Annual Report & Accounts 2009 - Anglo Irish Bank

Service contracts
In order to secure the services of the new Group Chief Executive and in the context of the circumstances surrounding the Bank,
the Group Chief Executive's contract includes an initial guarantee of employment for two years. Thereafter a notice period of
twelve months applies.
Other than the Group Chief Executive, there are no provisions for pre-determined compensation on termination in existence for
any Director.
Pensions
Current Directors
The Group Chief Executive is entitled to contributions to a defined contribution scheme. All pension benefits are determined
solely in relation to basic salary. Fees paid to Non-executive Directors are not pensionable. While acting in an Executive
capacity, the Chairman received monthly contributions to a defined contribution scheme.
Under the defined contribution pension scheme, a set percentage of salary is paid into the scheme each year and is invested for
the benefit of the member. At retirement, the accumulated value of the investments made is available to purchase retirement
benefits for the member. Under this scheme, once the contributions have been paid the Group has no further obligation.
Former Directors
Former Executive Directors participated in either a defined contribution scheme or a Group defined benefit scheme. On
appointment to the Board the previous practice was that Executive Directors, who were members of the Group defined benefit
scheme, could retire at age 55 with no reduction in retirement pension benefits.
The defined benefit pension scheme provides a set annual pension to the member at retirement calculated in accordance with
the rules of the scheme. The amount of pension payable is determined based on the length of service with the Group and the
level of basic salary at retirement. Each year, the value of the liabilities of the scheme increases as a result of each of the
members having an additional year in employment and, if relevant, any increases in basic salary earned over the year. This
increase in aggregate scheme liabilities is offset by the payment of an average annual recommended contribution into the
scheme (expressed as a percentage of the total pensionable salary of all the members) and by investment returns on the assets
of the pension scheme generated from past contributions. The average annual contribution is calculated by the scheme's
pension actuary following a review of the scheme's assets and liabilities every three years.
The Finance Act 2006 introduced an additional tax surcharge on the value of accrued pension entitlements held for any
individual in excess of €5m (the 'pension cap'). The limit is adjusted each year in accordance with an indexation factor set by
the Government. For individuals in excess of the pension cap this measure had the effect of significantly reducing the value of
pension benefits that would accrue under either scheme through the requirement to pay significant additional tax.
David Drumm, the only former Executive Director impacted by the pension cap, elected to avail of an option to take a cash
allowance in lieu of pension benefits forgone. Details of payments made in respect of the relevant periods are included in the
tables on pages 146 and 147. Further details of accrued benefits are provided on page 149.
As previously stated, the Remuneration Committee and the Board have decided that the Bank will no longer grant Executive
Directors the option of taking a cash allowance if they were to reach the pension cap.
Directors' remuneration - 15 months ended 31 December 2009
Aggregate emoluments for Directors for the period for which they were a Director amounted to €3.7m (30 September 2008:
€11.5m). This includes an aggregate accounting expense in relation to options and awards granted under share-based payment
schemes of €0.3m (30 September 2008: €2m).
During the period the actual benefit to Directors was nil in respect of share-based payment schemes. No options or share
awards were granted to Directors in the period and, following the Bank’s nationalisation in January 2009, any rights
outstanding were extinguished for zero benefit. The expense of €0.3m is an accounting charge determined by reference to the
fair value of options or share awards calculated on the date of grant.
In addition aggregate amounts received in earlier periods by former Directors by way of expenses allowance determined in the
current period to be chargeable to income tax (€42k) and other benefits (€343k), total €385k. The amount of such expenses
allowance and other benefits received in the period to 31 December 2009 amounted to €nil (year to 30 September 2008:
€36k).
Aggregate compensation paid to past Directors in respect of loss of office amounted to €nil (30 September 2008: €3.75m). In
addition, the Bank has now identified aggregate benefits of €73k, in respect of periods prior to 2008, that were provided to
certain former Directors in connection with their leaving office.
The Bank is in the process of consulting with certain former Directors regarding various historical transactions and
arrangements. The amounts disclosed above determined to be chargeable to income tax are subject to change.
Anglo Irish Bank
Annual Report & Accounts 2009
145