% of the annual bonus were agreed with each Executive Director and were
based on a range of strategic and other objectives set at the start of the year. The targets were principally designed to focus and
reward the Executive Directors for accomplishing strategic goals which directly support the Company’s strategy. Details of the
measures, to the extent they are not commercially sensitive, are outlined below.
The individual objectives which were used to assess performance are:
Ben Bramhall – Co-CEO
Measure
Employees
Maintain high levels of staff
engagement and embed a strong
culture based on XPS values
Customers
Relationships and services to
clients
Strategy execution
Make demonstrable progress
in delivery of the strategy
Efficiency and Process
Improvement
Target
Performance
Assessment
• At least 75% of staff agreeing ‘XPS
is a good place to work’ in annual
employee survey
• 86% agree or strongly agree that
100%
XPS is a good company to work for
(only 2% disagree).
• Positive feedback recently received
in relation to how the business has
treated and communicated with
staff regarding COVID-19
• Building strong professional
• Key successes in year in relation to
75%
relationships with major clients
building relationships
• Remaining ‘Senior Retiree’ clients
successfully transitioned
• Measured by comparing
• Progress made and work halted in
50%
transaction outcome to projections
presented to the Board
relation to one project
• Implement common working and
• Financial performance shows
75%
billing practices across the pensions
business to achieve improved
operational efficiency resulting in
aggregate increase in realisation.
underlying EBITDA grew by more
than revenue, after normalising for
impact of TSA/bonus accrual,
demonstrating increase in overall
business efficiency.
XPS Pensions Group Annual Report 2020
89
Paul Cuff – Co-CEO
Measure
Target
Performance
Assessment
Employees
Maintain high levels of staff
engagement and embed a strong
culture based on XPS values
• At least 75% of staff agreeing ‘XPS
is a good place to work’ in annual
employee survey
• 86% agree or strongly agree that
100%
XPS is a good company to work for
(only 2% disagree)
• Positive feedback recently received
in relation to how the business has
treated and communicated with
staff regarding COVID-19
Customers
Relationships and services to
existing clients
• Building strong professional
• Demonstrated successful
50%
relationships with major clients
development of relationships with
a number of clients
Achieve new client wins
• Achieve new client wins in the
• Significant new client wins for
75%
pensions business with expected
‘full year’ recurring revenue target
Pensions and other service lines
Strategy Execution
Make demonstrable progress
in delivery of the strategy
• Measured by comparing
• A number of projects successfully
50%
transaction outcome to projections
presented to the Board
executed during the year with good
integration into the XPS Group
• Other opportunities progressed
Snehal Shah – CFO
Measure
Induction
Target
Performance
Assessment
• Ensure a smooth transition from
• Transition from the previous CFO
100%
the previous CFO
• Build strong working relationships
with key people within the business
• Carry out a review of finance
function to ensure it has
appropriate post-TSA capabilities
was managed effectively
• Made highly effective changes to
the finance team
Internal Reporting
• Implement a revised monthly
process to facilitate a robust review
of the financial performance of the
business
• The monthly process has been
implemented and is working
effectively with high-quality
management information
100%
• Improve the quality of Board
• Completed with positive Board
75%
materials including improved KPIs
to provide more granular analysis of
performance against our strategy
and outlook
feedback
Budgeting & Forecasting
• Implement a budgeting and
• Rigorous reforecast and budgeting
75%
three-year forecasting process to
facilitate Board approval of internal
budgets and analyst guidance, as
well as consideration of any
business investment
process introduced
Investor relations
Communication with shareholders,
analysts and public markets
• Develop IR plan with appropriate
• Frequent dialogue with
80%
level of granularity and KPIs within
financial disclosures
shareholders and analysts with
positive feedback from
shareholders received
• Increased analyst coverage
Each objective is measurable, with target achievement levels ‘as evidenced by’ activities and outcomes. The Remuneration
Committee then assessed performance against each objective in each category on the basis of evidenced outcomes and rated
the percentage achievement. In light of the high standards of attainment of each of the Executive Directors’ the Remuneration
Committee assessed that performance against the targets would result in 75% of maximum for this element of bonus to
be payable.
90 XPS Pensions Group Annual Report 2020
DIRECTORS’ REMUNERATION REPORT CONTINUED Strategic Report
Governance
Financial Statements
Financial performance (% of this element)
Strategic performance (% of this element)
Total performance outcome (% of maximum)
Total performance outcome (% of salary)
Total performance outcome (£)
Agreed actual outcome (£) (1)
Weightings
Outcomes
Ben Bramhall
Paul Cuff
Snehal Shah
75%
25%
42%
75%
50%
75%
£217k
£130k
42%
75%
50%
75%
£217k
£130k
42%
75%
50%
57%
£112k
£67k
1. Following discussions with the executive directors, the Remuneration Committee agreed that the level of bonus payable be reduced from 50% of
maximum to 30% of maximum. This has resulted in the bonus outturn for the Executive Directors being aligned with that for other members of staff.
Statement of Directors’ shareholding and share interests (audited)
For each Director, the total number of Directors’ interests in shares at 31 March 2020 was as follows:
Director
Number of ordinary
shares held as at
31 March 2020
Share ownership
requirement
(% of salary)
Share ownership
requirement met?
Holding as % of
March 2020 salary
Number of ordinary
shares held as at
31 March 2019
Ben
Bramhall
Paul
Cuff
Snehal
Shah
Tom Cross
Brown
Alan
Bannatyne
Margaret
Snowdon
Sarah Ing
1,536,578
796,406
–
38,861
36,594
30,303
15,000
200%
200%
200%
Y
Y
N
587%
304%
0%(1)
n/a
n/a
n/a
n/a
n/a
n/a
1,509,380
768,450
-
38,861
36,594
n/a
n/a
n/a
–
n/a
n/a
n/a
–
1. In line with the Directors Remuneration Policy, Snehal Shah will retain 50% of vested shares until he reaches the 200% ownership requirement.
Snehal’s awards remain unvested at present.
The shareholdings above include those held by Directors and their respective connected persons. There were no changes in the
Directors’ interests in shares between 31 March 2020 and 24 June 2020.
Under the current share ownership guidelines, the Executive Directors are required to build and maintain a shareholding
equivalent to at least 200% of salary. The new Directors’ Remuneration Policy also introduces a requirement for Executive
Directors to maintain a shareholding for a period after leaving the Board.
Awards granted in the year under the PSP (audited)
The following nominal cost option PSP awards were granted in September 2019. Reflecting the prevailing share price at the time
of grant, the award levels for the Co-CEOs were reduced from the policy award level of 150% of salary to 125% of salary. The
award level for the CFO was not adjusted as the award level reflected that agreed as part of the recruitment process.
These awards vest in 2022 subject to performance relating to (i) adjusted EPS targets as to 50% of the award, and (ii) relative
TSR targets as to the remaining 50% of the award. The details of these targets are shown in the ‘Outstanding share plan awards’
section on page 92.
Director
Ben Bramhall
Paul Cuff
Snehal Shah
Date of grant
Basis of award
(% of salary)
Face value of
awards at grant1
Number of shares
under award
Date of vesting
18 September 2019
18 September 2019
18 September 2019
125%
125%
125%
360,000
360,000
298,125
313,043
September 2022
313,043
September 2022
259,239
September 2022
1. Based on the share price of £1.15 on 17 September 2019.
XPS Pensions Group Annual Report 2020
91
DIRECTORS’ REMUNERATION REPORT CONTINUED
Outstanding share plan awards (audited)
Details of all outstanding PSP awards made to Executive Directors are set out below:
Director
Date of grant
Ben Bramhall
Paul Cuff
Michael Ainslie
16 February 2017
26 July 2018
18 September 2019
16 February 2017
26 July 2018
18 September 2019
16 February 2017
26 July 2018
Snehal Shah
18 September 2019
Interests
held at
31 March
2019
Interests
awarded
during the
year
Interests
vested
during
the year
Interests
lapsed
during
the year
Interests
held at
31 March
2020
Exercise
price
Vesting
Period
0.05p
0.05p
0.05p
0.05p
0.05p
0.05p
0.05p
0.05p
0.05p
258,992
241,340
—
—
— 313,043
258,992
241,340
—
—
— 313,043
188,848
175,977
—
—
—
—
—
—
—
—
June 2020
— 258,992
— 241,340
July 2021
— 313,043 September 2022
June 2020
— 258,992
— 241,340
July 2021
— 313,043 September 2022
— 120,897
— 148,706
67,951
27,271
June 2020
July 2021
— 259,239
—
— 259,239 September 2022
Vesting outcomes for the 2016/17 PSP awards (granted in February 2017)
These awards comprise nominal cost options with an exercise price of 0.05p per option and vest in June 2020 subject to
performance relating to (i) adjusted Earnings per Share (‘EPS') targets as to 50% of the award, and (ii) Relative Total
Shareholder Return (‘TSR') targets as to the remaining 50% of the award.
The original EPS target range required compound annual growth of 3% above CPI for threshold vesting, increasing to a
requirement for growth of 7% above CPI for maximum vesting. As previously reported, with the agreement of the Executive
Directors, the Remuneration Committee significantly raised the level of EPS growth required in the light of the strategic business
planning work undertaken following grant.
The details of the revised EPS and TSR target ranges and performance against them are shown in the table below.
Diluted Adjusted EPS for the three-year period to the end of FY 2019/20
Portion of award vesting
Compound annual growth in EPS (‘CAG‘) of less than 8% above CPI
CAG of 8% above CPI
CAG between 8% and 18% above CPI
CAG of 18% or more above CPI
0%
25%
Between 25% and 100% on a straight-line basis
100%
Actual performance(1):
CAG of 11.3% above CPI
49.8%
1. Performance against the original EPS target range would have resulted in 100% of this portion of the award vesting. The measurement of the EPS
performance took into account the impact of Board approved transactions completed since the date of grant of the awards that were not envisaged when
the revised targets were set to ensure a like-for-like comparison. These were the disposal of the HR Trustees business and the Healthcare business. In
addition, the impact of the use of shares held by the EBT to settle bonus payments has been neutralised by reducing the EPS for FY 2019/20 to ensure the
outturn is an accurate reflection of operational performance.
XPS Pensions Group’s TSR ranking vs a Comparator Group of Companies
Portion of award vesting
Below median
Median
Between median and upper quartile
Upper quartile
Actual performance:
Between median and upper quartile
0%
25%
Between 25% and 100% on a straight-line basis
100%
30.9%
The TSR Comparator Group consisted of 20 companies (excluding investment trusts) whose shares are listed on the London
Stock Exchange and whose market capitalisation was similar to that of the Company at the date of grant as described in the IPO
Prospectus.
Based on the above the percentage of the total award vesting is 40.3% of maximum. Details of the shares under award and their
estimated value (based on the three-month average share price at 31 March 2020 of 136.7 pence per share) is as follows:
Executive
Ben Bramhall
Paul Cuff
Michael Ainslie
1. Based on the three-month average share price to 31 March 2020.
The awards also receive the value of dividend equivalents.
92 XPS Pensions Group Annual Report 2020
Maximum
number of
shares
258,992
258,992
67,951
Number of
shares to vest
Number of
shares to lapse
104,479
104,479
154,513
154,513
27,412
40,540
Estimated
value vesting
£(1)
142,823
142,823
37,472
Strategic Report
Governance
Financial Statements
2017/18 PSP awards (granted in July 2018)
These awards comprise nominal cost options with an exercise price of 0.05p per option and vest in 2021 following
announcement of annual results in 2021 subject to performance relating to (i) adjusted Earnings per Share (‘EPS') targets as to
50% of the award, and (ii) Relative Total Shareholder Return (‘TSR') targets as to the remaining 50% of the award. The details of
the EPS and TSR target ranges are shown in the table below.
Diluted Adjusted EPS for the three-year period to the end of FY 2020/21
Portion of award vesting
Compound annual growth in EPS (‘CAG‘) of less than 8% above CPI
CAG of 8% above CPI
CAG between 8% and 18% above CPI
CAG of 18% or more above CPI
0%
25%
Between 25% and 100% on a straight-line basis
100%
XPS Pensions Group’s TSR ranking vs a Comparator Group (1) of Companies Portion of award vesting
Below median
Median
Between median and upper quartile
Upper quartile
0%
25%
Between 25% and 100% on a straight-line basis
100%
1. The TSR Comparator Group consists of the constituents of the FTSE Small Cap Index (excluding investment trusts) at the start of the performance period.
2019/20 PSP Awards (granted in September 2019)
These awards comprise nominal cost options with an exercise price of 0.05p per option and vest in 2021 following
announcement of annual results in 2022 subject to performance relating to (i) adjusted Earnings per Share (‘EPS') targets as to
50% of the award, and (ii) Relative Total Shareholder Return (‘TSR') targets as to the remaining 50% of the award. The EPS
target range was set considering both the internal and external expectations for EPS performance over the next three years.
The details of the EPS and TSR target ranges are shown in the table below.
Diluted Adjusted EPS(1) for the three-year period to the end of FY 2021/22
Portion of award vesting
Compound annual growth in EPS (‘CAG‘) of less than 3% above CPI
CAG of 3% above CPI
CAG between 3% and 7% above CPI
CAG of 7% or more above CPI
0%
25%
Between 25% and 100% on a straight-line basis
100%
1. Measured by normalising to allow for the variance in costs due to the discount received by the Group in respect the Transitional Services Agreement and
the use of shares held by the EBT to settle bonus payments, to ensure the outturn
is an accurate reflection of operational performance.
XPS Pensions Group’s TSR ranking vs a Comparator Group (2) of Companies Portion of award vesting
Below median
Median
Between median and upper quartile
Upper quartile
0%
25%
Between 25% and 100% on a straight-line basis
100%
2. The TSR Comparator Group consists of the constituents of the FTSE Small Cap Index (excluding investment trusts) at the start of the performance period.
External board appointments
The Executive Directors did not hold any external directorships during the year. The approved Directors’ Remuneration Policy
makes provision for them to retain any fees for one appointment.
Payments to past directors (audited)
Other than the payments to Mike Ainslie outlined on page 94, there were no payments to past Directors in the financial year
2019/20 (2018/19: nil).
Payments for loss of office (audited)
No payments were made to any Director in respect of loss of office in the financial year 2019/20 (2018/19: nil).
XPS Pensions Group Annual Report 2020
93
DIRECTORS’ REMUNERATION REPORT CONTINUED
Compensation arrangements for Mike Ainslie
As reported in last year’s Remuneration Report, Mike Ainslie stepped down as Chief Financial Officer with effect from 30 June
2019.
During this period Mike continued to perform all of his responsibilities as CFO and in addition undertook an orderly transition
and handover and continued to receive his base salary, pension supplement and contractual benefits in the normal way.
A bonus under the 2018/19 bonus scheme was calculated by reference to performance in the normal way. In line with other
Executive Directors this was significantly reduced.
Subject to certain terms, half of each of the two outstanding PSP awards will vest subject to the applicable performance
conditions and time pro-rated from the date of grant to the departure date. The two-year holding period also applied. The other
half of awards lapsed on departure.
He did not participate in the 2019/20 bonus scheme (although he served for three months of the financial year) nor did he
receive a 2019/20 PSP award.
Mike Ainslie was not eligible for any pay in lieu of notice or severance as a result of his departure.
The Company contributed up to £1,000 (plus VAT) in respect of reasonable legal costs in connection with the departure direct
to the relevant law firm.
Review of past performance and CEO remuneration table (unaudited)
The graph below shows the TSR of the Company and the FTSE Small Cap Index (excluding investment trusts) over the period
from Admission to 31 March 2020. This is considered an appropriate comparator for XPS Pensions Group which is a constituent
of the FTSE Small Cap Index.
)
0
0
1
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
140
130
120
110
100
90
80
70
15 Feb 2017
31 Mar 2017
31 Mar 2018
31 Mar 2019
31 Mar 2020
XPS Pensions Group PLC
FTSE Small Cap Excl. Investment Trusts
The table below details certain elements of the CEOs’ remuneration since Admission:
2020
2019
2018
2017
Ben Bramhall
Paul Cuff
Ben Bramhall
Paul Cuff
Ben Bramhall
Paul Cuff
Ben Bramhall
Paul Cuff
1. The bonus was reduced with the agreement of the Co-CEO’s from the formulaic outcome of 50%.
2. The bonus was reduced with the agreement of the Co-CEO’s from the formulaic outcome of 54%.
Single total
figure of
remuneration
Annual bonus
payout as %
of maximum
£592,066
£592,066
£362,803
£362,803
£546,138
£545,724
£286,882
£4,179,695
30%(1)
30%(1)
12%(2)
12%(2)
79%
79%
31%
31%
Long-term
incentive
vesting rates
as % of
maximum
40.3%
40.3%
n/a
n/a
n/a
n/a
n/a
n/a
94 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Percentage change in remuneration of the CEOs (unaudited)
The table below presents the year-on-year % change in remuneration received by the CEOs, compared with the change in
remuneration received by all XPS Pensions Group staff.
Salary
Annual bonus
All taxable benefits
Ben Bramhall
Paul Cuff
0%
150%
(3)%
0%
150%
(3)%
All XPS
Pensions
Group staff
3%
2%
(23)%
CEO pay ratio
The table below sets out the pay ratios for the Group Chief Executives in relation to the equivalent pay for the lower quartile,
median and upper quartile employees (calculated on a full-time basis).
Year
2020
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
Option A
Total pay ratio
24:1
13:1
11:1
Notes:
1. The Company determined the remuneration figures at each quartile with reference to a date of 31 March 2020.
2. The Group used calculation option A as this is widely regarded as the method resulting in the most robust analysis.
3. The calculation is based on full-time equivalent FTE salary calculated on the same basis as the single figure table.
4. The Committee has reviewed the employee data and believes the median pay ratio to be consistent with the pay, reward and
progression policies for the Company’s UK employees over the period.
The total pay and benefits and the salary component of total pay and benefits for the employee at each of the 25th percentile,
the median and the 75th percentile are shown below:
£
Salary
Total pay and benefits
25th percentile
£23,500
£25,074
Median
£32,366
£34,920
75th percentile
£47,000
£51,904
Relative importance of spend on pay (unaudited)
The table below details the change in total staff pay between financial years 2018/19 and 2019/20 as detailed in Note 10 of the
Financial Statements, compared with distributions to shareholders by way of dividend, share buy backs or any other significant
distributions or payments. These figures have been calculated in line with those in the audited Financial Statements.
Total gross staff pay
Distributions to shareholders
% change
16%
2%
2019/20
£’000
56,077
13,412
2018/19
£’000
48,484
13,206
Statement of shareholder voting
The table below shows the outcome of the advisory vote on the 2018/19 Directors’ Remuneration Report at the Annual General
Meeting held on 12 September 2019 and of the binding vote on the Directors’ Remuneration Policy on 14 September 2017.
AGM resolution
Directors’ Remuneration Policy 2017 AGM
Directors’ Remuneration Report 2019 AGM
Votes for
122,743,535
162,678,130
% Votes against Votes withheld
98.40
99.96
1,993,027
71,699
0
1,689,700
Implementation of Policy for 2020/21 (unaudited information)
Base salary
Base salaries are as follows; the next annual review will be effective from 1 April 2021.
• Ben Bramhall: £288,000
• Paul Cuff: £288,000
• Snehal Shah: £243,270 (inclusive of an increase of 2% planned under the annual salary review proceeding on 1 October 2020).
Benefits in kind
Benefits will be paid in line with the Directors’ Remuneration Policy. Details of the benefits received by Executive Directors are
set out in the single figure table on page 87. There is no intention to introduce additional benefits in 2020/21.
XPS Pensions Group Annual Report 2020
95
DIRECTORS’ REMUNERATION REPORT CONTINUED
Pension
Contribution rates are currently 6% of base salary. Contributions may be made as cash supplements in full or in part. These
contributions are in line with those for the majority of employees in the Group.
Annual bonus
Bonus maxima of 150% of salary will be applied for the Co-Chief Executive Officers and 112.5% for the Chief Financial Officer.
The weightings are as follows: 75% of the bonus will be payable by reference to performance based on Adjusted PBT, with
performance against personal/strategic targets determining the extent to which the remaining 25% of the overall bonus
opportunity is payable.
In addition:
• No bonus will be payable unless the Committee is satisfied that the Company’s underlying performance warrants it; and
• As set out in the Policy table, bonus payments will also be subject to the Committee considering that the proposed bonus
amounts, calculated by reference to performance against the targets, appropriately reflect the Company’s overall
performance and shareholders’ experience. If the Committee does not believe this to be the case, it may adjust the bonus
outturn accordingly.
Owing to the Board’s concerns about commercial sensitivity, we do not believe it is in shareholders’ interests to disclose any
further details of these targets on a prospective basis. However, the Company is committed to adhering to principles of
transparency and will, provided disclosure of targets is not deemed to be commercially sensitive, make appropriate and relevant
levels of disclosure of bonus targets and performance against these targets for the 2020/21 bonus in next year’s report. The
targets will be set to ensure both consistency and fairness to all stakeholders.
PSP awards
It is intended that the PSP awards will be made in 2020/21. There are two performance criteria and they are based on EPS and
relative Total Shareholder Return (‘TSR') performance. The awards will normally vest three years after grant based upon
performance.
XPS Pensions Group’s TSR ranking vs a Comparator Group of Companies
Portion of award vesting
Below median
Median
Between median and upper quartile
Upper quartile
0%
25%
Between 25% and 100% on a straight-line basis
100%
The TSR Comparator Group consists of the constituents of the FTSE Small Cap Index (excluding investment trusts) at the start
of the performance period.
The Remuneration Committee has not, at the date of the publication of the Directors’ Remuneration Report, decided on the
appropriate target range for the EPS performance target. The targets will be disclosed in the RNS published shortly after the
grant date and in next year’s Directors’ Remuneration Report. The target range will take into account the Group’s expectations
for EPS performance over the next three years.
The Remuneration Committee will determine the appropriate award levels at the time of grant which will be no more than 150%
of salary for the co-CEOs and 125% for the CFO.
The Chairman’s and the Non-Executive Directors’ Fees
Tom Cross Brown receives an annual fee of £120,000 for his role as Board Chairman.
The Non-Executive Directors are entitled to a fee of £60,000 p.a., with an additional fee of £10,000 p.a. for the Chair of the
Audit & Risk Committee and £5,000 p.a. for each of the Senior Independent Director, Chair of the Remuneration Committee and
to the designated Non-Executive Director for workforce engagement.
This report was reviewed and approved by the Board of Directors on 24 June 2020 and was signed on its behalf by:
Margaret Snowdon OBE
Chair of the Remuneration Committee
24 June 2020
96 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
DIRECTORS’ REPORT
Overview
The Directors present their Annual Report on the activities of
XPS Pensions Group plc (the ‘Group’), together with the
audited financial statements for the year ended 31 March
2020. The Governance section on pages 50 to 96 forms part
of this Directors’ Report. Other requisite components of this
report are set out elsewhere in this Annual Report.
The Strategic Report provides information relating to the
Group’s activities, its business and strategy, engagement with
stakeholders, the principal risks and uncertainties faced by
the business and environmental and employee matters. These
sections, together with the Corporate Governance and the
Directors’ Remuneration reports provide an overview of the
Group and give an indication of future developments in the
Group’s business, so providing a balanced assessment of the
Group’s position and prospects. These reports and this
Directors’ Report have been drawn up and presented in
accordance with, and in reliance upon, applicable English
company law and any liability of the Directors in connection
with such reports shall be subject to the limitations and
restrictions provided by such law.
On 6 February 2017, the Company name changed from
Xafinity Group Holdings (Reading) Limited to Xafinity plc. On
16 February 2017, all the Company’s 136,896,244 ordinary
shares were admitted to the premium listing segment of the
Official List and to trading on the main market of the London
Stock Exchange (‘Admission’). From Admission the
Company’s ordinary shares are registered under ISIN
GB00BDDN1T20, SEDOL number BDDN1T2, and LEI
2138004Y8OBPJEAACJ11 and, until 16 May 2018, traded
under the ticker symbol XAF.
In connection with the acquisition of Punter Southall Holdings
Limited, which completed on 11 January 2018, a further
41,176,470 and 25,766,871 ordinary shares in the Company
were admitted on 5 and 11 January 2018 respectively to the
premium listing segment of the Official List and to trading on
the main market of the London Stock Exchange. The
Company had 203,839,585 ordinary shares in issue on
31 March 2018. On 16 May 2018, the Company name changed
from Xafinity plc to XPS Pensions Group plc. From 17 May
2018, the Company’s ordinary shares trade under the ticker
symbol XPS. XPS Pensions Group plc is a member of the
FTSE All-Share Index.
The table below details where certain other information,
which forms part of the Directors’ Report, can be found
within this Annual Report:
Results and dividend
The Group’s audited financial statements for the year ended
31 March 2020 are set out on pages 108 to 148 and the
Company’s audited financial statements are set out on pages
149 to 154. The Group’s profit after taxation for the year
ended 31 March 20120 was £7.4 million (2019: 11.5 million).
An interim dividend of 2.3p per ordinary share (2019: 2.3p)
was paid on 6 February 2020. The Directors recommend a
final dividend for the year of 4.3p per ordinary share (2019:
4.3p) to be paid on 24 September 2020 to shareholders on
the register on 28 August 2020. Further information
regarding dividend policy and payments can be found in the
Financial Review on page 30 and in Note 37 to the Financial
Statements on page 148.
Post balance sheet events
There have been no significant post balance sheet events to
report since 31 March 2020.
Directors
The current Directors of the Company, with summaries of
their key skills and experience, are set out in the Governance
section on pages 50 to 51 and 54. Directors on the Board
during the year and up to the date of this report are as
follows:
Tom Cross Brown
Ben Bramhall
Paul Cuff
Snehal Shah (appointed 9 July 2019)
Alan Bannatyne
Margaret Snowdon
Sarah Ing
Mike Ainslie (stepped down 27 June 2019)
Jonathan Punter (stepped down 12 September 2019)
Details of the Directors’ service contracts are shown in the
Report of the Remuneration Committee on page 80 to 81.
Details of share options granted to Directors and the interests
of the Directors in the ordinary shares of the Company are set
out in the Remuneration Report on pages 74 to 96.
In accordance with its Articles of Association, the Company
made qualifying third-party indemnity provisions for the
benefit of its Directors against any liability that attaches to
them in defending proceedings brought against them, to the
extent permitted by company law, which were in place
throughout the year and remain in force at the date of this
report. In addition, directors’ and officers’ liability insurance
cover was maintained throughout the year at the Company’s
expense and remains in force at the date of this report.
Information
Location within Annual Report
Likely future developments in the business of the Company
Strategic Report (pages 14 to 27)
Equality and diversity
Employee involvement
Co-Chief Executive Officers’ Report (page 10 to 13) and
Corporate Governance Report (page 69 )
Co-Chief Executive Officers’ Report (page 12), s172 Statement
(page 46 to 47) and Corporate Governance Report (page 66)
Directors’ share interests
Directors’ Remuneration Report (page 91)
Emissions and energy consumption
Strategic Report (page 41)
Financial risk management objectives and policies
Note 2 to the financial statements (page 122)
Directors’ regard to foster business relationships
Strategic Report (page 46 to 47)
XPS Pensions Group Annual Report 2020
97
DIRECTORS’ REPORT CONTINUED
As part of the acquisition of Punter Southall Holdings Limited
(‘PSHL) and its subsidiaries, the Company and Punter
Southall Group Limited (‘PSGL') agreed a Transitional
Services Agreement (‘TSA') on 11 January 2018, pursuant to
which PSGL provided certain IT, finance, human resources,
legal and compliance and facilities management services to
PSHL for up to two years after that date, with the Company
paying up to £2.125 million per annum for such services
(subject to additional charges that may be agreed). The
Board acknowledges that this is a significant contract in
which Jonathan Punter, who served as a Non-Executive
Director during the year until 12 September 2019, is materially
interested given his position as Chief Executive of PSGL.
As mentioned previously, the TSA concluded ahead of the
two-year agreement for the majority of Group functions.
Capital structure
The Company’s issued ordinary share capital and total voting
rights at 31 March 2020 and the date of this report were
respectively 203,904,546 and 204,008,840 ordinary shares
(each with a par value of 0.05p and all fully paid). There were
no ordinary shares held in treasury. 512,407 ordinary shares
were held in the Employee Benefit Trust. Further details of the
Company’s issued share capital are given in Note 29 of the
Financial Statements on page 140.
The Company’s ordinary shares rank pari passu in all respects
with each other, including for voting purposes and for all
dividends. Each share carries the right to one vote at general
meetings of the Company. Further information on the voting
and other rights of shareholders, including deadlines for
exercising voting rights, are set out in the Company’s Articles
of Association and in the explanatory notes that accompany
the Notice of the Annual General Meeting, which are available
on the Company’s website at www.xpsgroup.com.
Restrictions on shares
The Company’s ordinary shares are freely transferable and
there are no restrictions on the size of a holding. Transfers of
shares are governed by the provisions of the Articles of
Association and prevailing legislation. The ordinary shares are
not redeemable; however, the Company may purchase any of
the ordinary shares, subject to prevailing legislation and the
requirements of the Listing Rules.
The Directors are not aware of any agreements between
holders of the Company’s shares that may result in
restrictions on the transfer of securities or on voting rights.
Awards of shares under the Company’s Performance Share
Plan incentive arrangement are subject to restrictions on the
transfer of shares prior to vesting.
The Trustee of the Xafinity Employee Benefit Trust holds
512,407 ordinary shares in the Company but has waived its
entitlement to dividends and does not seek to exercise the
voting rights on those shares.
Major interests in shares
The table at the bottom of the page shows the interests in
shares (whether directly or indirectly held) notified to the
Company in accordance with Chapter 5 of the Disclosure
Guidance and Transparency Rules as at 31 March 2020 and
31 May 2020 (being the latest practicable date prior to
publication of this Annual Report).
Appointment and retirement of Directors
The Board may from time to time appoint one or more
additional Directors so long as the total number of Directors
does not exceed the limit of 12 prescribed in the Articles of
Association. Any person so appointed will retire at the next
Annual General Meeting and then be eligible for re-election.
The UK Corporate Governance Code recommends that all
Directors be subject to annual re-election by shareholders.
Therefore, being eligible, all Directors will offer themselves for
re-election at the 2020 Annual General Meeting.
Powers of Directors
The business of the Company shall be managed by the
Directors, who may exercise all powers of the Company,
subject to legislation, the provisions of the Articles of
Association and any directions given by special resolution.
The Articles of Association contain specific provisions
governing the Company’s power to borrow money and also
provide the powers to issue shares and to make purchases of
its own shares. In accordance with the authorities granted at
the 2019 Annual General Meeting, the Directors are
authorised, within certain limits, to allot shares or grant rights
to subscribe for shares in the Company and to make market
purchases of the Company’s own shares representing up to
10% of its share capital at that time. Details of the proposed
renewal of authorities of the Directors are set out in the
Notice of the 2020 Annual General Meeting.
Political donations
No political contributions were made, or political expenditure
incurred, by the Company and its subsidiaries during the year
(2019: £nil).
Provisions on change of control
The Company is subject to a change of control provision in
the following significant agreement:
The Company’s £90 million agreement with HSBC Bank plc
and the Bank of Ireland in multicurrency revolving facilities,
with a further uncommitted facility of up to £10 million,
includes a customary provision for a lending counterparty to
amend, alter or cancel the relevant commitment to the Group
following a change of control of the Company.
Shareholder
Punter Southall Group Limited
Schroder Investment Management
Gresham House
AXA Investment Managers
Invesco
Franklin Templeton Investments
Unicorn Asset Management
98 XPS Pensions Group Annual Report 2020
At 31 March 2020
At 31 May 2020
Number of
ordinary shares
Percentage of
total voting rights
Number of
ordinary shares
Percentage of
total voting rights
22,707,543
20,061,733
7,739,277
16,392,288
15,721,116
13,219,633
11,645,664
11.14
9.84
3.80
8.04
7.71
6.48
5.71
22,618,215
20,086,733
16,782,927
16,392,288
15,711,599
13,619,633
12,130,000
11.09
9.85
8.23
8.04
7.70
6.68
5.95
Strategic Report
Governance
Financial Statements
The Company does not have agreements with any Director or
employee that would provide specific compensation for loss
of office or employment resulting from a takeover, except that
provisions of the Company’s Performance Share Plan incentive
arrangement may cause awards to vest on a takeover.
Articles of Association
A copy of the full Articles of Association are available on the
Company’s website. The Company’s Articles of Association
may only be amended by a special resolution of shareholders
in a general meeting.
Auditors and disclosure of information to the Auditors
In accordance with section 418 of the Companies Act 2006,
each of the Directors who were members of the Board at the
date of the approval of this report confirms that:
• So far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
• The Director has taken all steps that they ought to have
taken as a Director to make themselves aware of any
relevant audit information and to establish that the
Company’s Auditors are aware of that information.
The Company’s Auditor, BDO LLP, has expressed its
willingness to continue in office and the Board has agreed,
based on the recommendation of the Audit and Risk
Committee, that a resolution for their reappointment will be
proposed at the forthcoming Annual General Meeting.
Annual General Meeting
Details of the forthcoming Annual General Meeting are given
on page 65 of the Governance Report.
Listing Rule (‘LR’) disclosures
For the purposes of LR 9.8.4CR, the information required to
be disclosed by LR 9.8.4R can be found in the following
locations:
Item
Interest capitalised
Publication of unaudited
financial information
Details of long-term incentive
schemes
Location
None
Not applicable
Details of the Company’s
long-term incentive scheme
can be found in the
Remuneration Committee
Report on pages 80 and 85.
Waiver of emoluments by a
Director
None
Waiver of future emoluments
by a Director
None
Non-pre-emptive issues of
equity for cash
Not applicable
Non-pre-emptive issues of
equity for cash in relation to
major subsidiary undertakings
Contracts of significance in
which a Director is or was
interested
Provision of services by a
controlling shareholder
Shareholder waiver of
dividend for the year and
future dividends
Not applicable
Transitional Services
Agreement with Punter
Southall Group Ltd – see page
97 of this report
Not applicable.
Dividend waiver by the Trustee
of the Xafinity Employee
Benefit Trust – see page 98 of
this report
Agreements with controlling
shareholder
Not applicable.
The Directors’ Report was approved by the Board of
Directors of XPS Pensions Group plc.
By order of the Board:
Snehal Shah
Chief Financial Officer
24 June 2020
XPS Pensions Group Annual Report 2020
99
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Annual
Report and the Group Financial Statements in accordance
with applicable laws and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the
Directors are required to prepare the Group Financial
Statements and have elected to prepare the Company
Financial Statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union. Under company law the Directors must not
approve the Financial Statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and Company and of the profit or loss for the Group
and Company for that period. In preparing these Financial
Statements, the Directors are required to:
• Select suitable accounting policies and then apply them
consistently;
Statement of the Directors in respect of the
Annual Report
As required by the UK Corporate Governance Code, the
Directors confirm that they consider that the Annual Report,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s position and performance, business model and
strategy. When arriving at this position the Board was
assisted by a number of processes, including the following:
• The Annual Report is drafted by appropriate senior
management with overall coordination by Internal
Communications and Company Secretarial teams to ensure
consistency across sections;
• An extensive verification process is undertaken to ensure
factual accuracy;
• Comprehensive reviews of drafts of the Annual Report are
undertaken by members of the Executive Board and senior
management team; and
• The final draft is reviewed by the Audit and Risk Committee
• Make judgements and accounting estimates that are
prior to consideration by the Board.
reasonable and prudent;
• State whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial
statements;
• Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business; and
• Prepare a Directors’ Report, a Strategic Report and
Directors’ Remuneration Report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the Financial Statements
comply with the Companies Act 2006 and, as regards the
Group Financial Statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing
the preparation and dissemination of Financial Statements
may differ from legislation in other jurisdictions.
Responsibility statement
The Directors confirm that to the best of their knowledge:
• The Group Financial Statements, prepared in accordance
with International Financial Reporting Standards (IFRSs) as
adopted by the European Union and Article 4 of the IAS
Regulation, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group; and
• The Annual Report includes a fair review of the
development and performance of the business and the
financial position of the Group and the Parent Company as
a whole; and
• The Strategic Report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
Snehal Shah
Chief Financial Officer
24 June 2020
100 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Financial
Statements
Financial Statements
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Statement of Financial Position –
Company
Statement of Changes in Equity –
Company
Statement of Cash Flows – Company
Notes to the Financial Statements –
Company
Company Information
102
108
109
110
111
112
149
150
151
152
155
XPS Pensions Group Annual Report 2020
101
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XPS PENSIONS GROUP PLC
Opinion
We have audited the financial statements of XPS Pensions Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 March 2020 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows,
the Statement of Financial Position – Company, the Statement of Changes in Equity – Company, the Statement of Cash Flows –
Company and the notes to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(‘IFRSs’) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 March 2020 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as
regards the Group financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the Group and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK)
require us to report to you whether we have anything material to add or draw attention to:
• the Directors’ confirmation set out on page 100 in the Annual Report that they have carried out a robust assessment of the
Group’s emerging and principal risks and the disclosures in the Annual Report that describe the principal risks and the
procedures in place to identify emerging risks and explain how they are being managed or mitigated;
• the Directors’ statement set out on page 112 in the financial statements about whether the Directors considered it appropriate
to adopt the going concern basis of accounting in preparing the financial statements and the Directors’ identification of any
material uncertainties to the Group and the Parent Company’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements;
• whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the Directors’ explanation set out on page 35 in the Annual Report as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.
102 XPS Pensions Group Annual Report 2020
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Governance
Financial Statements
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How we addressed the key audit matter in the audit
Revenue recognition
The Group generates revenue from pension advisory,
administration and investment consulting services as well as
providing independent trustee, SSAS and SIPP services.
IFRS 15 requires the identification of the separate performance
obligations embedded in a contract, and the allocation of the
transaction price to these performance obligations. Revenue is
only recognised when performance obligations have been
met. Identification of the separate performance obligations
and price allocation is complex and involves judgement. Refer
to Note 1 (Accounting Policies) in the financial statements for
the revenue recognition policy.
Risks over revenue recognition include:
• Inherent fraud risk in respect of overstatement of revenue
and accrued income and the understatement of deferred
revenue;
• Incorrect deferral of revenue on SSAS services;
• Recoverability of accrued income in respect of pension
advisory services;
• Completeness of production captured within the timecard
system and subsequently recorded in the accounting
system;
• Incorrect revenue recognised under IFRS 15 due to the
judgements involved in the application of the standard.
We identified the Group’s revenue streams and tested that the
related revenue recognition policy is in accordance with IFRS 15.
We utilised our IT audit specialists to assist in our review of
revenue transactions and to identity transactions which did not
appear to arise from standard billing arrangements. We then
agreed a sample of any such transactions to underlying
documentation to gain an understanding of the transaction and
check that the related revenue had been appropriately
recognised.
We tested a sample of revenue transactions for each material
income stream by agreeing back to timecard data, invoice,
confirmation of approval to bill by project managers and receipt
of payment to check the existence of revenue and that it was
accurately recorded.
We tested the recoverability of a sample of accrued income
through to its subsequent billing and cash receipt. For any
unpaid items we considered the recoverability of these by
reference to customers’ payment trends historically.
We tested deferred income on a sample basis by re-calculating
deferrals based on invoice amounts and periods to which
they relate and reviewing SSAS income for revenue deferrals
not made.
Where contracts exist, for a sample we have checked that
revenue is being recognised in accordance with the terms of the
contract as well as the requirements of applicable accounting
standards.
We tested the completeness of timecards recorded within the
timecard system and the subsequent recognition of related
revenue by reconciling the timecards recorded to the amounts
billed and written off, agreeing exceptions noted to underlying
support.
Key observations
Our testing did not identify any material misstatements in the
amount of revenue recognised or issues with the revenue
recognition policy and judgements made.
XPS Pensions Group Annual Report 2020
103
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XPS PENSIONS GROUP PLC CONTINUED
Key audit matter
How we addressed the key audit matter in the audit
Going concern and impairment considerations
relating to Coronavirus
During the course of the audit and finalisation of the financial
statements, the potential impact of Coronavirus has become
apparent. As a result, management (including the Board and
Audit Committee) invested a significant amount of time to
consider the implications to the Group. Refer to Note 1
(Accounting Policies) in the financial statements for the going
concern consideration.
Management considered implications for the Group’s going
concern assessment, impairment of intangibles and
appropriate disclosure in the Annual Report and financial
statements. No impairment of assets was considered
necessary.
Due to the level of judgement applied by management in
performing their assessments this was considered to be an
area of focus for our audit.
In relation to going concern we reviewed management’s reverse
stress test scenarios and the options available to management
in order to mitigate the impacts. We challenged management
on the key assumptions by considering the reasonableness of
the inputs and by sensitising the outcomes included in the
scenarios. These key assumptions include the impact on
revenue, EBITDA and debt collection. We also confirmed
management’s mitigating actions are within their control. We
reviewed post year-end cash collection to determine whether
there had been any impact and reviewed post year-end
management information to consider if revenues had been
negatively impacted.
We agreed to signed supporting documentation that bank
covenants have been relaxed and reviewed forecasts to
consider whether covenants are expected to be breached.
We also confirmed that additional facilities have been granted.
We considered the potential impact on the balance sheet,
specifically around intangibles and right of use assets. This
included a full impairment review for intangible assets which
used the reforecast figures to consider the impact of
Coronavirus.
We reviewed the disclosures in the financial statements in
relation to the potential impacts of the Coronavirus for
consistency with the management’s assessment.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an
appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of
their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as follows:
Overall materiality
How we determined it
Group
Parent Company
£546,000 (2019: £615,000)
£240,000 (2019: £240,000)
Materiality for the Parent Company’s
financial statements capped at 44%
(2019: 39%) of Group materiality.
Materiality was based on 5% of profit
before tax (2019: based on 5% of profit
before tax excluding accelerated
amortisation of £4.8 million for the
Punter Southall brand). £546,000 was
calculated based on the original figures
provided during the audit. We
recalculated final materiality based on
the adjusted numbers and have decided
to retain the lower materiality amount.
Rationale for benchmark applied We determined profit before tax as our
benchmark for materiality on the basis
that profit before tax is a key
performance indicator used by the
market.
We considered an asset based measure
to best reflect the nature of the Parent
Company which acts as a Parent Holding
Company for the Group.
Where financial information from components was audited separately, component materiality levels were set for this purpose at
lower levels varying from 1% to 91% of Group materiality.
104 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Performance materiality was set at £382,000 (2019: £430,000) for the Group, representing 70% (2019: 70%) of materiality. 70%
of materiality was selected as there have historically been a low number of audit adjustments, a limited number of balances are
subject to estimation and based on our assessment of the overall control environment. The same percentage was applied to
each component materiality including the Parent Company.
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £22,000 (2019:
£25,000), being 4% (2019: 4%) of Group materiality. We also agreed to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
An overview of the scope of our audit
The Group comprises the Parent Company, seven trading subsidiaries, all of which are considered to be significant components,
and five intermediate holding companies all based in the United Kingdom, together with a Jersey based trust company
controlled by the Parent Company, which contains the Group’s Employee Benefit Trust. Full scope audits of all entities were
carried out by the Group audit team given the need for statutory audit requirements for all components.
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of
internal control, and assessing the risks of material misstatement in the financial statements at the Group level. The scope of the
audit was tailored to ensure that specific testing was performed over the Key Audit Matters described above.
Capability of the audit to detect irregularities, including fraud
Whilst the Directors have ultimate responsibility for the prevention and detection of fraud, we are required to obtain reasonable
assurance that the financial statements are free from material misstatement, including those arising as a result of fraud.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it
operates, and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud.
These included but were not limited to compliance with the Companies Act 2006, IFRSs as adopted by the European Union, the
Financial Conduct Authority’s regulations and the Listing Rules.
We designed audit procedures to respond to the risk, recognising that the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion.
We focused on laws and regulations that could give rise to a material misstatement in the financial statements. Our tests
included, but were not limited to:
• agreement of the financial statement disclosures to underlying supporting documentation;
• enquiries of management, Head of Risk, department Heads, the Board and the Audit Committee;
• enquiries of the legal team and compliance department including the Head of Compliance and Money Laundering Reporting
Officer;
• review of minutes of Board meetings throughout the period; and
• considering the effectiveness of the control environment in monitoring compliance with laws and regulations.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
We also addressed the risk of management override of internal controls, including testing journals and evaluating whether there
was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual
Report and Accounts, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
XPS Pensions Group Annual Report 2020
105
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XPS PENSIONS GROUP PLC CONTINUED
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the
other information and to report as uncorrected material misstatements of the other information where we conclude that those
items meet the following conditions:
• Fair, balanced and understandable set out on page 100 – the statement given by the Directors that they consider the
Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position, performance, business model and strategy, is materially
inconsistent with our knowledge obtained in the audit; or
• Audit Committee reporting set out on pages 70-73 – the section describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code set out on pages 50-65 – the parts of the
Directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not
properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course
of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibility Statement set out on page 100, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
106 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Other matters which we are required to address
Following the recommendation of the Audit Committee, we were reappointed by the shareholders at the AGM on 12 September
2019 to audit the financial statements for the year ended 31 March 2020. The period of total uninterrupted engagement is seven
years, covering the years ended 31 March 2014 to 31 March 2020. We were first appointed by the Directors on 15 April 2013.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we
remain independent of the Group and the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Simon Brooker
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
24 June 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
XPS Pensions Group Annual Report 2020
107
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2020
Note
8
4
9
14
14
15
16
Revenue
Other operating income
Administrative expenses
Profit/(loss) from operating activities
Finance income
Finance costs
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) and total comprehensive
income/(loss) for the year from
continuing operations
Profit on discontinued operation,
net of tax
Profit/(loss) after tax
Memo
EBITDA
Depreciation and amortisation
Year ended 31 March 2020
Year ended 31 March 2019
Non-trading
and
exceptional
items
£’000
–
–
(12,824)
(12,824)
–
–
Trading
items
£’000
119,753
–
(93,488)
26,265
8
(2,378)
Total
£’000
119,753
–
(106,312)
13,441
8
(2,378)
Non-trading
and
exceptional
items
£’000
–
6,459
(19,575)
(13,116)
–
196
Trading
items
£’000
109,890
–
(83,861)
26,029
17
(1,760)
23,895
(12,824)
11,071
24,286
(12,920)
(3,812)
140
(3,672)
(4,225)
3,230
Total
£’000
109,890
6,459
(103,436)
12,913
17
(1,564)
11,366
(995)
20,083
(12,684)
7,399
20,061
(9,690)
10,371
–
–
–
20,083
(12,684)
7,399
1,137
21,198
–
(9,690)
1,137
11,508
30,430
(4,165)
(5,671)
(7,153)
24,759
(11,318)
27,442
(1,413)
(1,386)
(11,730)
26,056
(13,143)
Profit/(loss) from operating activities
26,265
(12,824)
13,441
26,029
(13,116)
12,913
Pence
Pence
Earnings per share attributable to the
ordinary equity holders of the Company:
Profit or loss:
Basic earnings per share
Diluted earnings per share
Profit or loss from continuing
operations:
Basic earnings per share
Diluted earnings per share
35
35
35
35
9.9
9.6
9.9
9.6
–
–
–
–
3.6
3.6
3.6
3.6
10.0
9.9
9.9
9.8
–
–
–
–
5.7
5.6
5.1
5.0
The notes on pages 112 to 148 form part of these Financial Statements.
108 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Other financial assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Loans and borrowings
Lease liabilities
Deferred income tax liabilities
Current liabilities
Loans and borrowings
Lease liabilities
Provisions for other liabilities and charges
Trade and other payables
Current income tax liabilities
Deferred consideration
Total liabilities
Net assets
Equity and liabilities
Equity attributable to owners of the parent
Share capital
Share premium
Merger relief reserve
Investment in own shares held in trust
Accumulated deficit
Total equity
31 March
2020
£'000
31 March
2019
£'000
Note
17
32
18
19
20
21
22
23
32
19
23
32
27
25
26
28
29
30
30
30
30
3,017
12,965
210,601
669
1,300
228,552
34,358
14,432
48,790
2,104
–
208,218
840
1,000
212,162
33,075
5,539
38,614
277,342
250,776
70,186
10,269
17,561
98,016
–
2,538
2,743
19,349
994
757
26,381
124,397
152,945
56,962
–
16,370
73,332
49
–
2,033
17,414
1,393
152
21,041
94,373
156,403
102
116,797
48,687
(529)
(12,112)
102
116,795
48,687
(167)
(9,014)
152,945
156,403
The notes on pages 112 to 148 form part of these Financial Statements.
The Financial Statements were approved by the Board of Directors on 24 June 2020 and were signed on its behalf by:
Snehal Shah
Chief Financial Officer
24 June 2020
Registered number: 08279139
XPS Pensions Group Annual Report 2020
109
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Share capital
£'000
Share
premium
£'000
Investment in
own shares
£'000
Merger relief
reserve
£’000
Accumulated
deficit
£'000
Total equity/
(deficit)
£'000
102
116,782
(465)
48,687
(11,728)
153,378
–
–
–
298
–
–
298
(167)
(167)
–
–
–
(499)
137
–
–
(362)
(529)
–
–
–
–
–
–
–
48,687
48,687
–
–
–
–
–
–
–
–
11,508
11,508
–
(13,206)
13
(13,206)
1,701
1,999
2,859
2,859
(148)
(148)
(8,794)
(8,483)
(9,014)
156,403
(9,014)
156,403
7,399
7,399
–
(13,412)
2
(13,412)
–
(499)
637
774
2,132
2,132
146
146
(10,497)
(10,857)
48,687
(12,112)
152,945
Balance at 1 April 2018 (as restated for IFRS 15)
Comprehensive income and total
comprehensive income for the year
Contributions by and distributions to owners:
Share capital issued
Dividends paid (note 37)
Share-based payment expense – equity settled
from employee benefit trust
Share-based payment expense – IFRS 2 charge
in respect of long-term incentives (note 13)
Deferred tax movement in respect of long-term
incentives (note 19)
Total contributions by and distributions to
owners
Balance at 31 March 2019
Balance at 1 April 2019
Comprehensive income and total
comprehensive income for the year
Contributions by and distributions to owners:
Share capital issued
Dividends paid (note 37)
Shares purchased by employee benefit trust for
cash
Share-based payment expense – equity settled
from employee benefit trust
Share-based payment expense – IFRS 2 charge
in respect of long-term incentives (note 13)
Deferred tax movement in respect of long-term
incentives (note 19)
Total contributions by and distributions to
owners
–
–
–
–
–
–
–
–
13
–
–
–
–
13
102
102
116,795
116,795
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
2
Balance at 31 March 2020
102
116,797
The notes on pages 112 to 148 form part of these Financial Statements.
110 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortisation
Finance income
Finance costs
Gain on sale of discontinued operations before tax
Share-based payment expense
Other operating income
Income tax expense
Increase in trade and other receivables
Increase in trade and other payables
(Decrease)/increase in provisions
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Finance income received
Acquisition of subsidiaries, net of cash acquired
Disposal of discontinued operations
Purchases of property, plant and equipment
Purchases of software
Increase in restricted cash balances – other financial assets
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from the issue of share capital net of share issue costs
Proceeds from new loans net of capitalised costs
Sale of own shares
Purchase of ordinary shares by EBT
Interest paid
Lease interest paid
Payment of lease liabilities (2019: finance lease only)
Dividends paid to the holders of the parent
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of the year
Cash and cash equivalents at end of year
The notes on pages 112 to 148 form part of these Financial Statements.
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
7,399
11,508
856
10,462
(8)
2,378
–
2,132
–
3,672
26,891
(750)
1,284
(428)
26,997
(3,539)
23,458
8
(7,544)
427
(2,021)
(1,377)
(300)
(10,807)
2
13,250
774
(499)
(1,630)
(197)
(2,046)
(13,412)
(3,758)
8,893
5,539
14,432
841
12,302
(17)
1,564
(1,164)
2,859
(6,459)
1,262
22,696
(3,698)
64
387
19,449
(3,941)
15,508
17
(4,925)
550
(1,928)
(715)
(1,000)
(8,001)
13
1,500
1,999
–
(1,644)
–
(34)
(13,206)
(11,372)
(3,865)
9,404
5,539
Note
17
18, 32
14
14
16
13
4
15
14
7,28
21
17
18
20
29
22
XPS Pensions Group Annual Report 2020
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
1 Accounting policies
XPS Pensions Group plc (the ‘Company’) is a public limited company incorporated in the UK. The principal activity of the
Group is employee benefit consultancy and related business services. The registered office is Phoenix House, 1 Station Hill,
Reading, RG1 1NB. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to
as the ‘Group’).
Basis of preparation
These Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by
the European Union (IFRSs as adopted by the EU), IFRS – IC Interpretations and the Companies Act 2006 applicable to
companies reporting under IFRS. The consolidated financial statements have been prepared under the going concern basis.
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial
Statements, are disclosed at the end of this section.
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have
been consistently applied to all the periods presented, unless otherwise stated.
Functional and presentation currency
The Financial Statements are presented in British Pounds which is the Company’s functional currency. Figures are rounded to
the nearest thousand.
Measurement convention
The financial information is prepared on the historical cost basis except for the measurement of contingent consideration.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the
investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that
there may be a change in any elements of control.
De facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee
without holding the majority of the voting rights. In determining whether de facto control exists the Company considers all
relevant facts and circumstances, including:
• The size of the Company’s voting rights relative to both the size and dispersion of other parties who hold voting rights;
• Substantive potential voting rights held by the Company and by other parties;
• Other contractual arrangements;
• Historic patterns in voting attendance.
The consolidated financial information presents the results of the Company and its subsidiaries (‘the Group’) as if they formed a
single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial information incorporates the results of business combinations using the acquisition method. In the
statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at
their fair values at the acquisition date. The results of the acquired operations are included in the consolidated statement of
comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which
control ceases.
Property, plant and equipment
Property, plant and equipment are stated at historic cost less accumulated depreciation. For items acquired as part of a
business combination, cost comprises the deemed fair value of those items at the date of acquisition. Depreciation on those
items is charged over their estimated remaining useful lives from that date.
Depreciation is charged to profit and loss in the statement of comprehensive income on a straight-line basis over the estimated
useful lives of each part of an item of property, plant and equipment. Estimated useful lives are as follows:
• Office equipment
• Leasehold improvements
• Fixtures and fittings
3 to 10 years
Over remaining life of the lease
3 to 10 years
Going concern
Accounting standards require the Directors to consider the appropriateness of the going concern basis when preparing the
Financial Statements. The Directors have taken notice of the Financial Reporting Council guidance ‘Guidance on the going
concern basis of accounting and reporting on solvency and liquidity risks’ which requires the reasons for this decision to
be explained.
112 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
The Directors have prepared cash flow forecasts for a period including 12 months from the date of approval of these Financial
Statements which show that during that period the Group is expected to generate sufficient cash from its operations to settle its
liabilities as they fall due without the requirement for additional borrowings. In light of the COVID-19 pandemic in the UK, the
Directors have undertaken additional assessments of the Group’s ability to operate for the foreseeable future. This involved
modelling various scenarios, including a worst case scenario, which is considered by the Directors to be prudent. Alongside the
potential downturn in revenue, mitigating cost-saving actions have been identified to reduce any potential impact on the Group.
Additionally, actions which the Group could take to protect the cash balance have been identified, if the situation requires them.
These actions include reducing capital expenditure to exclude non-essential spend, and reducing or freezing discretionary cost
items. The Directors have also negotiated a relaxation to the Group's banking covenants until September 2021, as well as access
to an additional £10 million of loan facility, should this be required. The worst case scenarios modelled by the Directors indicate
that with these additional funds, and the covenant relaxation, the Group is well placed to weather this outbreak and has
sufficient liquidity to continue to operate and to discharge its liabilities as they fall due within the foreseeable future. The
Directors, after reviewing the Group's budget and longer term forecast models, including the worst case scenario discussed
above, conclude that the Group has adequate resources to continue in operational existence for the foreseeable future and they
continue to adopt the going concern basis of accounting in preparing these annual Financial Statements.
Intangible assets and goodwill
Goodwill represents amounts arising on acquisition, being the difference between the cost of the acquisition and the net fair
value of the identifiable assets and liabilities acquired on a business combination. Identifiable intangibles are those which can be
sold separately or which arise from legal rights regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units for the
purposes of impairment testing and is not amortised. It is tested annually for impairment.
Externally acquired intangible assets are stated at cost less accumulated amortisation and impairment losses.
Acquired software is valued based on replacement cost valuations where identifiable or at cost less accumulated amortisation
and impairment. Internally produced software is valued at cost less accumulated amortisation and impairment.
Customer relationships are valued based on the net present value of the excess earnings generated by the revenue streams over
their estimated useful lives.
Brands valuation is based on net present value of estimated royalty returns.
Amortisation is charged to profit and loss in the statement of comprehensive income over the estimated useful lives of
intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life, such as goodwill, are
systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are
available for use. Estimated useful lives are as follows:
• Goodwill
• Customer relationships*
• Brands
• Software
Indefinite life
10 years, straight-line method
10 years, straight-line method
3 to 5 years, straight-line method
* Except for Pensions and investment customer relationships acquired as part of the Punter Southall acquisition, which have an estimated useful life of
20 years, on a straight-line basis and customer relationships recognised in 2013 which have an estimated useful life of 10 years, on a reducing balance basis.
Contingent consideration
Contingent consideration is included in cost at its acquisition date fair value and is classified as a financial liability, remeasured
at fair value subsequently through profit or loss. Contingent consideration classified as equity is not remeasured.
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill or intangible assets not ready for use, are not subject to
amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash inflows (cash-generating units). Non-financial assets other than
goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
Financial assets
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the
asset was acquired.
XPS Pensions Group Annual Report 2020
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
1 Accounting policies continued
Amortised cost
Amortised cost includes non-derivative financial assets where they are held within a business model whose objective is to hold
the financial asset in order to collect contractual cash flows and those contractual terms give rise to cash flows on specified
dates that are solely payments of principal and interest on the principal amount outstanding. These assets are included in
non-current assets if their maturity is greater than 12 months. Trade receivables are stated initially at fair value then measured at
amortised cost less provisions for impairment. The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision. The expected loss rates are based on the Group’s historical credit losses
experienced over the three-year period prior to year end. The historical loss rates are then adjusted for current and forward-
looking information on macroeconomic factors affecting the Group’s customers. Any impairment required is recorded in the
statement of comprehensive income within administrative expenses.
Cash and cash equivalents comprise cash balances and call deposits.
Restricted cash is cash which the Group is not entitled to receive, withdraw, transfer or otherwise deal with the Deposit, save as
expressly permitted by the Blocked Account Agreement during the Security Period. The Security Period is the period beginning
on the date of the Deed and ending on the date on which the Beneficiary is satisfied that the Secured Liabilities have been
irrevocably and unconditionally paid and discharged in full and all agreements which might give rise to Secured Liabilities have
terminated. The restricted cash has been included in non-current assets as it is expected that the cash will remain in the blocked
account for more than 12 months after the end of the reporting period.
Financial liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was
acquired. The Group’s accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises contingent consideration. The contingent consideration is carried in the consolidated statement of
financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income.
Other financial liabilities
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value
being recognised in the statement of comprehensive income over the period of the borrowings on an effective interest basis.
When borrowings are extinguished, any difference between the cash paid and the carrying value is recognised in the statement
of comprehensive income.
Trade payables and other short-term monetary liabilities represent liabilities for goods and services received by the Group prior
to the end of the financial year which are unpaid. The amounts within trade payables are unsecured. They are initially recognised
at fair value and subsequently carried at amortised cost using the effective interest method.
Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected, risk adjusted, future cash flows at a pre-tax risk-free rate.
Dilapidations provisions relate to the estimated cost to put leased premises back to the required condition expected under the
terms of the lease. These include provisions for required dilapidations along with provisions where leasehold improvements have
been made that would require reinstatement back to the original status on exit. These are uncertain in timing as leases may be
terminated early or extended. To the extent that exits of premises are expected within 12 months of the end of the year they are
shown as current.
Professional indemnity provisions relate to complaints against the Group. The amount provided is based on management’s best
estimate of the likely liability and is capped to the excess on the Group’s professional indemnity insurance on a case-by-case
basis where covered and settled on a net basis.
Social security costs provisions represent estimates of the Group’s National Insurance contributions liability on the cost of the
Group’s Performance Share Plan.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as
a deduction, net of tax, from the proceeds.
Retirement benefits: Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in
the year to which they relate.
114 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Employee Benefit Trust (EBT)
As the Group is deemed to have control of its EBT, it is treated as a subsidiary and consolidated for the purposes of the
Consolidated Financial Statements. The EBT’s investment in the Group’s shares is deducted from equity in the consolidated
statement of financial position as if it were treasury shares. Consideration paid (or received) for the purchase (or sale) of these
shares is recognised directly in equity. The cost of shares held is presented as a separate reserve (the ‘investment in own
shares’). Any excess of the consideration received on the sale of these shares over the weighted average cost of the shares sold
is credited to retained earnings.
The equity-settled share-based payment expense represents the amount of share awards made by the Employee Benefit Trust
on behalf of the Company as instructed by the Company.
EBT equity-settled awards, which vest immediately on issue, are measured at the fair value of the shares issued on the date of
the award, representing the bid price of the shares. The share-based payment expense is charged to the consolidated statement
of comprehensive income.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is
when paid, and in the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.
Revenue
Revenue, which excludes value added tax, represents the value of employee benefit consultancy and related business services
supplied. Revenue is derived mainly from sales made in the United Kingdom. Revenue derived from outside the United Kingdom
is immaterial.
Amounts recognised as revenue but not yet billed are reflected in the statement of financial position as accrued income
(contract assets for adjustments relating to fixed fees as described below). All performance obligations have been satisfied.
Amounts billed in advance of work performed are deferred in the statement of financial position as deferred income (contract
liabilities for adjustments relating to fixed fees as described below).
Performance obligations and timing of revenue recognition
Performance obligations in contracts with customers are typically satisfied as services are rendered. In most cases, revenue is
recognised on an over time basis. This is because effort has been expended by the business on fulfilling the performance
obligations in the contract and the contracts would require payment for time and effort spent by the Group on progressing the
contracts in the event of the customer cancelling the contract for any reason other than the Group’s failure to perform its
obligations under the contract. Invoices are in most cases raised monthly, based on timesheet data for Pensions actuarial and
consulting work and Pensions investment consulting. For Pensions Administration services, invoices are typically raised monthly
based on services provided. Payments is typically due 30 days from date of invoice. The services by the Group range from
actuarial and investment consultancy to administration of pension schemes. Additionally, the Group has a SSAS and SIPP
business which provides services to small self-administered pension schemes and self-invested pensions plans. The Group also
provides a defined contribution master pension trust for employers offering ‘full freedom and choice’, called the National
Pension Trust.
The Group has a number of customers who are on a fixed price contract. This contract covers a number of services, most of
which are ongoing and therefore require no revenue recognition adjustment to the regular invoice issued to the customer. These
are recognised monthly at the time of billing, as the benefit the customer receives as the work is done is largely in line with the
amount billed each month.
For some fixed price customers, an element of the fixed fee includes the triennial valuation of their defined benefit pension
schemes, which is a distinct performance obligation. Under IFRS 15, the Group has assessed these contracts and has determined
that an adjustment is needed to recognise the revenue for the performance obligation relating to the triennial valuations in the
specific periods that the work is undertaken.
Additionally, some of the fixed fee contracts include an element for investment strategic reviews. This is a distinct performance
obligation, which has been assessed under IFRS 15 and it was determined that an adjustment is required to recognise the
revenue for this performance obligation in the specific periods that the work is undertaken.
For the fixed fee customers where an adjustment is required, payment is made monthly over a three-year period. The
revenue recognition for triennial valuations takes place over the 15-month period after the valuation date, so there can be
up to 35 months variance between the date of billing and revenue recognition. For strategic reviews, the variance can also
be up to 35 months, depending on the timing of the review within the three-year contract window. Any variance between
the timing of payment and the timing of revenue recognition will be recognised as either a contract asset (where the
performance obligations met to date exceed the value billed from the contract to date), or as a contract liability (where the
value billed to date from the contract exceeds the performance obligations met to date).
XPS Pensions Group Annual Report 2020
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
1 Accounting policies continued
Determining the transaction price and allocating amounts to performance obligations
For the contracts where an adjustment is required, the Group has identified the element of the fixed fee that is attributable to
the triennial valuation and/or the strategic review. This has been calculated based on the expected time required to perform
these obligations for each specific customer. To ensure that the revenue is allocated to the relevant period, the Group has
determined the timespan for the triennial valuation work, and the separate stages of this work. A percentage has been applied
to each stage, based on the proportion of total effort. For strategic reviews, which are a smaller piece of work, the Group makes
an assessment at the end of each relevant period of the percentage complete for each review.
Judgement is required for these contracts in determining the value attributable to the triennial valuation work and the strategic
reviews, and also to the stage of completion at each reporting period. The judgements made are based on experience, and have
been validated by comparison to timesheet data.
The remainder of revenue from fixed fee contracts is recognised on a monthly basis, as the services provided tend to be evenly
spread over the life of the contract.
Services provided under contracts which do not include a fixed fee are recognised at a price quoted within the contract which
typically varies depending on the level of seniority of the employee providing the service. Commission income is recognised on
renewal of scheme membership, as the performance obligations are met at the time the contract is won or renewed with
the insurer.
Expenses
Exceptional and non-trading items
To assist in understanding its underlying performance, the Group has defined the following items of pre-tax income and expense
as non-trading as they either reflect items which are exceptional in nature or size or are associated with the amortisation of
acquired intangibles. Items treated as non-trading or exceptional include:
• profits or losses on disposal of assets or businesses;
• corporate transaction and restructuring costs;
• amortisation of acquired intangibles;
• changes in the fair value of contingent consideration;
• share-based payments; and
• the related tax effect of these items.
Any other non-recurring items are considered individually for classification as non-trading or exceptional by virtue of their
nature or size.
The separate disclosure of these items allows a clearer understanding of the trading performance on a consistent and
comparable basis, together with an understanding of the effect of non-recurring or large individual transactions upon the overall
profitability of the Group.
The non-trading items have been included within the appropriate classifications in the consolidated income statement. Further
details are given in note 6.
Leases and payments
The Group’s accounting policies for leases are set out in note 32.
Identifying leases
The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of
time in exchange for consideration. Leases are those contracts that satisfy the following criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits from use of the asset; and
(c) The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract
is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers
only the economic benefits that arise from use of the asset, not those incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of the asset, the Group considers whether it directs how and for
what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are
predetermined due to the nature of the asset, the Group considers whether it was involved in the design of the asset in a way
that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a
contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16.
116 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Foreign exchange policy
Transactions entered into by Group entities in a currency other than the functional currency (GBP) are recorded at the rates
ruling when the transactions occur.
Any exchange rate differences are recognised immediately through the statement of comprehensive income.
Net finance costs
Net finance costs comprise interest payable, interest receivable on own funds, foreign exchange gains and losses and costs
directly related to the raising of loans.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.
Share-based payment costs – Performance Share Plan
The Group operates an equity-settled, share-based compensation plan, under which the entity receives services from the
Executive Directors and key management personnel in consideration for equity instruments of the Group. The fair value of the
services received in exchange for the grant of the awards is recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the awards granted:
• including any market performance conditions (for example, an entity’s share price); and
• including the impact of any service and non-market performance vesting conditions (for example, profitability and remaining
a Director for a specified period of time);
See the Employee Benefit Trust (EBT) policy above for information on the Employee Benefit Trust element of share-based
payment costs.
Discontinued operations
The results of operations disposed of during the year are included in the consolidated statement of comprehensive income up to
the date of disposal. A discontinued operation is a component of the Group's business that represents a separate major line of
business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed
of, has been abandoned, or that meets the criteria to be classified as held for sale. Discontinued operations are presented in the
consolidated statement of comprehensive income as a single line which comprises the post-tax profit or loss of the discontinued
operation along with the post-tax gain or loss recognised on the remeasurement to fair value less costs to sell or on disposal of
the assets or disposal groups constituting discontinued operations. The prior year statement of comprehensive income is
restated for comparative presentations of any current year discontinued operations.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in profit and loss in the statement of
comprehensive income except to the extent that it relates to items recognised in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in
a business combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised.
Changes in accounting policies – New standards, interpretations, and amendments effective from 1 April 2019
IFRS 16 Leases is a new standard which has been adopted in the annual Financial Statements for the year ended 31 March 2020.
It has given rise to changes in the Group's accounting policies. IFRS 16 has replaced IAS 17 Leases and IFRIC 4 Determining
whether an arrangement contains a lease, which were previously issued by the IFRS Interpretations Committee.
IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with
options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. IFRS 16
substantially carries forward the lessor accounting in IAS 17, with the distinction between operating leases and finance leases
being retained.
XPS Pensions Group Annual Report 2020
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
1 Accounting policies continued
(a) Transition method and practical expedients utilised
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date
of initial application (1 April 2019), without restatement of comparative figures. The Group elected to apply the practical
expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into
before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a
lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 April 2019.
IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The
Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases
under IAS 17:
• Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under IAS 36
as at the date of initial application; and
• Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term
remaining as of the date of initial application.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and
lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some
classes of leases for short-term leases with a lease term of 12 months or less.
On adoption of IFRS 16, the Group recognised right-of-use assets and lease liabilities in relation to leases of office space, which
had previously been classified as operating leases.
The lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee company’s
incremental borrowing rate as at 1 April 2019. The lessee company’s incremental borrowing rate is the rate at which a similar
borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted average rate
applied was 2.60%.
The office space right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments, rent-free periods and an adjustment for costs of removal and restoring.
A section of one of the Group’s offices was sub-leased – under IFRS 16 this sub-lease is treated as a lease receivable. The
sub-leased element is excluded from the asset value of that office.
The right-of-use assets will be depreciated over the life of the lease, which is between one and ten years. The right-of-use assets
are included in non-current assets in the Statement of Financial Position. The lease liabilities are shown separately in the
Statement of Financial Position. At interim, the right-of-use assets were included within property, plant and equipment, however
for the Financial Statements as at 31 March 2020, these have been presented in their own category, to keep the assets distinct
from other assets not held under a lease.
The following table presents the impact of adopting IFRS 16 on the statement of financial position as at 1 April 2019:
Assets
Office equipment
Right-of-use assets
Prepayments
Lease receivable
Liabilities
Accrued expenses
Dilapidation provision
Loans and borrowings
Lease liabilities
31 March 2019
As originally
presented
£’000
Adjustments
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
1,126
_
3,744
_
7,474
517
57,011
_
IFRS 16
£’000
1 April 2019
£’000
(252)
9,488
(378)
43
(505)
493
(261)
9,174
874
9,488
3,366
43
6,969
1,010
56,750
9,174
(a) Property, plant and equipment was adjusted to reclassify leases previously classified as finance type to right-of-use assets.
The adjustment reduced the cost of property, plant and equipment by £261,000 and accumulated depreciation by £9,000
for a net adjustment of £252,000.
118 XPS Pensions Group Annual Report 2020
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Financial Statements
(b) The adjustment to right-of-use assets is as follows:
Adjustment noted in (a) – finance type leases
Operating type leases
Right-of-use assets
£'000
252
9,236
9,488
(c) Prepayments was adjusted for office rental expenses paid in advance. These amounts were included in the calculation of the
right-of-use assets.
(d) The lease receivable balance relates to a sub-lease for one of the Group's offices.
(e) Accrued expenses were adjusted for rent-free periods contained within the leases for several of the Group's office buildings.
Upon implementation of IFRS 16, these amounts were included in the calculation of the right-of-use assets.
(f) Dilapidations provision was adjusted to hold the full provision required for each office. Previously, the provision had been
charged monthly to administrative expenses over the life of the lease.
(g) Loans and borrowings were adjusted to reclassify leases previously classified as finance type to lease liabilities.
(h) The following table reconciles the minimum lease commitments disclosed in the Group’s 31 March 2019 annual financial
statements to the amount of lease liabilities recognised on 1 April 2019:
Minimum operating lease commitment at 31 March 2019
Less: short-term leases not recognised under IFRS 16
Plus: effect of extension options reasonably certain to be exercised
Undiscounted lease payments
Less: effect of discounting using the incremental borrowing rate as at the date of initial application
Lease liabilities for leases classified as operating type under IAS 17
Plus: leases previously classified as finance type under IAS 17
Lease liabilities recognised at 1 April 2019
1 April 2019
£'000
4,554
(90)
5,907
10,371
(1,458)
8,913
261
9,174
Included in profit or loss for the period are £2,567,000 of amortisation of right-of-use assets and £288,000 of finance expense
on lease liabilities. Short-term leases included in profit or loss for the period amounted to £162,000.
(b) Significant accounting policies subsequent to transition
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a term of 12 months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the
discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily
determinable, in which case the lessee company’s incremental borrowing rate on commencement of the lease is used. Variable
lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the
initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other
variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option;
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of a termination option
being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and
increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the
leased asset.
XPS Pensions Group Annual Report 2020
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
1 Accounting policies continued
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the
remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the
lease term.
Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or rate or
when there is a change in the assessment of the term of any lease.
Other new and amended standards and Interpretations issued by the IASB that apply for the first time in these annual financial
statements (including IFRIC 23 Uncertainty over Income Tax Treatments) do not impact the Group as they are either not
relevant to the Group’s activities or require accounting which is consistent with the Group’s current accounting policies.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards, and interpretations are not effective for 2020, and therefore have not
been applied in preparing XPS Pensions Group’s financial statements. They are not expected to have a material impact on the
Group's consolidated Financial Statements. These include IAS 1 Presentation of Financial Statements and IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors (amendment – definition of material), IFRS 3 Business Combinations
(amendment – definition of Business), and a revised conceptual framework for Financial Reporting.
The other standards, interpretations and amendments issued by the IASB (of which some are still subject to endorsement by the
European Union), but not yet effective are not expected to have a material impact on the Group’s consolidated financial
statements.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis, with revisions to
accounting estimates applied prospectively. In the future, actual experience may differ from these estimates and assumptions.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below.
Fair values of intangible assets
Goodwill and intangibles are tested for impairment on an annual basis at the year end and between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair value of the cash-generating unit below its
carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating
performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.
Application of the goodwill impairment test requires judgement, including the identification of cash-generating units,
assignment of assets and liabilities to such units, assignment of goodwill to such units and determination of the fair value of a
unit. The fair value of each cash-generating unit or asset is estimated using the income approach, on a discounted cash flow
methodology. This analysis requires significant estimates, including estimation of future cash flows, which is dependent on
internal forecasts, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows
will occur and determination of our weighted average cost of capital. See note 18 for more detail.
Revenue recognition
Revenue is recognised once the performance obligations of the contract with the customer have been met, in line with IFRS 15.
This may be at a point in time or over time according to when control passes to the customer. Dependent upon the income
stream and nature of the engagement, revenue is recognised on either a time costs incurred, fixed fee or rateably over the
period of providing the service basis. Revenue is billed on a monthly, quarterly or, in the case of SSAS and SIPP services, on an
annual basis. Services may be billed in arrears, as in the case of pensions advisory work, or in advance as is the case with SSAS
and SIPP revenues. As a result of such arrangements, critical accounting judgements are made in determining the timing of
revenue recognition. These relate to identifying individual performance obligations and then allocating an appropriate amount
of revenue to those obligations which largely depends on the time incurred in providing the services. Management applies
judgement in assessing timesheet data to ensure that revenue is allocated proportionally to effort. There are significant
judgements involved in determining the level of performance obligations met as part of the triennial valuation work. These have
been recognised on the basis of work completed through the 15-month valuation process.
120 XPS Pensions Group Annual Report 2020
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Governance
Financial Statements
Deferred tax
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax
assets that can be recognised based upon the likely timing and the level of future taxable profits together with future tax
planning strategies. Throughout the current and prior periods the Directors consider that the IAS 12 recognition criteria have
been satisfied.
Provisions
Dilapidations provisions have been made for properties which the Group currently lease based upon the cost to make good the
property in accordance with lease terms where applicable. Provisions are made for claims in respect of complaints against the
Group. The amount provided is based on management’s best estimate of the likely liability. The cost to the business is capped to
the excess on the Group’s professional indemnity insurance in respect of each individual claim. See note 27 for more detail.
Useful lives of intangible assets
Intangible assets are amortised over their estimated useful lives with the charge recorded in administrative expenses. Useful lives
are based on management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for
continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged
to the consolidated income statement in specific periods.
Business combinations
The Directors determine and allocate the purchase price of an acquired business to the assets acquired and liabilities assumed
as of the business combination date. The purchase price allocation process requires the use of significant estimates and
assumptions, including the estimated fair value of the acquired intangible assets.
While the Directors use their best estimates and assumptions as part of the purchase price allocation process to accurately
value assets acquired and liabilities assumed at the date of acquisition, our estimates and assumptions are inherently uncertain
and subject to refinement. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may
acquire in the future include but are not limited to:
• future expected cash flows from customer relationships and brands; and
• discount rates.
See note 7 for more detail.
Exceptional costs
Exceptional costs are recognised to the extent that they meet the definition outlined in the accounting policy above. This
requires a certain amount of judgement that is applied consistently by management.
Contingent consideration
Contingent consideration is recognised at its acquisition date fair value, and is classified as a financial liability. At each reporting
period the liability is re-measured at fair value through profit or loss. This remeasurement is based on movement in the Group
share price, as well as management’s expectation of future performance. Therefore, judgement is necessary in assessing the
amount of consideration that will be payable in the future. As a result of the inherent uncertainty in this evaluation process,
actual gains or losses may be different from the originally estimated consideration. See note 28 for more detail.
Incremental borrowing rate
On application of IFRS 16, an assessment of the appropriate Incremental Borrowing Rate (‘IBR’) to be used for property lease
present value calculations was required. In the first instance, the leases were reviewed to see if a rate was disclosed within them
which could be used. As no rates were identified from the lease documents, the IBR calculated was based on the borrowing rate
available to the Company entering into the lease (which corresponded to the Group’s RCF rate), adjusted to take into
consideration UK Government bond rates corresponding to the length of the lease term. This rate was then adjusted for the
lessee company’s risk profile, and the difference between five years (the initial term of the Group’s RCF) and the lease term
based on UK bond yield adjustment as a percentage.
XPS Pensions Group Annual Report 2020
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
2 Financial risk management
The XPS Pensions Group’s operations expose it to a variety of financial risks including credit risk, liquidity risk, market risk and
the effects of changes in interest rates on debt. The Group has in place a risk management programme that seeks to limit the
adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs.
The Group’s principal financial instruments comprise sterling cash, lease liabilities, bank deposits and bank loans together with
trade receivables and trade payables that arise directly from its operations.
Risk management policies are established for the XPS Pensions Group of companies and the Group Audit Committee oversees
how management monitors compliance with these policies and procedures and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group. Further details relating to the current year position are provided in note 31.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty, including brokers, to a financial instrument fails
to meet its contractual obligations, and arises principally from the Group’s receivables from customers.
Due to the nature of the business, the majority of the trade receivables are with trustees of pension schemes and large
institutions and losses have occurred infrequently over previous years.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that the Group will have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions.
Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates and equity prices will affect the Group’s
income or the value of its financial instruments. Interest rate risks are discussed in the cash flow interest rate risk below.
The Group’s financial instruments are currently in sterling, hence foreign exchange movements do not have a material effect on
the Group’s performance.
The Group is exposed to movements in interest rate in its net finance costs and also in a small element of its operating revenue.
Senior loans are linked to LIBOR. The Group earns income in relation to client as well as interest income on its own deposits.
The Group does not hold its own position in trading securities, being involved only in arranging transactions on behalf of its clients.
The Group does not engage in holding speculative financial instruments or derivatives. Further quantitative disclosures are
included throughout these Consolidated Financial Statements.
Cash flow interest rate risk
The XPS Pensions Group is exposed to cash flow interest rate risk in two main respects. Firstly, corporate and client bank
deposits, which earn interest at a variable rate, although not at a material level. Secondly, interest expense arising on bank
facilities at a margin over LIBOR.
COVID-19 risk
The COVID-19 outbreak in the UK in the early months of 2020 poses a risk to the Group both operationally and in terms of cash
management. The Group is, to an extent, sheltered from the full impact of COVID-19 in comparison to many businesses due to
the nature of its activities and clients, being largely trustees of pension schemes rather than commercial businesses. The Group’s
Risk Management Committee holds regular meetings to discuss the ongoing situation, and the Board has taken steps to mitigate
the impact of the virus on the Group. In March 2020, the Group took steps to enable over 98% of its employees to work
effectively entirely from home. The IT risk environment was monitored carefully over this period – and additional monitoring and
filtering was put in place to protect the business from threats from phishing emails. Mandatory IT security awareness training for
employees was increased, and supplemented with phishing simulation tests to assess weaknesses and focus additional training.
The Board has assessed the impact of COVID-19 on the budget, and undertook a reforecast exercise in early FY21. Additionally,
the banking covenants were renegotiated with the Group’s lenders, and agreement was reached to extend the Group’s revolving
credit facility.
122 XPS Pensions Group Annual Report 2020
Strategic Report
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Financial Statements
3 Capital risk management
The Group is focused on delivering value for its shareholders whilst ensuring the Group is able to continue effectively as a going
concern. Value adding opportunities to grow the business are continually assessed, although strict and careful criteria are applied.
The policy for managing capital is to increase shareholder value by maximising profits and cash. The policy is to set budgets and
forecasts in the short and medium term that the Group feels are achievable. The processes for managing capital are regular
reviews of financial data to ensure that the Group is tracking the targets set and to reforecast as necessary based on the most
up-to-date information. This then contributes to the XPS Pensions Group’s forecast which ensures future covenant test points
are met. The Group continues to meet these test points and they have been achieved over the last year.
Due to the nature of some of the services provided, two subsidiaries within the Group were regulated by the Financial Conduct
Authority (‘FCA') during the year. They are required to hold a minimum level of capital and this is monitored on a monthly basis.
Formal compliance returns are submitted to the FCA in line with their reporting requirements.
4 Other operating income
Other operating income arose from the revaluation of the share-based consideration for the Punter Southall acquisition. Since
this is not considered to be part of the main revenue-generating activities of the Group, the Group presents this income
separately from revenue.
Fair value adjustment of contingently issuable ordinary shares (note 28)
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
–
6,459
5 Auditors’ remuneration
During the period the following services were obtained from the Group’s auditor at a cost detailed below:
Audit services
Fees payable in respect of the parent company and consolidated accounts
Fees payable in respect of the subsidiary accounts
Audit-related services
Non-audit services
Other assurance services
Total
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
161
130
291
44
–
–
335
133
63
196
42
47
47
285
XPS Pensions Group Annual Report 2020
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
6 Non-trading and exceptional items
Corporate transaction costs1
Restructuring costs2
Settlement of historical contractual dispute3
Other exceptional costs4
Exceptional items
Contingent consideration write back5
Share-based payment costs6
Amortisation of acquired intangibles7
Exceptional finance costs8
Non-trading items
Total before tax
Tax on adjusting items9
Adjusting items after taxation
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
Note
13
18
(870)
(1,904)
(381)
(336)
(3,491)
–
(2,180)
(7,153)
–
(9,333)
(12,824)
140
(12,684)
(724)
(3,134)
–
–
(3,858)
6,459
(3,987)
(11,730)
196
(9,062)
(12,920)
3,230
(9,690)
1 Costs associated with the acquisitions of the Punter Southall companies, the Kier pensions administration unit, Royal London and Trigon acquisitions and
other deal-related fees £870,000 (2019: £587,000), and costs relating to the disposal of the Healthcare business £nil (2019: £137,000).
2 Restructuring costs linked to the integration of the Xafinity and Punter Southall businesses, following the acquisition of Punter Southall Holdings Limited
and its subsidiaries in January 2018, and the integration of the Royal London and Trigon businesses (2019: £3,134,000).
3 The Group agreed to pay £381,000 to a supplier in relation to an historic contractual dispute (2019: £nil).
4 Other exceptional costs includes costs relating to the impact of COVID-19 on the business (2019: £nil).
5 Contingent consideration revaluation relating to the share-based consideration for the Punter Southall acquisition.
6 Share-based payment expenses are included in non-trading and exceptional costs as they are significant non-cash costs which are excluded from the
results for the purposes of measuring performance for PSP awards and dividend amounts.
7 During the year the Group incurred £7,153,000 of amortisation charges in relation to acquired intangible assets (customer relationships and brand)
(2019: £11,730,000). The charge was significantly higher in the prior year due to an accelerated charge for brands acquired as part of the
Punter Southall acquisition.
8 The unwinding of discount on contingent consideration relates to the share-based consideration for the Punter Southall acquisition – £nil (2019:
£196,000).
9 The tax credit on non-trading items of £140,000 (2019: £3,230,000) represents 0% (2019: 25%) of the non-trading items incurred of £12,824,000 (2019:
£12,920,000). This is different to the expected tax credit of 19% (2019: 19%), as various adjustments are made to tax including for deferred tax (including
the change in the enacted rate), and the exclusion of amounts not allowable for tax.
7 Business combinations during the period
On 31 May 2019, the Group acquired 100% of the share capital of RL Corporate Pension Services Limited (‘RLCPS') from The
Royal London Mutual Insurance Society Limited, for total consideration of £4.8 million in cash upon completion. RLCPS provides
pensions actuarial, consulting and administration services to 150 smaller defined benefit pension schemes, covering 8,000
scheme members. The acquisition strengthens XPS’s presence in the market for provision of full services to smaller defined
benefit pension schemes. The entity was renamed in the year to XPS Pensions (RL) Limited.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
Book value
£’000
Adjustment
£’000
Fair value
£’000
341
251
(83)
(1)
–
14
522
561
–
(580)
–
3,048
(579)
2,450
902
251
(663)
(1)
3,048
(565)
2,972
Receivables
Cash
Payables
Corporation tax
Customer relationships
Deferred tax
Total net assets
124 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Fair value of consideration paid
Cash
Total consideration
Goodwill (note 18)
£'000
4,822
4,822
1,850
Since the interim results were announced, the Group has performed a thorough review of the fair value of assets acquired as
part of the XPS Pensions (RL) Limited acquisition. As a result of this review, the customer relationship fair value was amended to
align it with Group policies which were not accounted for in the interim accounts. Additionally, IFRS 15 was applied to XPS
Pensions (RL) Limited, in line with the Group policy outlined in note 1. These adjustments led to a change in the value of goodwill
recorded on acquisition.
On 31 October 2019, the Group acquired 100% of the share capital of Trigon Professional Services Limited from Trigon Pensions
Holdings Limited. Trigon Professional Services Limited provides actuarial, administration, consultancy and investment advisory
services. The transaction will further strengthen XPS’s presence in the south-west of the UK, with the 40 Trigon staff based in
Bristol joining the Group and doubling the size of XPS’s presence in the city. The acquisition will create further opportunities in
the local market, where Trigon already has a strong reputation for excellent client service.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
Book value
£’000
Adjustment
£’000
Fair value
£’000
Right-of-use asset
Receivables
Lease liability
Provisions
Payables
Customer relationships
Deferred tax liability
Total net assets
Fair value of consideration paid
Cash
Contingent cash (note 28)
Total consideration
Goodwill (note 18)
–
428
–
(90)
(346)
–
–
(8)
1,068
10
(806)
(247)
(29)
2,152
(409)
1,739
1,068
438
(806)
(337)
(375)
2,152
(409)
1,731
£'000
2,825
757
3,582
1,851
Included within the acquired balance book value was a £90,000 dilapidation provision. The premises lease related to the Trigon
office was subsequently transferred to another Group company.
Contingent consideration
The value of the contingent cash consideration for the Trigon acquisition in the contract is up to a maximum of £1.1 million, based
on the Trigon subsidiary meeting certain revenue thresholds in the year following the date of acquisition. The value attributed to
the contingent consideration included in consideration has been determined using Group revenue forecasts. The contingent
consideration is payable in December 2020.
In both acquisitions, the main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as
the assembled workforce of the acquired entities and the expected growth in the business generated by new customers, which
do not qualify for separate recognition.
The goodwill arising from the above acquisitions is not deductible for tax purposes.
Since the acquisition date, XPS Pensions (RL) Limited has contributed £3,159,000 to Group revenues and £638,000 to Group
profit before tax.
XPS Pensions Group Annual Report 2020
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
7 Business combinations during the period continued
Since the acquisition date, Trigon Professional Services Limited has contributed £950,000 to Group revenues and £24,000 to
Group profit before tax.
If both acquisitions had occurred on 1 April 2019, Group revenue would have been £121,599,000 and Group profit before tax for
the year would have been £11,396,000.
Acquisition expenses
Costs relating to the above acquisitions totalled £870,000, and are included within exceptional costs.
8 Operating segments
In accordance with IFRS 8 Operating Segments, an operating segment is defined as a business activity whose operating results
are reviewed by the chief operating decision-maker (‘CODM’) and for which discrete information is available. The Group’s CODM
is the Board of Directors.
The Group has one operating segment, and one reporting segment due to the nature of services provided across the whole
business being the same: pension and employee benefit solutions. The Group’s revenues, costs, assets, liabilities and cash flows
are therefore totally attributable to this reporting segment. The table below shows the disaggregation of the Group’s revenue,
by product line.
Pensions Actuarial & Consulting
Pensions Administration
Pensions Investment Consulting
National Pension Trust (‘NPT’)
SIPP1
Total – Continuing operations
Discontinued operations
Total
1 Self Invested Pensions (SIPP) business, incorporating both SIPP and SSAS products.
9 Administrative expenses
Included in the operating profit for the year are the following:
Expenses by nature
Staff costs (note 10)
Depreciation and amortisation
Operating lease costs
Premises costs (excluding rent accounted for under IFRS 16 Leases)
Exceptional items (note 6)
Other general business costs
Total
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
58,802
42,945
9,551
2,393
6,062
119,753
–
119,753
56,735
37,492
8,121
1,444
6,098
109,890
423
110,313
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
66,753
11,318
162
2,332
3,491
22,256
59,235
13,143
2,248
1,981
3,858
22,971
106,312
103,436
126 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
10 Staff numbers and costs
The average number of people employed by the Group (including Directors) during the year, analysed by category, was
as follows:
Operational
Administration
Sales and marketing
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security contributions and similar taxes
Defined contribution pension cost
Other long-term employee benefits
Share-based payment costs (note 13)
Year ended
31 March
2020
Number of
employees
Year ended
31 March
2019
Number of
employees
1,129
58
22
1,209
976
42
21
1,039
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
54,537
5,692
2,804
1,540
2,180
66,753
47,110
4,996
2,543
1,374
3,212
59,235
11 Employee benefits
Defined contribution plan
The Company operates a defined contribution pension plan. Outstanding contributions at the year end were
£nil (2019: £253,000).
12 Directors’ emoluments
The Directors were remunerated for their services by the Group and their emoluments are disclosed below.
Aggregate emoluments
Company contributions to money purchase pension plans
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
1,900
24
1,924
1,971
30
2,001
Year ended
31 March
2020
Number of
Directors
Year ended
31 March
2019
Number of
Directors
At 31 March 2020, retirement benefits are accruing to the following number of Directors under:
Money purchase schemes
3
3
The emoluments of the highest paid Director, including benefits and share-based payments
592
363
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
XPS Pensions Group Annual Report 2020
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
13 Share-based payment costs
The Group operates a number of equity-settled share-based remuneration schemes for employees:. Performance Share Plans
(‘PSP') are operational for Executive Directors and other key senior personnel. All employees are also eligible to participate in the
Save as You Earn (‘SAYE') scheme, the only vesting condition being that the individual remains an employee of the Group over the
savings period.
The Executive PSP award expense relates to annual awards over shares that vest subject to certain stretching performance
conditions, measured over a three-year period. Maximum ‘normal’ grant level is 150% of salary, capped at a maximum of 200% in
exceptional circumstances. Malus and clawback provisions apply. The fair value of awards granted during the year was
determined using certain assumptions around vesting. More information about the Executive PSP can be found in the
Remuneration Report of this Annual Report.
There is a further PSP for key senior staff which relates to annual awards over shares that vest subject to certain performance
conditions, measured over a three-year period. The fair value of awards granted during the year was determined using certain
assumptions around vesting.
Performance Share Plan awards and SAYE scheme
Social security cost on Performance Share Plan awards and SAYE scheme
Share-based payments
Accrued bonus to be settled from EBT
Social security cost on accrued bonus to be settled from EBT
Total
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
2,132
48
2,180
–
–
2,180
2,859
246
3,105
775
107
3,987
The fair value of Executive PSP options granted during the period were calculated using the Monte Carlo valuation method. The
inputs to the model were as follows:
Weighted average exercise price of options issued during the period (pence)
Expected volatility (%)
Expected life beyond vesting date (years)
Risk-free rate (%)
Dividend yield (%)
Year ended
31 March
2020
Year ended
31 March
2019
0.05
36%
3
0.46%
–
0.05
25%
3
0.79%
–
The fair value of Staff PSP options granted during the period were calculated using the Monte Carlo valuation method. The
inputs to the model were as follows:
Weighted average exercise price of options issued during the period (pence)
Dividend yield (%)
Year ended
31 March
2020
Year ended
31 March
2019
0.05
–
0.05
–
128 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
The fair value of SAYE options granted during the period were calculated using the Black-Scholes valuation method. The inputs
to the model were as follows:
Weighted average exercise price of options issued during the period (pence)
Expected volatility (%)
Expected life beyond vesting date (years)
Risk-free rate (%)
Dividend yield (%)
Year ended
31 March
2020
Year ended
31 March
2019
78.0
32%
3.35
0.42%
5.60%
147.2
25%
3.35
0.92%
3.60%
The normal approach to estimate expected volatility is to look at the historical volatility of the Group’s share price over the most
recent period. However, as the Group floated in 2017 in accordance with IFRS 2, the approach has been to use historical volatility
of other similar entities to determine a proxy for the Group’s volatility. The constituents of the FTSE Small Cap Index at the date
of grant have been used for this purpose for both PSP and SAYE grants.
As at 31 March 2020, in respect of the Group’s ordinary shares of 0.05p each: 2,750,750 Executive PSP options had been
granted and remained outstanding, at an exercise price of 0.05p per share; 7,996,727 Staff PSP options had been granted and
remained outstanding, at an exercise price of 0.05p per share; 210,647 SAYE options had been granted and remained
outstanding, at an exercise price of 130.2p per share; 139,740 SAYE options had been granted and remained outstanding, at an
exercise price of 147.2p per share; and 4,017,288 SAYE options had been granted and remained outstanding, at an exercise price
of 78p per share.
Executive PSP Outstanding at 1 April
Staff PSP
SAYE
Granted during the year
Forfeited during the year
Outstanding at 31 March
Outstanding at 1 April
Granted during the year
Forfeited during the year
Exercised during the year
Cancelled during the year
Outstanding at 31 March
Outstanding at 1 April
Granted during the year
Forfeited during the year
Exercised during the year
Cancelled during the year
Outstanding at 31 March
2020
Weighted average
exercise price
(pence)
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
139.67
78.0
119.53
130.20
135.61
82.73
2020
Number
1,877,606
1,152,183
(279,039)
2,750,750
5,155,853
3,167,051
(290,712)
(30,289)
(5,176)
7,996,727
1,821,624
4,148,818
(45,923)
(1,382)
(1,555,462)
4,367,675
2019
Weighted average
exercise price
(pence)
0.05
0.05
–
0.05
0.05
0.05
0.05
0.05
0.05
0.05
130.20
147.20
133.74
130.20
–
139.67
2019
Number
927,029
950,577
–
1,877,606
3,642,510
1,674,283
(136,658)
(23,461)
(821)
5,155,853
910,386
1,039,746
(118,679)
(9,829)
–
1,821,624
The exercise price of options outstanding at 31 March 2020 ranged between £0.0005 (i.e. the nominal value of an ordinary
share) in the case of the PSPs and £1.472 in the case of the SAYE scheme (2019: £0.0005 to £1.472). Their weighted average
contractual life was three years (2019: three years).
Of the total number of options outstanding at 31 March 2020, nil (2019: 59,954) had vested and were exercisable.
The weighted average fair value of each option granted during the year was £0.68 (2019: £1.26).
The weighted average share price on date of exercise was £1.33 (2019: £1.70).
XPS Pensions Group Annual Report 2020
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
14 Finance income and expense
Interest income on bank deposits
Finance income
Interest expense on bank loans
Other costs of borrowing
Interest on leases
Other finance expense
Unwinding of discount on contingent consideration
Finance expenses
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
8
8
1,746
315
288
29
–
2,378
17
17
1,422
286
7
45
(196)
1,564
Other costs of borrowing largely represent the amortisation expense of capitalised loan arrangement fees on the Group’s
bank debt.
15 Income tax expense
Recognised in the statement of comprehensive income
Current tax expense
Current year
Adjustment in respect of prior year
Total current tax expense
Deferred tax (credit)/expense
Origination and reversal of temporary differences
Total income tax expense
Continuing and discontinued operations:
Income tax expense from continuing operations
Income tax expense from discontinued operation (note 16)
Profit for the year
Total tax expense
Profit before income tax
Tax using the UK corporation tax rate of 19% (2019: 19%)
Non-deductible expenses
Gain on revaluation not allowable
Fixed asset differences
Adjustment in respect of prior periods
Amounts (charged)/credited directly to equity or otherwise transferred
Excess relief on exercise of share options
Effect of tax rate change
Total tax expense
130 XPS Pensions Group Annual Report 2020
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
3,687
(549)
3,138
534
3,672
3,942
(366)
3,576
(2,314)
1,262
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
3,672
–
3,672
995
267
1,262
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
7,399
3,672
11,071
2,103
225
–
–
(549)
146
(7)
1,754
3,672
11,508
1,262
12,770
2,426
703
(1,227)
17
(366)
(148)
(134)
(9)
1,262
Strategic Report
Governance
Financial Statements
The standard rate of Corporation tax in the UK was 19% (2019: 19%). Deferred tax assets and liabilities have been measured at
the rate they are expected to unwind at, using a rate substantively enacted at 31 March 2020, which is not lower than 19% (2019:
17%). Deferred tax not recognised relates to finance expense losses in a prior year and their future recoverability is uncertain. At
31 March 2020, the total unrecognised deferred tax asset in respect of these losses was approximately £1.2 million (2019: £1.2
million).
16 Discontinued operations
There were no operations discontinued in the year to 31 March 2020. On 30 September 2018, the Group disposed of its
Healthcare segment, which is the only operation presented as discontinued in the year to 31 March 2019.
Result of discontinued operations
Cash consideration received
Deferred cash consideration
Total consideration received
Pre-tax gain on disposal of discontinued operation
The profit from disposal of discontinued operations was determined as follows:
Result of discontinued operations
Revenue
Expenses
Profit before tax
Gain from selling discontinued operations
Tax expense
Profit for the year
Earnings per share from discontinued operations
Basic earnings per share
Diluted earnings per share
Statement of cash flows
The statement of cash flows includes the following amounts relating to discontinued operations:
Operating activities
Net cash from discontinued operations
Adjusted profit before tax from discontinued operations:
Profit and adjusted profit from operating activities in discontinued operations
Adjusted profit before tax
Tax
Adjusted profit after tax
Year ended
31 March
2020
£'000
Year ended
31 March
2019
£'000
–
–
–
–
550
614
1,164
1,164
Year ended
31 March
Year ended
31 March
2020
£'000
–
–
–
–
–
–
2019
£'000
423
(183)
240
1,164
(267)
1,137
Year ended
31 March
2020
pence
Year ended
31 March
2019
pence
–
–
0.6
0.6
Year ended
31 March
Year ended
31 March
2020
£'000
–
–
2019
£'000
323
323
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
–
–
–
–
240
240
(46)
194
XPS Pensions Group Annual Report 2020
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
17 Property, plant and equipment
Cost
Balance at 1 April 2019
Reclassification due to adoption of IFRS 16 (note 1)
Additions
Disposals
Balance at 31 March 2020
Accumulated depreciation
Balance at 1 April 2019
Reclassification due to adoption of IFRS 16 (note 1)
Depreciation charge for the year
Disposals
Balance at 31 March 2020
Net book value
Balance at 1 April 2019
Balance at 31 March 2020
Cost
Balance at 1 April 2018
Additions
Disposals
Balance at 31 March 2019
Accumulated depreciation
Balance at 1 April 2018
Depreciation charge for the year
Disposals
Balance at 31 March 2019
Net book value
Balance at 1 April 2018
Balance at 31 March 2019
Leasehold
improvements
£'000
Office
equipment
£'000
Fixtures and
fittings
£'000
1,562
–
1,176
–
2,738
933
–
182
–
1,115
629
1,623
1,544
(261)
484
(169)
1,598
418
(9)
485
(169)
725
1,126
873
806
–
361
(452)
715
457
–
189
(452)
194
349
521
Leasehold
improvements
£'000
Office
equipment
£'000
Fixtures and
fittings
£'000
1,060
558
(56)
1,562
705
284
(56)
933
355
629
633
1,184
(273)
1,544
317
374
(273)
418
316
1,126
921
186
(301)
806
575
183
(301)
457
346
349
Total
£'000
3,912
(261)
2,021
(621)
5,051
1,808
(9)
856
(621)
2,034
2,104
3,017
Total
£'000
2,614
1,928
(630)
3,912
1,597
841
(630)
1,808
1,017
2,104
132 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
18 Intangible assets
Group
Cost
Balance at 1 April 2019
Acquired through business combinations
Additions
Disposals
Balance at 31 March 2020
Accumulated amortisation
Balance at 1 April 2019
Amortisation for the year
Disposals
Balance at 31 March 2020
Net book value
Balance at 1 April 2019
Balance at 31 March 2020
Cost
Balance at 1 April 2018
Acquired through business combinations
Additions
Disposal
Reassessment of fair value of net assets
Balance at 31 March 2019
Accumulated amortisation
Balance at 1 April 2018
Amortisation for the year
Disposals
Balance at 31 March 2019
Net book value
Balance at 1 April 2018
Balance at 31 March 2019
Goodwill
£'000
Customer
relationships
£'000
116,593
3,701
–
–
118,105
5,200
–
–
120,294
123,305
–
–
–
–
116,593
120,294
28,437
7,090
–
35,527
89,668
87,778
Brands
£'000
Software
£'000
Total
£'000
6,036
–
–
–
6,036
5,791
63
–
5,854
245
182
2,534
–
1,377
(264)
243,268
8,901
1,377
(264)
3,647
253,282
822
742
(264)
1,300
1,712
2,347
35,050
7,895
(264)
42,681
208,218
210,601
Goodwill
£'000
Customer
relationships
£'000
Brands
£'000
Software
£'000
Total
£'000
115,585
923
–
(101)
186
116,593
–
–
–
–
115,585
116,593
115,000
3,105
–
–
–
118,105
21,585
6,852
–
28,437
93,415
89,668
6,036
–
–
–
–
6,036
913
4,878
–
5,791
5,123
245
2,248
–
715
(429)
–
2,534
679
572
(429)
822
1,569
1,712
238,869
4,028
715
(530)
186
243,268
23,177
12,302
(429)
35,050
215,692
208,218
The prior year comparative table has been updated to correct an error in the classification in the 31 March 2019 published
financial statements which had no impact on net book value. The customer relationships of £7,767,000 were incorrectly shown
as disposals in the year to 31 March 2019, and £20,454 were incorrectly shown as disposals in the year to 31 March 2017. These
have both been corrected to £nil. The disposal shown in cost and accumulated depreciation were the same value, and so there
was no net impact on the carrying amount of these assets at 31 March 2019 or 1 April 2017 and no impact on the consolidated
statement of comprehensive income.
As part of the Punter Southall acquisition in January 2018, the Group acquired the rights to use the Punter Southall brand for an
agreed period (up to a maximum of two years). In the year to 31 March 2018, the intangible brand asset was amortised assuming
a useful life of two years. During the year to 31 March 2019, the Group successfully rebranded all Punter Southall services. As a
result, the Punter Southall brand intangible asset was fully amortised in the year. This resulted in an amortisation charge of £4.8
million relating to the Punter Southall brand in the prior year. Had the amortisation of the brand not been accelerated, the
charge in the year would have been £2.8 million, so the impact of the change in useful life has led to an increased amortisation
charge in the prior year of £2 million. Deferred tax relating to the intangible asset of £0.9 million was credited to the accounts in
the prior year.
XPS Pensions Group Annual Report 2020
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
18 Intangible assets continued
At 31 March 2020, the remaining amortisation period for customer relationships assets prior to the Punter Southall acquisition in
January 2018 was four years. The customer relationship asset acquired as part of the purchase of the Punter Southall group of
companies for the Actuarial CGU will be amortised over 20 years, and for the Administrative CGU over ten years. The customer
relationships recognised from the in-year acquisitions will be amortised over ten years.
Material customer relationships included in the balance above are: customer relationships arising from the February 2013
acquisition with a net book value (‘NBV') of £23.2 million(2019: £25.8 million), PS Actuarial customer relationships with a NBV of
£49.2 million (2019: £51.9 million), PS Admin customer relationships with a NBV of £7.6 million (2019: £8.6 million), and Kier
customer relationships with a NBV of £2.7 million (2019: £3.0 million).
Impairment test
Goodwill represents the excess of the consideration over the fair value of the net assets acquired on the purchase of the
subsidiary companies listed in note 36, as well as goodwill which has arisen on the purchase of trade and assets by the Group. In
accordance with IFRS, this balance is not amortised and is subject to annual impairment reviews.
The carrying value of goodwill was assessed based on the three cash-generating units that were identified in prior years. The
two new acquisitions in the year have been included in CGU 1, as this is the main CGU for all activities outside of the two Punter
Southall CGUs identified as a part of that acquisition. The customers and activities of the in-year acquisitions are consistent with
the type of customer and activities for the other subsidiaries in CGU 1. Additionally, the in-year acquisitions provide services
across multiple lines, whereas CGUs 2 and 3 are specific to a service line.
The three CGUs to which goodwill has been allocated are:
CGU 1 – Former Xafinity businesses, Royal London and Trigon acquisitions
CGU 2 – PS Actuarial
CGU 3 – PS Admin
The cash-generating unit at each year end was assessed on the basis of value in use using the following assumptions, which
reflect past experience of the Group:
Discount rate pre-tax
Terminal value after period 8
Period on which detailed forecasts are based
Growth rate during detailed forecast period (average)
Growth rate applied beyond approved forecast period
2020
2019
CGU 1
CGU 2
CGU 3
CGU 1
CGU 2
CGU 3
10.9%
2.0%
3 years
9.0%
10.9%
2.0%
3 years
9.1%
10.9%
2.0%
3 years
8.7%
15%
2.0%
3 years
4.4%
12%
2.0%
3 years
4.1%
19%
2.0%
3 years
12.5%
to year 8
5%
5%
5%
6%
4%
8%
The discount rate comprises two elements, the cost of debt and the cost of equity, to derive a blended cost of capital
demanded by all providers of capital. The cost of equity is based on the following components:
• Beta: calculated to estimate how volatile the Group’s equity is compared to the FTSE Small Cap index;
• Risk-free rate: using a 30-year UK gilts as a proxy for the risk-free rate;
• Equity risk premium: the implied rate as at 31 March 2020 is used to assess the price of risk in equity markets; and
• Small cap premium: an additional size premium is applied to the Group’s cost of equity to account for extra risk.
The cost of debt represents the cost of capital for the Group’s drawn Revolving Credit Facility and is based on average
borrowings during the year.
The growth rate beyond the forecast period is based on a blend of average growth rates experienced by the Group and
management’s assessment of industry and macroeconomic outlooks. Such forecast rates have been accurate in the past, so the
Directors believe they will be sufficiently representative of actual results. The growth rate beyond the forecast period is not
expected to include any impact from the COVID-19 outbreak.
The growth rate is applied up to eight years, this is due to the longevity of the customer relationships held by the Group.
134 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
The impairment exercise demonstrated that there was significant headroom in all CGUs on this basis, but given the ongoing
integration exercise, the Directors decided to undertake an additional overall impairment test combining the CGUs above. This
exercise demonstrated equally significant headroom so the Directors are satisfied that no impairment has arisen during the
financial period.
Goodwill allocated to cash-generating units:
Goodwill – XPS Pensions Consulting Limited, Xafinity SIPP Services Limited, Xafinity Pensions
Consulting Limited and subsidiaries, XPS Pensions (RL) Limited, Trigon Professional Services
Limited (CGU 1):
Goodwill – XPS Investment Limited, XPS Pensions Limited (CGU 2):
Goodwill – XPS Holdings Limited, XPS Administration Holdings Limited, XPS Administration
Limited (CGU 3):
2020
£'000
2019
£'000
28,483
79,314
24,782
79,314
12,497
12,497
120,294
116,593
On review, the Directors are satisfied that no impairment has taken place throughout the historical financial period.
Sensitivity analysis of assumptions
The Group performed further sensitivity analysis by recalculating the fair value of the net assets in the three CGUs on a ‘worst-
case’ basis following the outbreak in the United Kingdom of COVID-19. Potential impacts on revenue were considered, alongside
mitigating factors that the Group would take if necessary. This analysis showed that even in this potential worst case scenario,
there was no requirement for impairment of any of the CGUs.
19 Deferred income tax
Analysis of the breakdown and movement of deferred tax during the year is as follows:
Property, plant and equipment
Capital gains
Short-term temporary differences
Business combinations
Property, plant and equipment
Capital gains
Short-term temporary differences
Business combinations
Balance at
1 April 2019
£'000
Recognised
in income
£'000
Recognised
in equity
£'000
Acquisitions
£’000
(196)
717
(644)
15,653
15,530
194
–
137
203
534
–
–
(146)
–
(146)
–
–
(14)
988
974
Balance at
1 April 2018
£'000
Recognised
in income
£'000
Recognised
in equity
£'000
Acquired
31 October
2018
£'000
(85)
717
(689)
17,225
17,168
(111)
–
(103)
(2,100)
(2,314)
–
–
148
–
148
–
–
–
528
528
31 March
2020
£'000
(2)
717
(667)
16,844
16,892
31 March
2019
£'000
(196)
717
(644)
15,653
15,530
31 March
2020
Assets
£'000
2
–
667
–
669
31 March
2019
Assets
£'000
196
–
644
–
840
31 March
2020
Liabilities
£'000
–
717
–
16,844
17,561
31 March
2019
Liabilities
£'000
–
717
–
15,653
16,370
Deferred income tax assets are recognised to the extent that the realisation of the related tax benefit through future taxable
profits is probable. Deferred tax assets and liabilities have been measured at the rate they are expected to unwind at, using a
rate substantively enacted at 31 March 2020, which is not lower than 19% (2019: 17%).
20 Other financial assets
The non-current financial asset relates to restricted cash held by the Group as security for the National Pension Trust (‘NPT').
For the NPT to gain approval to operate by the Pensions Regulator, the Group is required to demonstrate it can support the NPT
in any eventuality. The Group has therefore placed £1.3 million into a restricted bank account, which the trustees of the NPT are
able to access in certain circumstances.
There are no lifetime expected credit losses associated with this cash balance.
XPS Pensions Group Annual Report 2020
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
21 Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Net trade receivables
Accrued income
Contract assets
Total financial assets other than cash and cash equivalents carried at amortised cost
Prepayments
Accrued consideration
Other receivables includes £186,000 (2019: £186,000) of capitalised loan arrangement fees
Total trade and other receivables
The carrying value of trade and other receivables carried at amortised cost approximates to fair value.
31 March
2020
£’000
18,541
(674)
17,867
11,477
1,528
30,872
3,086
109
291
34,358
31 March 2020
Expected loss rate
Gross carrying amount
Loss provision
Amendment for specific bad debt provision
Total
31 March 2019
Expected loss rate
Gross carrying amount
Loss provision
Amendment for specific bad debt provision
Total
Current
0%
9,968
4
(4)
–
Current
0%
10,537
12
(12)
–
Past due
0-30 days
Past due
31-90 days
Past due more
than 90 days
0%
4,114
3
(3)
–
0%
2,186
6
(6)
–
15%
2,273
336
338
674
Past due
0-30 days
Past due
31-90 days
Past due more
than 90 days
0%
3,373
10
(10)
–
0%
1,845
6
(6)
–
25%
1,416
603
(177)
426
31 March
2019
£’000
17,171
(426)
16,745
10,692
938
28,375
3,744
614
342
33,075
Total
£’000
18,541
349
325
674
Total
£’000
17,171
631
(205)
426
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss
provision for trade receivables and contract assets. The expected loss rates are based on the Group’s historical credit losses
experienced over the three-year period prior to the period end. The historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the Group’s customers such as Brexit and COVID-19. The
Group has identified the gross domestic product (‘GDP'), unemployment rate and inflation rate as the key macroeconomic
factors in the UK.
Once the IFRS 9 approach has been calculated, the Group then calculates a specific debt provision based on age of debt and
specific client knowledge. The provision is then adjusted to take this detail into account.
Of the March 2019 contract asset balance of £0.9 million, £0.5 million was recognised in revenue in the year.
22 Cash and cash equivalents
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
The balance is comprised solely of cash at bank and on hand.
31 March
2020
£’000
14,432
14,432
31 March
2019
£’000
5,539
5,539
136 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
23 Loans and borrowings
31 March 2020
Drawn Revolving Credit Facility
Capitalised debt arrangement fees
Sub-total
Capitalised debt arrangement fees shown as current
assets on balance sheet
Total
31 March 2019
Drawn Revolving Credit Facility
Capitalised senior debt arrangement fees
Finance lease
Sub-total
Capitalised debt arrangement fees shown as current
assets on balance sheet
Total
Due within
1 year
(current)
£’000
Due
between
1 and 2 years
£’000
Due after
2 years
£’000
Sub-total
(non-current)
£’000
–
(186)
(186)
70,500
(128)
70,372
70,500
(314)
70,186
70,186
Total
£’000
70,500
(314)
–
–
–
(186)
(186)
70,372
70,186
70,000
Due within
1 year
(current)
£’000
Due between
1 and 2 years
£’000
Due after
2 years
£’000
Sub-total
(non-current)
£’000
–
(186)
51
(135)
57,250
(314)
161
57,097
57,250
(500)
212
56,962
Total
£’000
57,250
(500)
261
57,011
–
–
–
(186)
(135)
57,097
56,962
56,825
–
–
–
(186)
(186)
–
–
49
49
(186)
(137)
The book value and fair value of loans and borrowings are not materially different.
Terms and debt repayment schedule
31 March 2020
Revolving Credit Facility – A
Revolving Credit Facility – B
31 March 2019
Revolving Credit Facility – A
Revolving Credit Facility – B
Amount
£’000
38,000
32,500
Amount
£’000
38,000
19,250
Currency
GBP
GBP
Currency
GBP
GBP
Nominal
interest rate
Year of
maturity
1.75% above LIBOR
1.75% above LIBOR
2022
2022
Nominal
interest rate
Year of
maturity
1.75% above LIBOR
1.75% above LIBOR
2022
2022
At 31 March 2020, the Group had drawn down £70,500,000 (2019: £57,250,000) of its £80,000,000 Revolving Credit Facility.
The Revolving Credit Facility available to the Group was increased to £90,000,000 in June 2020.
The related fees for access to the facility are included in the consolidated statement of comprehensive income.
Capitalised loan-related costs are amortised over the life of the loan to which they relate.
Bank debt is secured by way of debentures in the group companies which are obligors to the loans. These are XPS Reading
Limited, XPS Consulting (Reading) Limited, XPS Pensions Consulting Limited (and its subsidiaries), Xafinity Pensions Consulting
Limited (and its subsidiaries), Xafinity SIPP Services Limited, and XPS Holdings Limited (and its subsidiaries).
XPS Pensions Group Annual Report 2020
137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
24 Reconciliation of liabilities arising from financing activities
Long-term borrowings
Capitalised debt arrangement fees
Lease liabilities
Total liabilities from financing
activities
31 March
2019
£’000
57,250
(686)
261
Cash
flows
£’000
13,250
–
(2,243)
56,825
11,007
31 March
2018
£’000
55,750
(872)
35
54,913
Long-term borrowings
Capitalised debt arrangement fees
Lease liabilities
Total liabilities from financing activities
25 Trade and other payables
Trade payables
Accrued expenses
Interest payable
Other payables
Non-cash
change
Liability to
asset
£’000
Non-cash
change
Adoption of
IFRS 16
£’000
–
186
708
894
Cash
flows
£’000
1,500
–
(34)
1,466
–
–
8,913
8,913
Non-cash
change
Liability to
asset
£’000
–
186
(1)
185
Total financial liabilities excluding leases, loans and borrowings, classified as financial
liabilities at amortised cost
Other payables – tax and social security payments
Other payables – VAT
Deferred income
Contract liabilities
Total trade and other payables
Non-cash
change
New leases/
interest this
year
£’000
–
–
5,168
31 March
2020
£’000
70,500
(500)
12,807
5,168
82,807
Non-cash
change
Other
£’000
–
–
261
261
31 March
2020
£’000
2,523
7,634
270
176
10,603
1,551
4,723
1,276
1,196
19,349
31 March
2019
£’000
57,250
(686)
261
56,825
31 March
2019
£’000
2,716
7,474
22
667
10,879
1,453
2,883
1,415
784
17,414
The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates to
fair value.
Of the March 2019 contract liability balance of £0.8 million, £0.5 million was recognised in revenue in the year.
26 Current income tax liabilities
Tax payable
31 March
2020
£’000
994
31 March
2019
£’000
1,393
138 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
27 Provisions for other liabilities and charges
31 March 2020
Current
Balance at 1 April 2019
Provisions made during the year
Provisions used during the year
Provisions released unused during the year
On acquisition
Balance at 31 March 2020
31 March 2019
Current
Balance at 1 April 2018
Provisions made during the year
Provisions used during the year
Provisions released unused during the year
Balance at 31 March 2019
Social security
costs on
Performance
Share Plan
£’000
Dilapidations
£’000
Professional
indemnity
£’000
425
47
–
–
–
472
517
895
(48)
–
90
1,454
1,091
405
(399)
(280)
–
817
Social security
costs on
Performance
Share Plan
£’000
Dilapidations
£’000
Professional
indemnity
£’000
158
270
(3)
–
425
242
275
–
–
517
1,059
201
(141)
(28)
1,091
Total
£’000
2,033
1,347
(447)
(280)
90
2,743
Total
£’000
1,459
746
(144)
(28)
2,033
Social security costs (National Insurance) are payable on gains made by employees on exercise of share options granted to
them. The eventual liability to National Insurance is dependent on:
• The market price of the Company’s shares at the date of exercise;
• The number of options that will be exercised; and
• The prevailing rate of National Insurance at the date of exercise.
Dilapidations relate to the estimate cost of returning a leasehold property to its original state at the end of the lease in
accordance with the lease terms. The cost is recognised within the depreciation of the right-of-use asset over the remaining
term of the lease. The main uncertainty relates to estimating the cost that will be incurred at the end of the lease.
The dilapidations provision will be utilised at the end of the lease of the asset to which it relates.
The Group is involved in a small number of potential professional indemnity claims. The amount provided represents the
Directors’ best estimate of the Group’s liability, after having taken legal advice. Uncertainties relate to whether claims will be
settled out of court or if not whether the Group is successful in defending any action. Because of the nature of the disputes, the
Directors have not disclosed future information on the basis that they believe that this would be seriously prejudicial to the
Group’s position in defending the cases brought against it. The provision relating to potential professional indemnity claims is
updated depending on the status of each individual claim.
28 Deferred consideration
Contingent cash consideration
Balance at 31 March 2020
Contingently issuable ordinary shares
Contingent cash consideration
Balance at 31 March 2019
Balance at
1 April 2019
£’000
Acquisition
£’000
Fair value
adjustment
£’000
152
152
757
757
(4)
(4)
Settled in
31 March
year
£’000
(148)
(148)
2020
£’000
757
757
Balance at
1 April 2018
£’000
Fair value
adjustment
£’000
Unwinding of
discount
£’000
6,655
1,677
8,332
(6,459)
(100)
(6,559)
(196)
–
(196)
Settled in
31 March
year
£’000
–
(1,425)
(1,425)
2019
£’000
–
152
152
XPS Pensions Group Annual Report 2020
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
29 Share capital
In issue at the beginning of the year
Issued during the year
In issue at the end of the year
Allotted, called up and fully paid
Ordinary shares of 0.05p (2019: 0.05p) each
Shares held by the Group’s Employee Benefit Trust
Ordinary shares of 0.05p (2019: 0.05p) each
Shares classified in shareholders’ funds
Ordinary
shares
(’000)
31 March
2020
203,873
32
203,905
Ordinary
shares
(£’000)
31 March
2020
102
–
102
31 March
2020
(’000)
31 March
2020
(£’000)
203,393
512
203,905
102
–
102
Ordinary
shares
(’000)
31 March
2019
203,840
33
203,873
31 March
2019
(’000)
203,182
691
203,873
Ordinary
shares
(£’000)
31 March
2019
102
–
102
31 March
2019
(£’000)
102
–
102
The Group has invested in the shares for its Employee Benefit Trust (‘EBT'). These shares are held on behalf of employees and
legal ownership will transfer to those employees on the exercise of an award. This investment in own shares held in trust is
deducted from equity in the consolidated statement of changes in equity.
30 Reserves
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Accumulated deficit:
Share premium:
Investment in own shares:
Merger relief reserve:
All net gains and losses recognised through the consolidated statement of
comprehensive income.
Amounts subscribed for share capital in excess of nominal value.
Cost of own shares held by the EBT.
The merger relief reserve represents the difference between the fair value and nominal value
of shares issued on the acquisition of subsidiary companies.
31 Financial instruments
The fair values and the carrying values of financial assets and liabilities are the same.
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three
levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the
measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
or indirectly; and
• Level 3: unobservable inputs for the asset or liability.
The contingent consideration balance in the Statement of Financial Position is a level 3 financial liability.
The Group’s finance team perform valuations of financial items for financial reporting purposes, including level 3 fair values, in
consultation with third-party valuation specialists for complex valuations. Valuation techniques are selected based on the
characteristics of each instrument, with the overall objective of maximising the use of market-based information. The finance
team reports directly to the Chief Financial Officer.
140 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Credit risk
The maximum exposure to credit risk at the reporting date was:
Trade receivables
Provision for impairment of trade receivables
Net trade receivables due
Accrued income
Contract assets
Cash and cash equivalents
Credit risk mitigation
The ageing of trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-90 days
Past due more than 90 days
Movement in impairment allowance for trade receivables
Balance at start of the year
Increase during the year
Receivable written off during the year as uncollectable
Reversal of allowances
Balance at end of the year
Carrying
Amount
31 March
2020
£’000
18,541
(674)
17,867
11,477
1,528
14,432
45,304
31 March
2020
£’000
9,968
4,114
2,186
2,273
18,541
426
525
(13)
(264)
674
Carrying
Amount
31 March
2019
£’000
17,171
(426)
16,745
10,692
938
5,539
33,914
31 March
2019
£’000
10,537
3,373
1,845
1,416
17,171
293
308
(6)
(169)
426
The Group prepared a forward-looking impairment model using a provision matrix based on historical data. Using this, the
Group believes that an impairment allowance of £674,000 (2019: £426,000) is adequate in respect of trade receivables. Those
debts which have not been provided against are considered recoverable by the Group. In accordance with IFRS 9, the expected
credit loss (‘ECL') model was used to calculate the impairment loss.
Cash flow risk
The XPS Pensions Group is exposed to cash flow interest rate risk in two main respects. Firstly, corporate and client bank
deposits, which earn interest at a variable rate, although not at a material level. Secondly, interest expense arising on bank
facilities at a margin over LIBOR.
Interest rate risk
The interest rate on long-term borrowings is a margin over LIBOR and as such the Company is at risk from LIBOR increases.
Liquidity risk
Liquidity risk arises from the Group’s working capital and the finance charges and principal repayments on its debt instruments.
It is the risk the Group will encounter difficulty in meeting its financial obligations as they fall due.
XPS Pensions Group Annual Report 2020
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
31 Financial instruments continued
The following table sets out the contractual maturities (representing undiscounted cash flows) of financial liabilities:
Trade and other payables
Leases
Loans and borrowings
Bank interest
Trade and other payables
Finance leases
Loans and borrowings
Bank interest
Up to 3
months
£’000
10,603
806
–
425
11,834
Up to 3
months
£’000
10,639
12
–
398
11,049
Between
3 and 12
months
£’000
–
2,072
–
1,108
3,180
Between
3 and 12
months
£’000
–
37
–
1,147
1,184
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over 5 years
£’000
–
2,600
–
1,156
3,756
–
4,920
70,500
709
76,129
–
3,754
–
–
3,754
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over 5 years
£’000
–
51
–
1,435
1,486
–
161
57,250
3,969
61,380
–
–
–
–
–
31 March
2020
£’000
10,603
14,152
70,500
3,398
98,653
31 March
2019
£’000
10,639
261
57,250
6,949
75,099
The Group does not have any concerns over meeting its liabilities as they fall due, as the forecasts prepared indicate sufficient
cash receipts in each period to cover liabilities.
Capital risk
The Group’s objectives when managing capital is to maximise shareholder value whilst safeguarding the Group’s ability to
continue as a going concern. Total capital is calculated as total equity in the statement of financial position.
Management of capital
Total equity
31 March
2020
£’000
152,945
31 March
2019
£’000
156,403
32 Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
IFRS 16 was adopted on 1 April 2019 without restatement of comparative figures. For an explanation of the transitional
requirements that were applied as at 1 April 2019, see Note 1. The following policies apply subsequent to the date of initial
application, 1 April 2019.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the
discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily
determinable, in which case the lessee company’s incremental borrowing rate on commencement of the lease is used. Other
variable lease payments are expensed in the period to which they relate.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and
increased for the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore
the leased asset (typically leasehold dilapidations – see note 27).
142 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the
remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease
term. When the Group revises its estimate of the term of any lease (because, for example, it reassesses the probability of a
lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted at a revised discount rate to that applied on lease
commencement. The carrying value of lease liabilities is also revised when the variable element of future lease payments
dependent on a rate or index is revised, however this will use the original discount rate. In both cases, an equivalent adjustment
is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining
(revised) lease term.
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the
modification:
• If the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone
price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the
above policy.
• In all other cases where the renegotiated increases the scope of the lease (whether that is an extension to the lease term, or
one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the
modification date, with the right-of-use asset being adjusted by the same amount.
• If the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and the
right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference
recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the
renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the
modification date. The right-of-use asset is adjusted by the same amount.
For contracts that both convey a right for the Group to use an identified asset and require services to be provided to the Group
by the lessor, the Group has elected to account for the entire contract as a lease, i.e. it does allocate any amount of the
contractual payments to, and account separately for, any services provided by the supplier as part of the contract.
Nature of leasing activities (in the capacity as lessee)
The Group leases a number of properties in the UK. In some instances the rent is reviewed and may be reset periodically to
market rental rates. In other cases the periodic rent is fixed over the lease term. The Group also leases certain items of
equipment (photocopiers). Leases of photocopiers comprise only fixed payments over the lease terms. The percentages in the
table below reflect the current proportions of lease payments that are either fixed or variable. The sensitivity reflects the impact
on the carrying amount of lease liabilities and right-of-use assets if there was an uplift of 5% on the balance sheet date to lease
payments that are variable.
31 March 2020
Property leases with periodic uplifts to market rentals
Property leases with fixed payments
Leases of plant and equipment
Lease
contracts
Number
Fixed
payments
%
Variable
payments
%
Sensitivity
£’000
9
9
2
20
–
32
2
34
66
–
–
66
± 293
–
–
± 293
The Group sometimes negotiates break clauses in its property leases. On a case-by-case basis, the Group will consider whether
the absence of a break clause would exposes the Group to excessive risk. Typically factors considered in deciding to negotiate a
break clause include:
• the length of the lease term;
• whether the location represents a new area of operations for the Group.
At 31 March 2020, the carrying amounts of lease liabilities are not reduced by the amount of payments that would be avoided
from exercising break clauses because it was considered reasonably certain that the Group would not exercise its right to break
the lease. Total lease payments of £5,867,572 (2019: £5,951,218) are potentially avoidable were the Group to exercise break
clauses at the earliest opportunity.
XPS Pensions Group Annual Report 2020
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
32 Leases continued
Right-of-use assets
At 1 April 2019
Additions
Amortisation
Effect of modification to lease terms
At 31 March 2020
Lease liabilities
At 1 April 2019
Additions
Interest expense
Effect of modification to lease terms
Lease payments
At 31 March 2020
Short-term lease expense
Low value lease expense
Aggregate undiscounted commitments for short-term leases
The maturity of the lease liabilities are as follows:
Up to 3 months
Between 3 and 12 months
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
33 Notes supporting statement of cash flows
Cash and cash equivalents for the purposes of the statement of cash flows comprise:
Cash at bank available on demand
Land and
buildings
£’000
Office
equipment
£’000
9,236
5,247
(2,511)
766
12,738
252
31
(56)
–
227
Land and
buildings
£’000
Office
equipment
£’000
8,913
4,849
280
708
(2,181)
261
31
8
-
(62)
Total
£’000
9,488
5,278
(2,567)
766
12,965
Total
£’000
9,174
4,880
288
708
(2,243)
12,569
238
12,807
31 March
2020
£'000
168
(6)
162
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
716
1,822
2,329
4,411
3,529
12,807
12
37
51
161
–
261
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
14,432
5,539
144 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
34 Related party transactions
Key management emoluments during the year
Emoluments
Share-based payment
Company contributions to money purchase pension plans
Social security costs
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
1,557
(203)
24
138
1,516
1,651
429
30
322
2,432
Share-based payments are a credit in the current period, due to a revision of the estimate of the expected vesting of
historical awards.
Non-Executive emoluments during the year
Emoluments
Social security costs
Services provided to related parties during the year
PSFM Limited
PS Independent Trustees Limited
PSFM SIPP Limited
Punter Southall Group Limited
Psigma Investment Management Limited
Punter Southall Analytics Limited
Punter Southall Defined Contribution Consulting Limited
Punter Southall Governance Services Limited
Year ended
31 March
2020
£’000
Year ended
31 March
2019
£’000
343
42
385
320
40
360
31 March
2020
£’000
31 March
2019
£’000
5
14
–
57
3
–
–
7
86
38
10
1
31
–
12
32
–
124
During the period the Group provided services of £85,581 (2019: £124,640) to other related parties. These transactions were
included in turnover.
All companies listed above are part of the Punter Southall Group Limited group. One of the Non-Executive Directors of XPS
Pensions Group (resigned 12 September 2019) is the Chief Executive of Punter Southall Group.
Services received from related parties during the year
Punter Southall Group Limited
CAMRADATA Analytical Services Limited
Punter Southall Defined Contribution Consulting Limited
Independent Transition Management Limited
PS Independent Trustees Limited
Punter Southall Health and Protection Limited
Donna Cuff
31 March
2020
£’000
31 March
2019
£’000
1,823
26
–
–
9
–
23
1,881
3,355
30
2
2,076
1
3
43
5,510
XPS Pensions Group Annual Report 2020
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
34 Related party transactions continued
During the period the Group paid administration costs of £1,881,397 (2019: £5,509,407) to other related parties. These
transactions were included in administrative expenses.
All companies listed above are part of the Punter Southall Group. Donna Cuff is the wife of Paul Cuff (Co-CEO of XPS
Pensions Group).
Amounts receivable/(payable) to related parties at the balance sheet date
CAMRADATA Analytical Services Limited
Independent Transition Management Limited
Punter Southall Governance Services Limited
Punter Southall Group Limited
PS Independent Trustees Limited
Punter Southall Defined Contribution Consulting Limited
Psigma Investment Management Limited
PSFM Limited
31 March
2020
£’000
31 March
2019
£’000
–
–
5
(17)
–
2
3
(2)
(9)
(19)
(206)
–
(386)
12
10
–
–
(589)
All companies listed above are part of the Punter Southall Group.
All transactions with related parties are made in the ordinary course of business and balances outstanding at the reporting date
are unsecured.
35 Earnings per share
Profit for the year
Weighted average number of ordinary
Continuing
operations
31 March
2020
£’000
Discontinued
operations
31 March
2020
£’000
7,399
’000
–
’000
Total
31 March
2020
£’000
7,399
’000
Continuing
operations
31 March
2019
£’000
Discontinued
operations
31 March
2019
£’000
10,371
’000
1,137
’000
Total
31 March
2019
£’000
11,508
’000
shares in issue
203,301
203,301
203,301
203,167
203,167
203,167
Diluted weighted average number of
ordinary shares
Basic earnings per share (pence)
Diluted earnings per share (pence)
208,219
3.6
3.6
208,219
–
–
208,219
3.6
3.6
205,221
5.1
5.0
205,221
0.6
0.6
205,221
5.7
5.6
The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the period.
Share awards were made to the Executive Board members and key management personnel in 2017, 2018 and 2019. These are
subject to certain conditions, and vest in 2020, 2021 and 2022. Dividend yield shares relating to these awards will also be
awarded upon vesting of the main awards. Further shares have been issued under SAYE share schemes in 2017, 2018 and 2019,
and these will vest in 2020, 2021 and 2022 respectively. These shares are reflected in the diluted number of shares and diluted
earnings per share calculations.
146 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
Adjusted earnings per share
Continuing
operations
31 March
2020
£’000
Discontinued
operations
31 March
2020
£’000
Adjusted profit after tax (notes 6, 16)
Adjusted earnings per share (pence)
Diluted adjusted earnings per share
(pence)
20,083
9.9
9.6
–
–
–
Total
31 March
2020
£’000
20,083
9.9
Continuing
operations
31 March
2019
£’000
Discontinued
operations
31 March
2019
£’000
20,061
9.9
9.6
9.8
194
0.1
0.1
Total
31 March
2019
£’000
20,255
10.0
9.9
36 Subsidiaries
The following is the list of wholly owned companies consolidated within the Financial Statements of XPS Pensions Group plc.
Company name
XPS Pensions Group plc
XPS Financing Limited
XPS Reading Limited
XPS Consulting (Reading)
Limited
XPS Pensions Consulting
Limited
Xafinity SIPP Services
Limited
Xafinity Pensions
Consulting Limited
Xafinity PT Limited
Entegria Limited
Xafinity Pensions Trustees
Limited
Hazell Carr (AT) Services
Limited
Hazell Carr (SG) Services
Limited
Hazell Carr (ES) Services
Limited
Hazell Carr (PN) Services
Limited
Hazell Carr (SA) Services
Limited
Xafinity Trustees Limited
Xafinity Employee Benefit
Trust 2013
XPS Holdings Limited
XPS Administration
Holdings Limited
XPS Administration
Limited
XPS Investment Limited
Company
number
08279139
08279274
08279362
08287502
02459442
SC069096
04436642
Principal activity
Registered address
Holding company
Holding company
Holding company
Holding company
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Employee benefit
consultancy
Employee benefit
consultancy
Dormant
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Scotia House, Castle Business Park, Stirling, Stirlingshire,
FK9 4TZ
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
00232565
05777554
01450089
Dormant
Dormant
Dormant
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
SC420031
01867603
Employee benefit
consultancy
Dormant
Scotia House, Castle Business Park, Stirling, Stirlingshire,
FK9 4TZ
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
02372343
Dormant
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
00236752
Dormant
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
SC086807
Dormant
04305500
N/A
Dormant
Trust
04807951
09655671
Holding Company
Holding Company
09428346
06242672
Employee benefit
consultancy
Employee benefit
consultancy
Employee benefit
consultancy
Employee benefit
consultancy
Employee benefit
consultancy
Scotia House, Castle Business Park, Stirling, Stirlingshire,
FK9 4TZ
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
JTC Trustees Limited, Elizabeth House, 9 Castle Street,
St Helier, Jersey, JE4 2QP
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
Phoenix House, 1 Station Hill, Reading, Berkshire, RG1 1NB
XPS Pensions Limited
03842603
XPS Pensions (RL)
Limited
Trigon Professional
Services Limited
05817049
12085392
XPS Pensions Group plc directly owns XPS Financing Limited. All other subsidiaries disclosed are indirectly owned by other
Group companies.
XPS Pensions Group Annual Report 2020
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
37 Dividends
Amounts recognised as distributions to equity holders of the parent in the year
Final dividend for the year ended 31 March 2019: 4.3p per share (2018: 4.2p per share)
Interim dividend for the year ended 31 March 2020: 2.3p (2019: 2.3p) per ordinary share was paid
during the year
31 March
2020
£’000
8,738
4,674
13,412
31 March
2019
£’000
8,533
4,673
13,206
The recommended final dividend payable in respect of the year ended 31 March 2020 is £8.8 million or 4.3p per share (2019:
£8.8 million).
The proposed dividend has not been accrued as a liability as at 31 March 2020 as it is subject to approval at the Annual
General Meeting.
Proposed final dividend for year ended 31 March 2020
The Trustee of the Xafinity Employee Benefit Trust has waived its entitlement to dividends.
31 March
2020
£’000
8,835
31 March
2019
£’000
8,767
The Company statement of changes in equity shows that the Company has positive reserves of £2,516,000. There are sufficient
distributable reserves in subsidiary companies which will be passed up to XPS Pensions Group plc in order to pay the proposed
final dividend.
38 Ultimate controlling party
The Directors do not consider that there is an ultimate controlling party.
148 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
STATEMENT OF FINANCIAL POSITION – COMPANY
AS AT 31 MARCH 2020
Assets
Non-current assets
Investments
Current assets
Trade and other receivables
Total assets
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Net assets
Equity and liabilities
Share capital
Share premium
Merger relief reserve
Other reserve
Retained profit
Total equity
31 March
2020
£’000
31 March
2019
£’000
Note
5
6
7
8
9
9
9
9
22,097
22,097
200,447
200,447
222,544
33,207
33,207
33,207
19,115
19,115
184,847
184,847
203,962
18,421
18,421
18,421
189,337
185,541
102
116,797
48,687
21,235
2,516
189,337
102
116,795
48,687
18,253
1,704
185,541
The notes on pages 152 to 154 form part of these Financial Statements.
Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own statement of
comprehensive income. The profit for the financial year, of the holding Company, as approved by the Board, was £14,224,000
(2019: £14,020,000).
These Financial Statements were approved by the Board of Directors on 24 June 2020 and were signed on its behalf by:
Snehal Shah
Chief Financial Officer
24 June 2020
Registered number: 08279139
XPS Pensions Group Annual Report 2020
149
STATEMENT OF CHANGES IN EQUITY – COMPANY
FOR THE YEAR ENDED 31 MARCH 2020
Balance at 1 April 2018
Comprehensive income and total comprehensive income for
the year
Contributions by and distributions to owners
Share capital issued
Share-based payment expense – equity settled from
employee benefit trust
Share-based payment expense – IFRS 2 charge in respect of
long-term incentives
Deferred tax movement in respect of long-term incentives
Dividends paid
Total contributions by and distributions to owners
Balance at 31 March 2019
Balance at 1 April 2019
Comprehensive income and total comprehensive income for
the year
Contributions by and distributions to owners
Share capital issued
Share-based payment expense – equity settled from
employee benefit trust
Share-based payment expense – IFRS 2 charge in respect of
long-term incentives
Deferred tax movement in respect of long-term incentives
Dividends paid
Total contributions by and distributions to owners
Share
capital
£’000
Share
premium
£’000
Merger
relief
reserve
£’000
Other
reserve
£’000
Retained
profit
£’000
Total
£’000
102
116,782
48,687
13,581
890
180,042
–
–
–
–
–
–
–
102
102
–
–
–
–
–
–
–
–
13
–
–
–
–
13
–
–
–
–
–
–
–
–
–
1,999
14,020
14,020
–
–
13
1,999
2,821
(148)
–
–
–
(13,206)
2,821
(148)
(13,206)
4,672
(13,206)
(8,521)
116,795
48,687
18,253
1,704
185,541
116,795
48,687
18,253
1,704
185,541
–
2
–
–
–
–
2
–
–
–
–
–
–
–
–
–
773
2,063
146
–
14,224
14,224
–
–
2
773
–
–
(13,412)
2,063
146
(13,412)
2,982
(13,412)
(10,428)
Balance at 31 March 2020
102
116,797
48,687
21,235
2,516
189,337
The notes on pages 152 to 154 form part of these Financial Statements.
150 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
STATEMENT OF CASH FLOWS – COMPANY
FOR THE YEAR ENDED 31 MARCH 2020
The Company does not operate a bank account and therefore there were no cash flows during the year. All movements of funds
have been dealt with through subsidiary companies.
The notes on pages 152 to 154 form part of these Financial Statements.
XPS Pensions Group Annual Report 2020
151
NOTES TO THE FINANCIAL STATEMENTS – COMPANY
FOR THE YEAR ENDED 31 MARCH 2020
1 Accounting policies
XPS Pensions Group plc (the ‘Company’) is a public company incorporated in the UK. The principal activity of the Company is
that of a holding company. The registered office is Phoenix House, 1 Station Hill, Reading, RG1 1NB.
Basis of preparation
These Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by
the European Union (IFRSs as adopted by the EU), IFRS – IC Interpretations and the Companies Act 2006 applicable to
companies reporting under IFRS. The Financial Statements have been prepared under the going concern basis.
The preparation of Financial Statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Company’s accounting policies. The Company
makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. There are no critical judgements or estimates to disclose.
Measurement convention
The Financial Statements are prepared on the historical cost basis.
Investments in subsidiaries
Investments in subsidiaries are carried at cost, plus capital contributions to the Group’s subsidiary companies in respect of
share-based payment charges, less any provisions for impairment.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is
when paid and in the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in profit and loss in the statement
of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted
at the statement of financial position date, and any adjustment to tax payable in respect of previous years.
Changes in accounting policies – New standards, interpretations, and amendments effective from 1 April 2019
IFRS 16 Leases is a new standard which has been adopted in the annual financial statements for the year ended 31 March 2020,
however its impact has not been material on the Company. IFRS 16 has replaced IAS 17 Leases and IFRIC 4 Determining whether
an arrangement contains a lease. Under IFRS 16, the Company reviewed all contracts with suppliers to determine if there were
any lease assets and liabilities to be recognised. Following this review, it was determined that the Company did not have any
lease assets and liabilities requiring recognition.
New standards and interpretations adopted and not yet adopted
A number of new standards, amendments to standards, and interpretations are not effective for 2020, and therefore have not
been applied in preparing XPS Pension Group plc’s financial statements. These standards, interpretations and amendments
issued by the IASB (of which some are still subject to endorsement by the European Union), but not yet effective are not
expected to have a material impact on the Company’s financial statements.
2 Financial risk management
The Company is a holding company and has limited exposure to financial risks. Details of the financial risks management are
contained in the Group accounts (note 2) and details of their application to the Company is included in note 10 of the Company
accounts.
3 Capital risk management
The Company is a holding company and will apply the risk management policies of the Group contained in the Group’s Financial
Statements.
152 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
4 Staff numbers and costs
The Company had no employees other than Directors in the year to 31 March 2020 (2019: none).
No Directors received remuneration for their services to the Company during the year. Directors were remunerated for their
services to the Group by a subsidiary company.
Pension contributions of £nil (2019: £nil) were paid on behalf of the Directors.
5 Investments in subsidiaries
At the beginning of the year
In relation to XPS Pensions Consulting Limited
In relation to Xafinity SIPP Services Limited
In relation to XPS Pensions Limited
In relation to XPS Administration Limited
In relation to XPS Investment Limited
In relation to XPS Pensions (RL) Limited
At the end of the year
31 March
2020
£’000
19,115
1,156
72
1,006
680
61
7
22,097
31 March
2019
£’000
14,443
3,479
57
813
297
26
–
19,115
Subsidiary
Ownership
Country of
incorporation
Class of
shares held
Principal
activities
Registered address
XPS Financing Limited
100% England and Wales Ordinary
Holding company Phoenix House, 1 Station Hill,
Reading, Berkshire, RG1 1NB
The additions to investments during the year represent amounts in respect of Performance Share Plan awards and SAYE schemes,
and an equity-settled award made by the Employee Benefit Trust to subsidiary companies as instructed by the Company.
All other subsidiaries disclosed in note 36 of the Group accounts are indirectly owned by other group companies.
6 Trade and other receivables
Receivables due from related parties
7 Trade and other payables
Payables due to related parties
Other payables – corporation tax
Total trade and other payables
31 March
2020
£’000
200,447
31 March
2019
£’000
184,847
31 March
2020
£’000
31,705
1,502
33,207
31 March
2019
£’000
17,667
754
18,421
8 Share capital
Details on the share capital of the Company are contained in the Group Financial Statements.
9 Reserves
Reserve
Description and purpose
Share premium Amount subscribed for share capital in excess of nominal value.
Other reserve
The other reserve represents the amount in respect of the equity-settled awards made by the Employee
Benefit Trust to subsidiary companies as instructed by the Company.
Merger relief
reserve
The merger relief reserve represents the difference between the fair value and nominal value of shares
issued on the acquisition of subsidiary companies.
Retained profit
All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
XPS Pensions Group Annual Report 2020
153
NOTES TO THE FINANCIAL STATEMENTS – COMPANY CONTINUED
FOR THE YEAR ENDED 31 MARCH 2020
10 Financial instruments
The fair values and the carrying values of financial assets are the same.
Credit risk
The maximum exposure to credit risk at the reporting date was:
Receivables due from related parties
Carrying
amount
31 March
2020
£’000
200,447
Carrying
amount
31 March
2019
£’000
184,847
Loans from related parties are repayable on demand. Credit risk for receivables due from related parties has not increased
significantly since their initial recognition.
Liquidity risk
The Company does not have any significant liquidity risk, as its receivables and payables are all with related parties.
Capital risk management
As part of the XPS Pensions Group, the Company is focused on delivering value for its shareholders whilst ensuring the Group is
able to continue effectively as a going concern. Total capital for the Company comprises total equity.
The policies for managing capital are to increase shareholder value by maximising profits and cash. The policy is to set budgets
and forecasts in the short and medium term that the Company ensures are achievable. The process for managing capital are
regular reviews of financial data to ensure that the Company is tracking the targets set and to reforecast as necessary based on the
most up-to-date information. This then contributes to the XPS Pensions Group’s forecast which ensures future covenant test points
are met. The XPS Pensions Group continues to meet these test points and they have been achieved over the last 12 months.
Further information can be found within the Consolidated Financial Statements of XPS Pensions Group plc.
Management of capital
Total equity
11 Related party transactions
Amounts receivable from/(payable to) related parties at the balance sheet date
Loans to related parties
Loans from related parties
31 March
2020
£’000
189,337
31 March
2019
£’000
185,541
31 March
2020
£’000
200,447
(31,705)
168,742
31 March
2019
£’000
184,847
(17,667)
167,180
All transactions with related parties are made in the ordinary course of business and balances outstanding at the reporting date
are unsecured. Loans are repayable on demand and accrue interest at a rate in line with the Group’s bank borrowing rate. 2.68%
was applied in the year (2019: 2.34%). All related parties are part of the XPS Pensions Group.
12 Ultimate controlling party
The Directors do not consider that there is an ultimate controlling party.
154 XPS Pensions Group Annual Report 2020
Strategic Report
Governance
Financial Statements
COMPANY INFORMATION
Registered office and Directors’ address
Phoenix House
1 Station Hill
Reading
Berkshire
RG1 1NB
Company Secretary
Zoe Adlam
Financial adviser and broker
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London
EC2Y 9LY
Financial adviser and broker
RBC Capital Markets
2 Swan Lane
London
EC4R 3BF
Legal advisers to the Company
Macfarlanes LLP
20 Cursitor Street
London
EC4A 1LT
Auditor
BDO LLP
Level 12 Thames Tower
Station Road
Reading
Berkshire
RG1 1LX
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Bankers
HSBC Bank plc
Apex Plaza, Block D, 5th Floor
Forbury Road
Reading
RG1 1AX
XPS Pensions Group Annual Report 2020
155
This Annual Report is printed on material which is
made from mixed FSC®certified and traceable
pulp sources and is manufactured in accordance
with ISO certified standards for environmental,
quality and energy management
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Registered Office
Phoenix House
1 Station Hill
Reading
Berkshire
RG1 1NB
T: 0118 918 5000
www.xpsgroup.com