This report sets out the remuneration policy for the Company’s directors and senior executives in line with statutory requirements and good practice guidelines and describes the elements of their remuneration and discloses the amounts paid to the directors in 2006.

The Remuneration Committee

The key purposes of the Committee are to ensure that the remuneration of senior executives is aligned to the Company’s strategy and that the Company is able to attract, retain and motivate high calibre people within a very competitive international market for talent.

The Committee reviews and recommends to the Board the Company’s remuneration policy and strategy and, within the policy, makes decisions on individual remuneration terms and compensation packages for the executive directors with particular reference to the Company’s performance. The Committee also sets the remuneration structure and terms for the Company’s other senior executives; sets the Chairman’s fee and exercises the powers of the Board in relation to the executive long-term incentive and all-employee share plans. The full terms of reference for the Committee are available from the Group Company Secretary and can be found on the Company’s website www.aviva.com.

Remuneration Committee composition

The following independent non-executive directors served on the Committee during the year:

	Period
Member	From	To
Richard Karl Goeltz (Chairman)	3 May 2004	To date
Mary Francis	25 January 2006	To date
Carole Piwnica	25 January 2006	To date
André Villeneuve	16 April 1996	31 December 2006

 

The illustrations above would vary slightly for Richard Harvey, whose long-term incentive plan award is 175% of basic salary. The illustrations assume “on target” performance when 30% of an LTIP award vests and “stretch” performance when 100% of an LTIP award vests.

Policy	How delivered	Details
Total remuneration	Basic salary Annual bonus LTIP Pension Long-term savings Benefits All-employee share schemes	Positioned at median against a FTSE 30 comparator group, although account is taken of relative size and complexity of comparator organisations.
Basic salary Basic salary is benchmarked within the range of median to upper quartile for comparable jobs. Progression within this range is dependent upon performance.	Monthly in cash Reviewed annually	Basic salary depends upon: Benchmarked salaries for comparable roles in the FTSE 50 and UK/European financial institutions; An individual’s performance; Predicted market movement; Aviva’s financial performance; and Anticipated pay increases for other Aviva employees.
Annual bonus The discretionary annual bonus plan exists to motivate directors towards the achievement of the annual business plan. 75% of basic salary is payable for "on target" performance, and up to 150% is payable for "stretch" performance.	Annually, one-third is paid in cash and two-thirds in deferred shares. The shares vest on the third anniversary of the date of grant, subject to the recipient remaining in service. A resignation in the year of a bonus award would result in the forfeiture of the shares awarded that year. A resignation in the following year would result in a 50% forfeiture, and in the year after that a 25% forfeiture. All shares would be forfeited should the director be dismissed for cause.	Business performance (of the Aviva Group in the case of the Group Chief Executive and the Group Finance Director and of the Group and appropriate business units in the case of the other executive directors) determines 70% of the bonus awards, with the remainder dependent upon the achievement of personal objectives, relating to strategic action, operating performance and leadership. “Business performance” covers, inter alia, new business contribution, operating profit, combined operating ratio, total expenses, return on capital employed, customer satisfaction and employee engagement. Target and maximum bonus levels (75% and 150% of basic salary respectively) were set with reference to the FTSE 30 and a global financial services comparator group. These levels are reviewed annually as part of the total compensation review.
Long-Term Incentive Plan This plan exists to motivate recipients to achieve the Company’s longer term objectives, to aid the retention of key personnel and to align their interests to those of shareholders.	Awards are made annually in the form of restricted shares that vest, subject to performance conditions, at the end of a three year performance period. Awards that do not vest, lapse. The Group Chief Executive is eligible to receive an annual award of shares to the value of 175% of his basic salary. The other executive directors are eligible to be awarded shares to the value of 150% of their basic salary. Under the scheme rules no awards may exceed 200% of a participant’s basic salary. Awards made to other senior employees vary based on an individual’s skills and longer term potential. Normally awards are made between 0% and 150% of basic salary.	Vesting of the shares is dependent upon two equally weighted performance measures; Return on Capital Employed (ROCE) and relative Total Shareholder Return (TSR), reflecting shareholders’ long-term interests in both absolute (ROCE) and relative (TSR) performance. ROCE vesting – ROCE targets are set annually within the context of the Company’s three-year business plan. Vesting depends upon the Company’s performance over the three-year performance period against a target return. The Group’s external auditor provides a formal opinion on the ROCE calculation. For awards granted for the three-year performance period commencing 1 January 2006, the Company’s cumulative ROCE over the period must exceed 31.5% for 15% of the shares to vest, with the maximum 50% of shares vesting if the cumulative ROCE exceeds 37.5% over the period. TSR vesting – 15% of the award vests for median performance rising to 50% vesting for upper quintile performance. The group of companies against which the Company’s TSR is measured comprises: AEGON, Allianz, AXA, Fortis, Friends Provident, Generali, HBOS, ING, Legal & General, Lloyds TSB, Prudential, The Royal Bank of Scotland, Royal & Sun Alliance and Zurich.These companies were chosen for their product and geographic match to Aviva. An independent consultant determines Aviva’s performance within this group. In December 2006, the Committee reviewed the appropriateness of relative TSR as a performance measure and agreed to include Standard Life in the above comparator group in respect of future grants.
All employee share plans To provide employees with the opportunity to acquire Aviva shares, where applicable.	Eligible to participate in the Company’s UK all employee share plans.	See details below (“UK All Employee Share Plans”).
Long-term savings Aviva has taken the opportunity presented by changes to pension legislation to introduce a new long-term saving arrangement, the Aviva Capital Accumulation Plan (ACAP). Contributions for the executive directors are shown in the Directors' remuneration table below.	Discretionary payments into an employee benefit trust operated by independent trustees. Currently those executive directors who are participating are not accruing benefits in the Aviva Staff Pension Scheme. The level of contribution varies but will not normally exceed 50% of basic salary.	Payments are held in trust for a minimum of five years. A resignation or departure for breach of contract generally results in the forfeiture of contribution for the year in which resignation occurred.
Pension The Aviva Staff Pension Scheme (Pension Scheme) provides a competitive post retirement package.	Deferred cash payable on retirement in the form of a lump sum/monthly payment.	See details below (“Pension”).

 

Director	Impact of pensions simplification review
Richard Harvey	The value of Richard Harvey’s UURB up to the newly introduced HMRC Lifetime Allowance (LTA) of £1.5 million was transferred into the Pension Scheme and therefore at retirement he will receive a deferred pension of £75,000 per annum as increased in line with deferred pensions (lower of the increase in RPI or 5%) subject to the LTA. The balance, valued at £11.6 million, was transferred into an Employer Funded Retirement Benefit Scheme (EFRBS).
Andrew Moss	The value of Andrew Moss’ UURB was transferred into the Pension Scheme and therefore at retirement he will receive a deferred pension of currently c.£20,000 pa. Further accrual in the pension scheme ceased from April 2006.
Philip Scott	The value of Philip Scott’s pension benefits on 6 April 2006 was in excess of the LTA. Philip Scott elected to register with HMRC for enhanced protection. As a consequence, he will remain a member of the Pension Scheme; however he will not be entitled to accrue any additional entitlement and on retirement his benefits will be based upon his final pensionable salary and years of service at that time. On this basis, it is anticipated that Philip Scott will not be subject to a recovery charge (additional tax). Philip Scott will continue to pay an annual contribution of 5% of his basic salary to the Pension Scheme. Should any recovery charge become payable, the cost would be borne by Philip Scott.
Patrick Snowball	The value of Patrick Snowball’s pension benefits on 6 April 2006 was in excess of the LTA, and he elected to register with HMRC for primary protection. As a consequence, he will continue to accrue benefits in the Pension Scheme but may be subject to a recovery charge (additional tax) on his benefits in excess of the amount registered. Patrick Snowball will continue to pay an annual contribution of 5% of his basic salary to the Pension Scheme. The cost of any recovery charge will be borne by Patrick Snowball.

Provision	Policy
Notice period
By the director	Six months
By the Company	12 months, rolling. No notice or payment in lieu to be paid where the Company terminates for cause.
Termination payment	Pay in lieu of notice up to a maximum of 52 weeks’ basic salary. This may be increased by a discretionary redundancy payment (where appropriate) but any such further termination payment is capped at 52 weeks’ basic salary. Any amount is subject to mitigation and phased payments.
Remuneration and benefits	As described in this Report. The detailed operation of the annual bonus and LTIP plans is at the Company’s discretion and in the case of the long-term savings plans at the trustees discretion.
Expenses	Reimbursement reasonably incurred in accordance with their duties.
Holiday entitlement	30 working days plus public holidays.
Sickness	In line with senior management terms ie 100% basic salary for 52 weeks, and 75% thereafter.
Non-complete	During employment and for six months after leaving.
Contract dates	Director	Date current contract commenced
	Richard Harvey	6 December 2006
	Andrew Moss	16 January 2007
	Philip Scott	22 January 2007
	Patrick Snowball	15 November 2006

Provision	Policy
Period	Three-year term which can be extended by mutual consent.
Termination	By the director or the Company giving the other one month’s written notice without compensation.
Fees	As described below.
Expenses	Reimbursement of travel and other expenses reasonably incurred in the performance of their duties.
Time commitment	Between 25 and 50 days per annum depending upon Board and committee requirements and corporate activity.
Non-compete	During employment and for six months after leaving.
Appointment dates	Director	Date of last appointment	Date appointment terminates
	Guillermo de la Dehesa	30 May 2005	30 May 2008
	Wim Dik	7 December 2005	7 December 2008
	Mary Francis	1 October 2005	1 October 2008
	Richard Karl Goeltz	3 May 2004	3 May 2007
	Carole Piwnica	10 May 2006	AGM 2009
	Lord Sharman	14 January 2005	14 January 2008
	Russell Walls	3 May 2004	3 May 2007

	Basic salary/fees			Bonuses			ACAP			Benefits			Total
	2006 £’000	2005 £’000		2006 £’000	2005 £’000		2006 £’000	2005 £’000		2006 £’000	2005 £’000		2006 £’000	2005 £’000
Chairman
Lord Sharman	375	48		–	–		–	–		–	–		375	48
Executive directors
Richard Harvey	875	790		1,296	1,028		450	–		61	104		2,682	1,922
Andrew Moss	533	470		744	589		275	–		36	20		1,588	1,079
Philip Scott	543	515		680	583		–	–		63	54		1,286	1,152
Patrick Snowball	543	503		763	693		–	–		39	104		1,345	1,300
Non-executive directors
Guillermo de la Dehesa	86	77		–	–		–	–		–	–		86	77
Wim Dik	69	59		–	–		–	–		–	–		69	59
Mary Francis	64	13		–	–		–	–		–	–		64	13
Richard Karl Goeltz	78	63		–	–		–	–		–	–		78	63
Carole Piwnica	74	56		–	–		–	–		–	–		74	56
Russell Walls	64	56		–	–		–	–		–	–		64	56
Former directors
Derek Stevens*	99	91		–	–		–	–		–	–		99	91
André Villeneuve*	65	59		–	–		–	–		–	–		65	59
Total emoluments of directors	3,468	2,800		3,483	2,893		725	–		199	282		7,875	5,975

* Retired on 31 December 2006.

The charts below illustrate the balance between basic salary and variable performance based compensation (annual bonus and long-term incentive plans) received by each executive director in the year to 31 December 2006.

 

Notes

1. “Bonuses” include the value of shares granted under the free share part of the Aviva All-Employee Share Ownership Plan (maximum £3,000) and the total amounts earned in respect of 2006 performance under the Annual Bonus Plan (ie including the amounts deferred and granted in the form of shares).
2. “Benefits”. All the executive directors received life assurance benefits during the year that relate to the cost incurred by the Company of insuring the directors’ life assurance and spouses’ benefits which, had they died during the year, could not have been wholly paid by the pension scheme and would therefore have been met by the Company. The disclosure also includes the cost of private medical insurance, and when appropriate, accompanied travel, accommodation and car benefits. All the numbers disclosed include the tax charged on the benefits. No directors received an expense allowance during the year.
3. Payments to former directors: Since his retirement as a director in 2003, Anthony Wyand has served as a consultant and as a director on the Boards of some of the Group’s European operations. Under this arrangement, a fee of £145,000 was paid to him in 2006. During the year, shares granted to certain former executive directors under the company’s incentive plans vested. Details of these awards were fully disclosed in the year of grant.
4. For the purposes of the disclosure required by Schedule 6 to the Companies Act 1985 the total aggregate emoluments of the directors in respect of 2006 was £7.9 million. (2005: £6.0 million).
5. No compensation payment for loss of office was made to any director, or former director, during the year.
6. Andrew Moss did not benefit from the LTIPs that vested in 2006 as he was not an employee in 2003, when they were granted.

Pension benefits

During the year to 31 March 2006, each of the executive directors accumulated pension benefits under the defined benefits section of the Pension Scheme. Richard Harvey and Andrew Moss, who were subject to the pre-April 2006 Earnings Cap, ceased accruing further benefits in the scheme from that date.

Executive directors’ pension arrangements

	Richard Harvey1 £’000	Andrew Moss2 £’000	Philip Scott3 £’000	Patrick Snowball3 £’000
Accrued annual pension at 1 January 2006	527	17	343	231
Transfer of UURB in excess of Lifetime Allowance	(458)	–	–	–
Increase in accrued annual pension during the year as a result of inflation	4	–	12	8
Augmentation of benefits	–	–	–	20
Adjustment to accrued annual pension as a result of salary increase relative to inflation	2	–	6	13
Increase in accrued annual pension as a result of additional service	–	3	–	17
Accrued annual pension at 31 December 20064	75	20	361	289
Employee contributions during the year5	10	6	27	27
Transfer value of accrued pension at 31 December 20056	7,681	166	4,357	3,465
Transfer value of accrued pension at 31 December 20066	1,252	231	5,236	4,833
Change in transfer value during the period less employee contributions6	(6,433)	61	852	1,341
Age at 31 December 2006 (years)	56	48	52	56

Notes

1. Mr Harvey was subject to the HMRC Earnings Cap; hence a large part of the liability to pay his pension fell outside the Pension Scheme and was provided by the Company through an UURB. In line with material changes affecting pensions which became effective from 6 April 2006 the Company crystallised the value of its liability for Mr Harvey’s UURB in excess of the LTA and transferred £11.6 million, being the actuarially calculated, and independently reviewed, value of the pension crystallised, into an EFRBS. As a result Mr Harvey’s pension benefit, post March 2006 is £75,000 pa. and subject to increase in line with deferred pensions (the lower of the increase in the Retail Prices Index or 5%) subject to the LTA. In addition Mr Harvey is entitled to a pension benefit of cNZ$25,000 pa from a New Zealand defined benefit scheme in respect of his service with the Group’s former operations in that country. In calculating the actuarial value of the amount to be transferred to the EFRBS an appropriate reduction was made to reflect the benefit of his New Zealand pension.
   
   The amount of the transfer of £11.6 million to the EFRBS was accounted for as follows:
   • Amount provided on the Company’s balance sheet for Richard Harvey as part of the IAS 19 charge at 31 March 2006, immediately prior to the change on 6 April 2006 is £10.8 million.
   • Less the amount of £700,000 transferred to the Pension Scheme to provide a pension up to the LTA.
   • The balance of £1.5 million was charged to the profit and loss account to take account of the increase in pension which would have been payable on his basic pay increase at 1 April 2006 (amount of pension increase £67,000 pa).
2. Mr Moss ceased accrual in the pension scheme after 31 March 2006 and as a result his pension benefit, post March 2006 is c£20,000 pa and subject to increase in line with deferred pensions (the lower of the increase in the Retail Prices Index or 5%) subject to the LTA.
3. Mr Snowball and Mr Scott have been accruing benefits in the Pension Scheme since before June 1989 and therefore were not subject to HMRC’s Earnings Cap and can continue to accrue benefits in the Pension Scheme, which they did throughout 2006. For a number of years Mr Snowball had been accruing additional benefits which were due to accrue uniformly up to his normal retirement date in 2010. Mr Snowball’s benefits were augmented to accrue in full in 2006, to reflect his increased duties following a restructuring of the UK businesses when no change was made to any other element of his remuneration. A payment of £429,000 was made into the pension scheme to fund this and therefore that part of the annual accrual ceased.
4. The “accrued pension” is the amount of annual pension to which the directors would have been entitled at age 60 had they left service at 31 December 2006.
5. Contributions of 5% of salary are made by Mr Scott and Mr Snowball towards their pension. As Mr Harvey and Mr Moss ceased accruing benefits in the Pension Scheme from March 2006 their 5% contributions ceased from that date and therefore the amounts disclosed are in relation to the period prior to that date.
6. The change in the transfer values over the year include the effect of changes made by the Trustee of the Pension Scheme to the assumptions used in respect of the market value of future investment returns and mortality. The significant reduction in relation to Mr Harvey reflects the reduction in his accrued pension benefit to £75,000 pa as described in note 1 above. Transfer values represent the estimated liability on the Scheme to pay the stated level of benefits. They are not sums paid, or due, to a director and do not represent the true cost of providing the pension benefit.
7. No former directors received any increase in retirement benefits in excess of the amount to which they were entitled on the later of the date when the benefits first became payable on 31 March 1997.

Share incentive plans

Details of the directors who held executive office for any part of the financial year, and hold or held options to subscribe for ordinary shares of the Company or hold or held awards over shares in the Company, pursuant to the Company’s share-based incentive plans, are set out below.

Savings related share options

These are options granted under the HMRC approved Savings Related Share Option Scheme. Options are normally exercisable during the six month period following the end of the relevant (three, five or seven year) savings contract.

	At 1 January 2006 Number	Options granted during year Number	Options exercised during year Number	Options lapsing during year Number	At 31 December 2006 Number	Exercise price p	Exercise period
Richard Harvey
Savings related options 2002	4,426	–	–	–	4,426	401.0	December 2009 – May 2010
Andrew Moss
Savings related options 2005	3,279	–	–	–	3,279	491.0	December 2010 – May 2011
Philip Scott
Savings related options 2002	4,096	–	–	–	4,096	401.0	December 2007 – May 2008
Patrick Snowball
Savings related options 2003	2,272	–	2,272	–	–	406.0	_

The mid-market price of an ordinary share in the Company on 29 December 2006, being the last business day of the year, was 822 pence, and the mid-market prices during the year ranged from 690 pence to 850.5 pence. During the year, directors made an aggregate gain of £8,355 upon the exercise of share options.

Share awards

The Aviva Long-Term Incentive Plan 2005 was approved by shareholders at the 2005 Annual General Meeting and is described above. This “2005 Plan” replaced the original Aviva Long-Term Incentive Plan (Aviva LTIP) which was approved by shareholders in 2001 and under which awards were made on an annual basis up to and including 2004.

Performance testing under the Aviva LTIP

Under the Aviva LTIP, which granted awards between 2001 and 2004, shares vest subject to the attainment of TSR and ROCE performance conditions over a three-year performance period. The Company’s TSR, when compared with the TSR of a comparator group of European financial services companies, needs to match at least median performance for 20% of the awards to vest. At upper decile performance, 70% of the awards vest. Between median and upper decile, vesting is determined on a straight-line basis. ROCE of 24% in excess of RPI over the three-year period results in 24% of the shares vesting, rising to a maximum of 30% if the ROCE exceeds 30% over the same period.

At the end of the performance period relating to the awards granted in 2003, the Company was ranked eight out of the 20 companies in the comparator group and the ROCE was 33.6%. As a result, 34.9% of the awards vested based on the TSR part of the Plan and 30.0% of the awards vested based on the ROCE part, making a total of 64.9% vested. The 35.1% of the awards, which did not vest, lapsed.

The vesting history under the Aviva LTIP is as follows:

		Percentage of award vesting
Year of grant	Performance period	ROCE	TSR	Total
2001	January 2001 to December 2003	21.7	0.0	21.7
2002	January 2002 to December 2004	23.3	23.0	46.3
2003	January 2003 to December 2005	30.0	34.9	64.9

Performance graph

The following graph compares the TSR performance of the Company over the past five years with the TSR of the FTSE 100 Return Index. This index has been chosen because it is a recognised equity market index, of which Aviva is a member. The graph also includes the median TSR of the companies in the comparator group as this is the group against which performance is measured for the purpose of the Aviva Long-Term Incentive Plan. The companies which compose the comparator group for TSR purposes were amended when the new Long-Term Incentive Plan was introduced in 2005 so that the group matches more closely the companies which offer similar products in similar geographic markets to Aviva. The TSR graph for the comparator group has therefore been plotted using the 19 companies (excluding Aviva) in the comparator group pre-2005 and the 14 companies (excluding Aviva) in the group for 2005 and 2006.

Aviva five-year TSR performance against the FTSE100 Index and the median of the Comparator Group

 

The Aviva Annual Bonus Plan was approved by shareholders in April 2005 and it replaced the Aviva Deferred Bonus Plan.

The Aviva Deferred Bonus Plan was approved by shareholders at the 2001 Annual General Meeting. The awards disclosed include those made in lieu of some or all of the cash bonus earned and deferred under the Company’s Annual Bonus Plan and also the matching awards granted on a “one-for-one” basis. The vesting of the awards on the third anniversary of their grant is not subject to performance conditions. This plan was replaced by the Aviva Annual Bonus Plan in 2005 and therefore no awards have been granted under the Plan since 2005.

The Aviva Share Plan was established in May 2004 specifically to facilitate the recruitment of Andrew Moss. The awards made under the Plan compensate Andrew Moss for the value of the long-term incentive awards granted to him by his previous employer and which lapsed when he resigned to join Aviva. Andrew Moss is the only participant in the Plan. On 10 May 2004, the date Andrew Moss joined the Company, 103,846 shares in the Aviva Employee Trust (with a market value of £540,000) were allocated to him. On 31 October 2004 67,307 of the shares vested, 23,077 vested on 31 December 2005 and the balance of 13,462 vested on 31 December 2006. The vesting of these shares was not subject to any performance conditions. This plan is now closed.

Long-Term Incentive Plan Awards

	At 1 January 2006 Number	Awards granted during year Number	Awards vesting during year Number	Awards lapsing during year Number	At 31 December 2006 Number	Market price at date awards granted p	Market price at date awards vested p	Vesting date
Richard Harvey
Aviva Long-Term Incentive Plan
– 2003	175,000	–	113,575	61,425	–	379.5	822.0	March 2006
– 2004	139,059	–	–	–	139,059	527.5	–	March 2007
Aviva Long-Term Incentive Plan 2005
– 2005	207,437	–	–	–	207,437	633.5	–	March 2008
– 2006	–	170,731	–		170,731	814.0	–	March 2009
Aviva Deferred Bonus Plan
– 2003	127,750	–	127,750	–	–	379.5	822.0	March 2006
– 2004	118,478	–	–	–	118,478	527.5	–	March 2007
– 2005	109,764	–	–	–	109,764	633.5	–	March 2008
Aviva Annual Bonus Plan
– 2006	–	83,317	–	–	83,317	814.0	–	March 2009
Andrew Moss
Aviva Share Plan	13,462	–	13,462	–	–	520.0	834.0	December 2006
Aviva Long-Term Incentive Plan
– 2004	83,650	–	–	–	83,650	535.0	–	August 2007
Aviva Long-Term Incentive Plan 2005
– 2005	102,803	–	–	–	102,803	633.5	–	March 2008
– 2006	–	87,804	–	–	87,804	814.0	–	March 2009
Aviva Deferred Bonus Plan
– 2005	61,408	–	–	–	61,408	633.5	–	March 2008
Aviva Annual Bonus Plan
– 2006	–	47,648	–	–	47,648	814.0	–	March 2009
Philip Scott
Aviva Long-Term Incentive Plan
– 2003	111,250	–	72,201	39,049	–	379.5	822.0	March 2006
– 2004	88,867	–	–	–	88,867	527.5	–	March 2007
Aviva Long-Term Incentive Plan 2005
– 2005	116,822	–	–	–	116,822	633.5	–	March 2008
– 2006	–	95,121	–	–	95,121	814.0	–	March 2009
Aviva Deferred Bonus Plan
– 2003	80,100	–	80,100	–	–	379.5	822.0	March 2006
– 2004	68,960	–	–	–	68,960	527.5	–	March 2007
– 2005	68,690	–	–	–	68,690	633.5	–	March 2008
Aviva Annual Bonus Plan
– 2006	–	47,138	–	–	47,138	814.0	–	March 2009
Patrick Snowball
Aviva Long-Term Incentive Plan
– 2003	96,250	–	62,466	33,784	–	379.5	822.0	March 2006
– 2004	84,452	–	–	–	84,452	527.5	–	March 2007
Aviva Long-Term Incentive Plan 2005
– 2005	107,943	–	–	–	107,943	633.5	–	March 2008
– 2006	–	95,121	–	–	95,121	814.0	–	March 2009
Aviva Deferred Bonus Plan
– 2003	35,612	–	35,612	–	–	379.5	822.0	March 2006
– 2004	70,802	–	–	–	70,802	527.5	–	March 2007
– 2005	67,068	–	–	–	67,068	633.5	–	March 2008
Aviva Annual Bonus Plan
– 2006	–	56,100	–	–	56,100	814.0	–	March 2009

Dilution

Awards granted under the Aviva Annual Bonus Plan 2005 and the Aviva Long-Term Incentive Plan 2005 are met by the issue of new shares at the time that the awards vest. The Committee monitors the number of shares issued under its various all employee and discretionary share plans and their effect on dilution limits. The relevant dilution limits established by the Association of British Insurers in respect of all share plans (10% in any rolling ten year period) and executive share plans (5% in any rolling ten year period) were, based on the Company’s issued share capital at 31 December 2006, 2.60% and 1.12% respectively.

Between March 1998 and March 2003, the Company met its liability for shares awarded under the incentive plans by funding an employee trust that acquired shares in the market at the time of grant. Details of the shares currently held in the employee trusts are set out in note 29 to the accounts.

Accounting changes

Major changes to accounting policies and practices in 2005, including adopting International Financial Reporting Standards and European Embedded Value principles for supplementary reporting, affected a number of the key performance indicators and performance measures used in connection with the Company’s long-term incentive plans. During the transition period the Committee received reports showing the impacts of these changes on the performance measures and satisfied itself that the evaluation of actual performance against the performance conditions which were originally set using prior accounting practices is appropriate having made allowance for the accounting changes.

Senior executives’ remuneration

The total compensation paid during the year to key management personnel, being those having authority and responsibility for planning, directing and controlling the activities of the Company, including the Company’s directors and non-executive directors (as required to be disclosed by International Accounting Standard 24) was £53 million (2005: £34 million) and is set out below in note 53 to the Accounts.

Non-executive directors’ remuneration

The Company’s Articles of Association provide that the total aggregate remuneration paid to the Chairman and non-executive directors will be determined by the Board within the limits set by shareholders. The current aggregate limit of £1.5 million was approved by shareholders at the Company’s 2005 Annual General Meeting. Executive directors are remunerated under their service contracts and receive no additional fee for serving as directors.

Chairman		£375,000 pa
Board membership fee		£50,000 pa
Additional fees are paid as follows:
Senior independent director		£10,000 pa
Committee Chairman	– Audit	(inclusive of committee membership fee) £35,000pa
	– Remuneration	(inclusive of committee membership fee) £20,000 pa
Committee Membership	– Audit	£10,000 pa
	– Remuneration	£10,000 pa
	– Nomination	£5,000 pa
	– Risk and Regulatory	£5,000 pa
	– Corporate Social Responsibility	£5,000 pa

Other than for the Chairman’s fee, which was increased by £15,000 pa from 1 January 2006 to reflect the loss of a car allowance of £18,000 pa from that date, no increases were made to the level of directors’ fees during the year. However, fees payable to the senior independent director, chairman of the Remuneration Committee and for membership of the Risk and Regulatory and Corporate Social Responsibility committees were introduced from 1 April 2006 following changes to the Board committee structure and directors’ responsibilities.

In addition to the Board membership and committee membership fees Derek Stevens received an additional amount of £10,000 per annum for serving as the chairman of the Aviva Staff Pension Scheme. The fee for Guillermo de la Dehesa includes an amount of € 40,000 per annum for serving as the non-executive chairman of the Group’s operations in Spain. No non-executive director accrued retirement benefits during the year.

Directors’ interests in Aviva shares

The interests held by each person who was a director at the end of the financial year in the ordinary shares of 25 pence each in the Company are shown below. All the disclosed interests are beneficial. The table also summarises the interests in shares held through the Company’s various all-employee and executive share schemes. View details of the options and long-term incentive awards and the Aviva Share Plan.

	Shares1			Bonus Plan Awards2			Long-Term Incentive Awards3			Options4			Aviva Share Plan5
	1 January 2006	31 December 2006		1 January 2006	31 December 2006		1 January 2006	31 December 2006		1 January 2006	31 December 2006		1 January 2006	31 December 2006
Guillermo de la Dehesa	144	144		–	–		–	–		–	–		–	–
Wim Dik	200	200		–	–		–	–		–	–		–	–
Mary Francis	1,000	1,000		–	–		–	–		–	–		–	–
Richard Karl Goeltz	2,500	2,500		–	–		–	–		–	–		–	–
Richard Harvey	44,781	198,758		355,992	311,559		521,496	517,227		4,426	4,426		–	–
Andrew Moss	35,040	43,337		61,408	109,056		186,453	274,257		3,279	3,279		13,462	–
Carole Piwnica	–	2,500		–	–		–	–		–	–		–	–
Philip Scott	170,004	274,896		217,750	184,788		316,939	300,810		4,096	4,096		–	–
Lord Sharman	–	2,000		–	–		–	–		–	–		–	–
Patrick Snowball	16,250	22,815		173,482	193,970		288,645	287,516		2,272	–		–	–
Russell Walls	1,500	1,500		–	–		–	–		–	–		–	–
Former directors
Derek Stevens*	2,989	3,047		–	–		–	–		–	–		–	–
André Villeneuve*	640	640		–	–		–	–		–	–		–	–

* Retired 31 December 2006.

Notes

1. “Shares” are the directors’ beneficial holdings in the ordinary shares of the Company and in respect of the executive directors include shares held in trust under the Company’s All Employee Share Ownership Plan (AESOP) being shares purchased by them under the partnership element and shares granted under the free share element of the AESOP. Executive directors are required to build and maintain a beneficial interest in the Company’s shares equal in value to 1.5 times their annual salary (1.75 times annual salary in the case of the Group Chief Executive). The requirement was introduced as part of the revised remuneration arrangements from 2005; the holding must be attained within five years.
2. “Bonus Plan Awards” relates to entitlements to shares arising through the current, or former, Aviva Bonus Plans. Under these plans some of the earned bonuses are paid in the form of shares and deferred for three years. The transfer of the shares to the director at the end of the period is not subject to the attainment of performance conditions but a proportion of the shares can be forfeited if the executive leaves service before the end of the period.
3. “Long-Term Incentive Awards” are awards granted under the Aviva Long-Term Incentive Plans which vest only if the performance conditions are achieved.
4. “Options” are options over shares granted under the Savings Related Share Option Scheme.
5. “Aviva Share Plan” relates to shares held under the Plan referred to above in which only Andrew Moss participated.

The following changes to directors’ interests which relate to shares acquired each month under the partnership element of the AESOP during the period 1 January 2006 to 28 February 2007 have been reported to the Company.

	Number of shares
Richard Harvey	14
Philip Scott	15
Patrick Snowball	14

This report was reviewed and approved by the Board on
28 February 2007.

 

Richard Karl Goeltz
Chairman, Remuneration Committee