Part 3: annual report on remuneration

Sections of the annual report on remuneration which have been subject to audit are noted accordingly.

Single total figure of remuneration (audited)

Directors' remuneration £'000

Fixed payPerformance-related pay
Salary/feesBenefits1Pension2Salary supplement3Sub-totalAnnual bonus4LTIP5Share Matching
Plan6
Share-saveSub-totalTotal
remuneration
2013/142012/132013/142012/132013/142012/132013/142012/132013/142012/132013/142012/132013/142012/132013/142012/132013/142012/132013/142012/132013/142012/13
Chairman
John Barton255250255250255250
Executive directors
Lord Wolfson7297144945160280109271,0471,0661,0931,0642,5002,50063,5993,5644,646*4,630*
Christos Angelides529519333314022079197817915295142,5002,5002,7492,1035,7785,1176,5595,908
David Keens487477211973725815684874721,8011,4502,5292,04244,8213,9645,4024,532
Michael Law175N/A16N/AN/A26N/A217N/A239N/A783N/A449N/AN/A1,471N/A1,688N/A
Jane Shields175N/A17N/AN/A26N/A218N/A239N/A783N/A454N/A5N/A1,481N/A1,699N/A
Andrew Varley12135572718531464353516311,0781,4686312,8977773,332
Non-executive directors
Steve Barber636063606360
Christine Cross535053505350
Jonathan Dawson747074707470
Caroline Goodall534534534
Francis Salway535053505350
2,7672,5491431243005003311713,5413,3442,5872,4018,9987,5286,1815,6131517,78115,54221,32218,886

*As detailed in the Remuneration Committee Chairman's Statement, Lord Wolfson waived his entitlement to the April 2011 SMP award which would have matured in April 2014 at an estimated value of £3.8m. Lord Wolfson also waived his entitlement to the June 2010 SMP award which matured in 2013 and would have had a value at that date of £3m. Had he not done so, Lord Wolfson's total remuneration would have been £8,435,000 for 2013/14 and £7,601,000 for 2012/13.

Andrew Varley stepped down from the Board on 31 May 2013; since then he has continued in his role as Group Property Director and received the same rate of salary. Michael Law and Jane Shields joined the Board on 1 July 2013. The values disclosed for salary, benefits and salary supplement for these three Directors relate only to the period of their executive directorship. LTIP remuneration of £631,000 was paid to Andrew Varley after he stepped down from the Board and relates to the three year performance period ending July 2013. Performance-related remuneration for Michael Law and Jane Shields in the above table includes pay relating to the period before they became executive directors but paid after their appointment.

Total emoluments paid to directors (salary/fees, benefits, salary supplements and annual bonus) for the year to January 2014 were £5,828,000 (2013: £5,245,000).

Note 1: Benefits

Car/cash allowanceFuelMedical insurance
& NEXT clothing allowance
Total
2014
£'000
2013
£'000
2014
£'000
2013
£'000
2014
£'000
2013
£'000
2014
£'000
2013
£'000
Lord Wolfson403677224945
Christos Angelides242477223333
David Keens1918212119
Michael Law13N/A2N/A1N/A16N/A
Jane Shields11N/A4N/A2N/A17N/A
Andrew Varley519271727

Note 2: Pension

Pension values are calculated using the method required by the new regulations, i.e. the total pension accrued at January 2014 less the total pension accrued at the end of the previous year, adjusted for inflation and multiplied by a factor of 20. It does not necessarily represent the economic value of the pension rights accrued and this benefit is not immediately available to the director.

In summary, the pension entitlements of the directors are as follows:

Age at January
2014
Years of pensionable serviceAccrued annual pension
£'000
Change in accrued annual pension
£'000
Change in accrued annual pension
(net of inflation) £'000
Transfer value
of accrued
annual
pension
Increase/
(decrease)
in transfer
value less
director's contributions
£'000
2014
£'000
2013
£'000
Lord Wolfson46193241684,3704,3331
Christos Angelides50212861474,8054,802(23)
David Keens602518864,8325,696(864)
Michael Law522512232,2952,3351(40)
Jane Shields501911832,0032,0131(10)
  1. Michael Law and Jane Shields were promoted to the Board on 1 July 2013. As they were already employed by NEXT the transfer value disclosed above is calculated at the year start.

Years of pensionable service shown above may include bought-in service from the transfer of other pension entitlements into the Plan. Directors' pension arrangements are subject to the same actuarial reduction as other employees on termination or early retirement.

Note 3: Salary supplement in lieu of pension

Supplements of 15% of base salary are paid in lieu of pension provision after the directors became deferred members of the defined benefit section of the NEXT Group Pension Plan. David Keens, Jane Shields and Andrew Varley received this supplement from 2011, Michael Law from April 2012 and Lord Wolfson and Christos Angelides from November 2012.

Note 4: Annual bonus

The performance targets for the annual bonus are set out in the Remuneration Policy. For the year to January 2014 actual pre-tax EPS achieved was 460.0p, growth of 17.6%. Accordingly, a bonus of 150% of salary for the Chief Executive and 100% of salary for the other executive directors was earned.

To provide a retention element in the case of the Chief Executive, any annual bonus in excess of 100% of base salary is payable in shares, deferred for a period of two years and subject to forfeiture if he voluntarily resigns prior to the end of that period.

Note 5: LTIP

The performance targets for the LTIP are set out on in the Remuneration Policy. In April 2013, the Committee reviewed the Company's financial performance for the three year performance period to January 2013 in light of underlying economic and other conditions ('the economic underpin'). During this period, the Company's compound annual growth in underlying EPS and pre-tax profits was 16.5% and 7.1% respectively, well ahead of RPI (4.1%). Dividends had also increased in line with EPS and some £736m was returned to shareholders through share buybacks. As the Company's performance also compared favourably against its principal retail competitors and FTSE100 companies, the Committee confirmed that the economic underpin performance condition had been satisfied. As a consequence, 98% of the award for this period vested.

For the three year performance period to July 2013, TSR ranked fourth in the comparator group of 21 and 100% of the grant made in the second half of 2010 vested. The Committee assessed the performance of the Company and noted that EPS compound annual growth of 16.2% and pre-tax profit compound annual growth of 6.4% over the three year period were significantly ahead of RPI (3.7%). In addition, dividends had continued to increase in line with EPS and £768m had been returned to shareholders through buybacks. The Committee also assessed earnings growth against selected comparable major UK retailers and concluded that NEXT had performed favourably. Taking these factors into account, the Committee determined that the economic underpin performance condition for the award had been satisfied. The awards were cash settled for all executives.

For the performance period to January 2014, TSR ranked third against the comparator group of 21 which corresponds to an expected vesting of 100% of the maximum award made in January 2011. In March 2014 the Remuneration Committee assessed the performance of the Company on the same basis as described above and noted that EPS compound annual growth of 18.2% and pre-tax profit compound growth of 8% over the three year period were significantly ahead of RPI (3.3%). In addition, dividends had continued to increase in line with EPS and £827m had been returned to shareholders through buybacks. The Committee also assessed earnings growth against selected comparable major UK retailers and concluded that NEXT had performed favourably. Taking these factors into account, the Committee determined that the economic underpin performance condition for the award had been satisfied and it should vest in full.

LTIP values for the January 2014 single figure table comprise the actual value of awards that have vested and been paid for the performance period ending in July 2013, together with the estimated value of awards that will vest for the performance period ending in January 2014, based on the average NEXT share price over the last financial quarter of £56.47. For January 2013 these are the actual values of the LTIP awards that vested in respect of performance periods ending in that financial year.

The maximum value of LTIP awards that vest for a participant in a year is capped at £2.5m. This cap was applied to awards that vested in the year to January 2013 for Lord Wolfson and Christos Angelides and payments to them were reduced by £397k and £75k respectively. For the awards vesting in the year to January 2014 the cap will again be applied and payments to Lord Wolfson and Christos Angelides will be reduced by an estimated £1,097k and £762k respectively.

Note 6: SMP

The SMP was introduced to encourage ownership of NEXT shares amongst executive directors and other senior executives and to act as a further retention incentive. It also continues to support the Committee's approach of ensuring close long term alignment of management's interests with shareholders. For the 2011 grant, which is due to vest in April 2014, some 25 senior executives were able to reinvest part, or all, of their annual cash bonus in NEXT shares.

The performance targets for the SMP are set out in the Share Matching Plan. SMP values for January 2014 assume a maximum vesting in April 2014 and are based on the average NEXT share price over the last financial quarter of £56.47. The strong growth in EPS means the maximum performance target for the SMP has been exceeded and therefore the 2011 SMP will vest in full in April 2014, subject to the continued employment of participants.

Executive directors will no longer be granted awards under the SMP after January 2014 and participation will be restricted to senior executives below Board level.

As noted below the Single Figure of Remuneration table, Lord Wolfson waived his entitlement to the April 2011 SMP award and to the June 2010 SMP award. In respect of the SMP award which will vest in April 2014, the estimated total 2014 pre-tax value for the other executive directors is £6.2m, of which £3.7m (60%) derives from the growth in NEXT's share price since investment in 2011.

The SMP values for January 2013 are actual values at the date of vesting.

Executive directors' external appointments

No current executive director holds any non-executive directorships outside the Group. Andrew Varley, who stepped down from the Board in 2013, is a non-executive director of LondonMetric Property plc and the Committee approved his retention of the director's fee of £50,000 per annum for this appointment.

Pension entitlements (audited)

In October 2013 all active members of the NEXT Group Pension Plan (the "NEXT Plan"), were transferred to the new 2013 NEXT Group Pension Plan (the "2013 Plan") so that pensioners of the NEXT Plan could be issued with individual policies with Aviva. Most deferred pensioners and pensioners who had not previously been subject to a buy-in through Aviva were also transferred to the 2013 Plan. Benefits within the 2013 Plan mirror those in the NEXT Plan.

Executive directors are now members of the 2013 Plan which has been approved by HM Revenue & Customs and consists of defined benefit and defined contribution sections.

The trustee of both Plans is a limited company, NEXT Pension Trustees Limited (the "Trustee"). The Board of the Trustee includes members of the 2013 Plan, a pensioner member and a Chairman who is an independently appointed person with no other association with NEXT. Two of the directors are member nominated directors and cannot be removed by NEXT; the other directors, including the independent director, are appointed by and can be removed by NEXT. All directors of the Trustee receive a fee for their services, including those directors who are also employees of NEXT. No director of the Company is a director of the Trustee.

The Plans' investments are kept separate from the business of the NEXT Group and the Trustee holds them in separate trusts. Responsibility for investment of the Plans' funds has been delegated to professional investment managers.

The Group operates a salary sacrifice scheme whereby members from either section can elect to receive a reduced gross salary in exchange for enhanced employer pension contributions. The participation of members in the salary sacrifice scheme does not result in any overall increase in costs to the Group.

Defined contribution section

Employees of the Group can join the defined contribution section of the 2013 Plan. Members elect to pay either 3% or 5% of their pensionable earnings which is matched by the Company. For death prior to retirement, a lump sum of three times the member's base salary at the previous April is payable along with the current value of the member's fund.

Defined benefit section

The defined benefit section was closed to new members in 2000. In 2012 the Group reviewed this section for remaining employee members and following a consultation process the future accrual of pension benefits has been based on pensionable salary frozen at October 2012, rather than final earnings. In addition, those employees can elect to receive up to a 15% salary supplement or additional contributions to the defined contribution section. The defined benefit section now provides members with a retirement benefit of one sixtieth or one eightieth (depending on the member's chosen contribution rate) of pensionable earnings at October 2012 for each year of pensionable service.

Lord Wolfson, Christos Angelides and a small number of senior employees, on completion of at least 20 years' pensionable service at age 65, receive a retirement benefit of two-thirds of pensionable earnings at October 2012, which accrues uniformly throughout their pensionable service. The deferred pensions for David Keens, Jane Shields and Michael Law are based on their pensionable earnings at the time they became deferred pensioners and accrued uniformly throughout their pensionable service.

The defined benefit section provides a lump sum death in service benefit and dependants' pensions on death in service or following retirement. Pensions are only payable to deceased members' children after death in service. In the case of ill-health retirement, only the accrued pension is payable. All benefits are subject to 2013 Plan limits. Increases to pensions in payment are at the discretion of the Trustee although pensionable service post-1997 is subject to limited price indexation. From 2006, sales and profit related bonuses were excluded from pensionable earnings and the normal retirement age under the Plan was increased from 60 to 65. There are no additional benefits which become receivable by a director in the event of early retirement.

Members contribute 3% or 5% of pensionable earnings, whilst the Company currently makes contributions at the rate of 17.5%. The last full triennial valuation of the NEXT Plan was carried out as at March 2013, and the first triennial valuation of the 2013 Plan was carried out as at October 2013. As calculated in accordance with International Financial Reporting Standards, the surplus in the 2013 Plan at January 2014 was £70.3m; further details are given in Note 21 to the financial statements.

Certain members (including Lord Wolfson and Christos Angelides) whose accrued or projected pension fund value exceeds their personal lifetime allowance are provided with benefits through an unfunded, unapproved arrangement. The relevant members contribute towards the additional cost of providing these benefits by a payment of 5% on all pensionable earnings. Since April 2011, where existing members have reached either the annual or lifetime pension contributions limits, the Company has offered those members the choice of leaving the defined benefit section and either joining the defined contribution section (with an enhanced Company contribution) or taking a salary supplement, in both cases equal to 10% or 15% of their salary (depending on their existing contributions and benefits).

Auto-Enrolment

Following the introduction of Auto-Enrolment (A-E) in 2012, most employees now have the option of joining the 2013 Plan, the statutory A-E plan or opting out of pension provision through the Company. Contributions to A-E commenced in February 2013.

Directors' shareholding and share interests (audited)

Directors' interests

The Company has a formal share ownership requirement for executive directors, as set out in the Share ownership guidelines. All executive directors have met this requirement. Directors' beneficial interests in shares at the beginning of the financial year and at the end of the year were as follows:

Ordinary sharesDeferred
bonus shares1
LTIP2SMP2Sharesave3
2014201320142013201420132014201320142013
Lord Wolfson1,514,1281,520,5059,84418,922149,221180,8299,204467,09843641,826
Christos Angelides105,07377,171-93,440134,88863,986103,214431431
Steve Barber5,0005,000----
John Barton14,00016,000----
Christine Cross5,5985,598----
Jonathan Dawson5,0005,000----
Caroline Goodallnilnil----
David Keens201,950165,535-74,71590,54458,41496,306388477
Michael Law11,627N/A-34,493N/A13,282N/A431N/A
Francis Salway7,7909,258----
Jane Shields37,065N/A-34,493N/A13,318N/A494N/A
Andrew Varley579,88569,817-55,53167,30340,02072,224431431
  1. Full details of deferred bonus are set out on in the Remuneration Policy.
  2. The LTIP and SMP amounts above are the maximum potential awards that may vest subject to performance conditions.
  3. Executive directors can participate in the Company's Sharesave scheme (see details in the Remuneration Policy) and the amounts above are the options which will become exercisable at maturity.
  4. As disclosed in the Share Matching Plan, Lord Wolfson has waived his potential entitlement under the 2011 SMP (67,098 options).
  5. Andrew Varley stepped down from the Board in May 2013.

The Company's 2013 5.25% corporate bonds were redeemed during the year so David Keens no longer has a beneficial bond holding (2013: £83,000 nominal value).

Save for the waiver of Lord Wolfson's 2011 SMP entitlement, there have been no other changes to directors' interests in the shares of the Company from the end of the financial year to 19 March 2014. Full details of directors' interests in the shares and share options of the Company are contained in the Register of Directors' Interests which is open to inspection.

The table below summarises those share awards made to executive directors that have not yet vested or, in the case of awards made under historic share option schemes, have not yet been exercised.

Awards
during
financial
year end
January
Date of
award
Market
price at
award
date
£
Option
price
£
Maximum
share
potential
awarded
Options
waived1
Shares
vested in
the year
Vesting
date/
Exercisable
dates2
Lord Wolfson
Deferred bonus shares2012Apr 201120.24N/A17,02017,0203Apr 2013
2013Apr 201229.33N/A1,902Apr 2014
2014Apr 201344.08N/A7,942Apr 2015
LTIP2011Mar 201020.13Nil34,22824,3474Jan 2013
2011Sept 201021.14Nil32,59232,592Jul 2013
2012Mar 201120.70Nil33,6845Jan 2014
2012Sept 201123.02Nil30,289Jul 2014
2013Mar 201226.60Nil26,861Jan 2015
2013Sept 201230.83Nil23,175Jul 2015
2014Mar 201337.396Nil19,492Jan 2016
2014Sept 201346.366Nil15,720Jul 2016
SMP2012Apr 201122.37Nil67,09867,098Apr 2014 – Apr 2021
2014Apr 201343.81Nil9,204Apr 2016 – Apr 2023
Sharesave2009Oct 20089.171,8261,8268Dec 2013 – Jun 2014
2014Oct 201341.12364Dec 2018 – Jun 2019
Christos Angelides
LTIP2011Mar 201020.13Nil31,04828,6924Jan 2013
2011Sept 201021.14Nil29,56529,565Jul 2013
2012Mar 201120.70Nil30,5565Jan 2014
2012Sept 201123.02Nil16,486Jul 2014
2013Mar 201226.60Nil14,619Jan 2015
2013Sept 201230.83Nil12,614Jul 2015
2014Mar 201337.396Nil10,609Jan 2016
2014Sept 201346.366Nil8,556Jul 2016
SMP2011Jun 201020.23Nil46,13246,1327Jun 2013
2012Apr 201122.37Nil48,690Apr 2014 – Apr 2021
2013Apr 201230.32Nil8,392Apr 2015 – Apr 2022
2014Apr 201343.81Nil6,904Apr 2016 – Apr 2023
Sharesave2012Oct 201120.84431Dec 2014 – Jun 2015
David Keens
LTIP2011Mar 201020.13Nil17,13916,796Jan 2013
2011Sept 201021.14Nil16,32016,320Jul 2013
2012Mar 201120.70Nil16,8665Jan 2014
2012Sept 201123.02Nil15,166Jul 2014
2013Mar 201226.60Nil13,449Jan 2015
2013Sept 201230.83Nil11,604Jul 2015
2014Mar 201337.396Nil9,759Jan 2016
2014Sept 201346.366Nil7,871Jul 2016
SMP2011Jun 201020.23Nil44,79644,7967Jun 2013
2012Apr 201122.37Nil44,796Apr 2014 – Apr 2021
2013Apr 201230.32Nil6,714Apr 2015 – Apr 2022
2014Apr 201343.81Nil6,904Apr 2016 – Apr 2023
Sharesave2011Oct 201017.823193198Dec 2013 – Jun 2014
2012Oct 201120.84158Dec 2014 – Jun 2015
2014Oct 201341.12230Dec 2018 – Jun 2019
Michael Law
LTIP2012Mar 201120.70Nil7,3335Jan 2014
2012Sept 201123.02Nil6,594Jul 2014
2013Mar 201226.60Nil5,851Jan 2015
2013Sept 201230.83Nil5,048Jul 2015
2014Mar 201337.396Nil4,814Jan 2016
2014Sept 201346.366Nil4,853Jul 2016
SMP2012Apr 201122.37Nil7,952Apr 2014 – Apr 2021
2013Apr 201230.32Nil2,862Apr 2015 – Apr 2022
2014Apr 201343.81Nil2,468Apr 2016 – Apr 2023
Sharesave2012Oct 201120.84431Dec 2014 – Jun 2015
Jane Shields
LTIP2012Mar 201120.70Nil7,3335Jan 2014
2012Sept 201123.02Nil6,594Jul 2014
2013Mar 201226.60Nil5,851Jan 2015
2013Sept 201230.83Nil5,048Jul 2015
2014Mar 201337.396Nil4,814Jan 2016
2014Sept 201346.366Nil4,853Jul 2016
SMP2012Apr 201122.37Nil8,032Apr 2014 – Apr 2021
2013Apr 201230.32Nil2,820Apr 2015 – Apr 2022
2014Apr 201343.81Nil2,466Apr 2016 – Apr 2023
Sharesave2009Oct 20089.171,4971,4978Dec 2013 – Jun 2014
2010Oct 200914.34195Dec 2014 – Jun 2015
2014Oct 201341.12299Dec 2018 – Jun 2019
Andrew Varley
LTIP2011Mar 201020.13Nil12,74212,487Jan 2013
2011Sept 201021.14Nil12,13312,133Jul 2013
2012Mar 201120.70Nil12,5365Jan 2014
2012Sept 201123.02Nil11,273Jul 2014
2013Mar 201226.60Nil9,995Jan 2015
2013Sept 201230.83Nil8,624Jul 2015
2014Mar 201337.396Nil7,253Jan 2016
2014Sept 201346.366Nil5,850Jul 2016
SMP2011Jun 201020.23Nil32,20432,2047Jun 2013
2012Apr 201122.37Nil33,306Apr 2014 – Apr 2021
2013Apr 201230.32Nil6,714Apr 2015 – Apr 2022
Sharesave2012Oct 201120.84431Dec 2014 – Jun 2015
  1. As disclosed in the Share matching plan, Lord Wolfson has waived his potential entitlement under the 2011 SMP (options over 67,098 shares).
  2. For LTIP awards, the date in this column is the end of the three year performance period. Actual vesting will be the date on which the Committee determines whether any Performance Condition has been satisfied.
  3. The market value of shares at the time the deferred bonus vested was £44.08.
  4. For LTIP awards made prior to February 2014 the maximum value of LTIP awards that vest for a particular year is capped at £2.5m. The cap was applied to the awards that vested in the year to January 2013 for Lord Wolfson and Christos Angelides. The impact of this cap was to reduce the shares vested by 9,196 and 1,735 respectively.
  5. See Note 5 for details of the performance conditions and vesting levels applicable to the LTIP schemes vesting in the year.
  6. The LTIP price at award date is NEXT's average share price over the three months prior to the start of the performance period.
  7. Christos Angelides, David Keens and Andrew Varley exercised their SMP options at the date of vesting when the market price for the shares was £45.58.
  8. The market price for the shares at the date of Sharesave exercise was £54.00 for Lord Wolfson and Jane Shields and £54.95 for David Keens.
  9. Within the above table, all awards are subject to pre-vesting performance conditions except for Sharesave options and Deferred Bonus Shares.

The LTIP performance periods which mature after January 2014 are not yet complete and no entitlement has yet been earned. A charge of £26,845,000 for the year (2013: £23,368,000) has been made in the accounts in respect of these LTIP grants, of which approximately £10,962,000 (2013: £9,554,000) related to the executive directors.

For all LTIP participants, the total maximum shares receivable at January 2013 was 1,084,471 (January 2012: 1,364,175). During the year, grants over 385,956 shares vested (2013: 517,192), grants over 52,296 shares, including 10,931 shares subject to the maximum cap, lapsed (2013: 57,545 in total, including 23,344 capped shares) and further grants over 217,087 shares were issued (2013: 295,033). At January 2014 the total maximum shares receivable was 863,306 (excluding the impact of any cap on the total value which may apply) with an average remaining contractual life of 1.6 years (2013: 1.6 years).

The aggregate gains of directors arising from the exercise of options granted under the SMP and Sharesave scheme and LTIP awards that vested in the year totalled £14,150,000 (2013: £7,011,000).

Scheme interests awarded during the year to january 2014 (audited)

LTIP
Face valueIn respect of the LTIP awards granted during the year to January 2014, the maximum "face value" of awards (i.e. the maximum number of shares that would vest if all performance measures are met multiplied by the average share price used to determine the award) is summarised below:

Mar 2013
£'000
Sep 2013
£'000
Total
£'000
Lord Wolfson7297291,458
Christos Angelides397397794
David Keens365365730
Michael Law1180225405
Jane Shields1180225405
Andrew Varley2271271542
  1. March 2013 award granted prior to promotion to Executive director and therefore at 60% of annual salary.
  2. LTIP award prior to Andrew Varley stepping down from the Board.
Vesting if minimum performance achieved20% of the entitlement will be earned for relative TSR at median and full vesting requires relative TSR at upper quintile.

Performance periodMarch 2013 grant: period from February 2013 to January 2016.
September 2013 grant: period from August 2013 to July 2016.
Performance measuresThe LTIP performance measures are detailed in the Remuneration Policy. The Companies in the TSR comparator group for the awards granted during the financial year are:

ASOS
Burberry
Carpetright
Carphone Warehouse
Debenhams
Dixons Retail
Dunelm
Halfords
Home Retail Group
J Sainsbury
JD Sports1
Kesa1
Kingfisher
Marks & Spencer
Morrisons
Mothercare
N Brown
Supergroup
Ted Baker
Tesco
W H Smith
  1. JD Sports replaced Kesa in the comparator group for the three year performance period commencing July 2013.
SMP
Face valueIn respect of the SMP awards granted during the financial year, the maximum potential "face value" of awards (i.e. the maximum number of shares that would vest if all performance measures are met multiplied by the average share price used to determine the number of shares awarded) is summarised below
£'000
Lord Wolfson403
Christos Angelides302
David Keens302
Michael Law1108
Jane Shields1108
  1. 2013 award granted prior to promotion to Executive director and therefore a lower bonus was earned and capped. Further details of these awards are provided in the Executive Directors Share Awards tables.
Vesting if minimum performance achievedFor each investment share 0.5 matched share will be earned at the end of a three year performance period for fully diluted EPS for the financial year ending January 2016 of 314.5p and 2 matched shares will be earned for EPS of 365.0p.
Performance periodFebruary 2013 to January 2016.
Performance measuresThe SMP performance measures are detailed in the Remuneration Policy.

Deferred bonus

In addition to the scheme interests detailed above, any annual bonus in excess of 100% of base salary payable to the Chief Executive is deferred for a period of two years and subject to forfeiture if he voluntarily resigns prior to the end of that period. The value of the deferred bonus (£364k) is included in the single total figure of remuneration table.

Payments to past directors (audited)

There were no payments to past directors during the financial year ending January 2014.

Payments for loss of office (audited)

There were no payments made to any director in respect of loss of office.

Pay and performance

Performance graph

The graph below illustrates the performance of the Company when compared with the FTSE All Share and FTSE General Retailers index. These have been selected to illustrate the Company's total shareholder return performance against a wide UK index and a sector specific index for the five year period ending January 2014.

Analysis of Chief Executive's pay over 5 years

Financial Year to JanuarySingle figure of total remuneration
£'000
Annual bonus pay-out against maximum opportunity1LTIP pay-out against maximum opportunity2SMP pay-out against maximum opportunity
20144,646100%Two semi-annual
awards vested at
100% each, however
total value capped
at £2.5m
Entitlement waived3
20134,63099%Two semi-annual
awards vested at 96%
and 98%, however
total value capped
at £2.5m
Entitlement waived3
20124,10672%Two semi-annual
awards vested at
100% and 83%,
however total value
capped at £2.5m
N/A
20113,010100%65%N/A
20102,833100%100%N/A
  1. The maximum bonus for the Chief Executive is 150% of salary.
  2. The first of semi-annual, rather than annual, awards vested in July 2011
  3. Lord Wolfson waived his entitlement to these SMP awards. Had he not done so, his total remuneration would have been £8,435,000 for January 2014 and £7,601,000 for 2013.

The Remuneration Committee continues to focus strongly on the alignment of executive remuneration and long term growth in shareholder value. The graph below charts total annual remuneration of Lord Wolfson against TSR over the last 10 years and shows that TSR grew by 440% more than the Chief Executive's remuneration, or by 260% excluding the SMP waivers.

Change in Remuneration of Chief Executive

The table below shows the percentage changes in Lord Wolfson's remuneration (i.e. salary, taxable benefits and annual bonus) between 2013/14 and 2012/13 compared with the percentage changes in the average of each of those components of pay for Group employees in the UK and Eire. This group has been selected as the most appropriate comparator and represents almost 90% of the Group's workforce.

Salary increase %Annual bonus increase %Taxable benefits increase %
Lord Wolfson2.0%2.7%8.9%
UK/Eire Employees (average per FTE)2.6%18.7%2.2%

Relative importance of spend on pay

The graph below illustrates for the years ended January 2014 and 2013 the relative and actual spend on total remuneration paid to all employees of the Group together with other significant distributions and payments (i.e. for share buybacks and dividends).

Implementation of Remuneration Policy in the financial year to January 2015

The Committee will implement the policy set out in the Remuneration Policy subject to approval by shareholders of that policy at the 2014 AGM. The policy table sets out the performance targets for SMP and LTIP awards which will be made during the year to January 2015 and summarised below is that same information for all outstanding awards made under the LTIP and SMP schemes:

LTIP

Details of potential awards granted to executive directors for outstanding performance periods are as follows:

Maximum potential award granted (% of base salary)
3 year performance periods commencingLord WolfsonChristos Angelides & David KeensJane Shields &
Michael Law
August 2011, February 2012, August 2012,
and February 2013
100%75%60%
August 2013100%75%75%

The comparator group for the LTIP three year performance periods ending January 2015, July 2015, January 2016 and July 2016 is the same as the group detailed in the Remuneration Report. For the three year performance period ending July 2014, HMV was included in place of Dunelm.

Share Matching Plan

Vesting of awards is dependent solely on achieving the fully diluted post-tax EPS targets detailed below.

Required fully diluted EPS (pence)
Date of grantFor 0.5:1 matchFor 1:1 matchFor 2:1 match
April 2011 (for this award the matching ratio is after grossing up for income tax and employees' national insurance)231.3240.2258.1
April 2012 (for this award no grossing up was applied prior to the matching award)267.2281.5310.2
April 2013 (for this award no grossing up was applied prior to the matching award)314.5331.3365.0

These targets require a minimum three year growth in EPS of 12% before any shares vest and a maximum award is only achieved if EPS growth reaches 25% (2011 award) and 30% (2012 and 2013 awards) over three years. The effective matching ratio will be calculated on a straight line basis for EPS falling between each of the threshold points. Details of the calculation of fully diluted EPS are provided in Note 9.

Dilution of share capital by employee share plans

The Company monitors and has complied with dilution limits in its various share scheme rules and has not issued a significant number of new or treasury shares in satisfaction of share schemes in the last 10 years. Share-based incentives are usually satisfied from shares purchased and held by the ESOT – see Note 26.

Consideration of matters relating to Directors' Remuneration

Remuneration Committee

During the year the Committee comprised the following independent non-executive directors:

Jonathan Dawson (Committee Chairman)
Steve Barber
John Barton
Christine Cross
Francis Salway
Caroline Goodall

The Committee met six times during the year under review. All meetings were fully attended except that Christine Cross and Jonathan Dawson were each unable to attend one meeting.

Role of Remuneration Committee

The Committee determines the remuneration of the Group's Chairman and executive directors, and reviews that of senior executives. It is also responsible for determining the targets for performance-related pay schemes, approves any award of the Company's shares under share option or incentive schemes to employees and oversees any major changes in employee benefit structures. The Committee members have no conflicts of interest arising from cross-directorships and no director is permitted to be involved in any decisions as to his or her own remuneration. The remuneration of non-executive directors is decided by the Chairman and executive directors of the Board. The Committee's terms of reference are available on the Company's website (www.nextplc.co.uk) or on request from the Company Secretary.

Assistance to the Committee

During the period the Committee received input from the Chief Executive and Group Finance Director. Aon Hewitt and FIT Remuneration Consultants LLP also provided independent external advice, mostly of a technical nature and related to share plans and the implementation of the new Directors' Remuneration reporting regime. These advisers have no other connection with the Company and were appointed by the Committee based on their expertise in the relevant areas of interest. Based on the nature of the advice, the relatively small fees and no other connection existing with these advisers, the Committee was satisfied that the advice received was objective and independent. PricewaterhouseCoopers provided independent verification services of total shareholder returns for NEXT and the comparator group of companies under the long term incentive plan. Each of these firms is a member of the Remuneration Consultants Group, being the professional body for remuneration consultants and have confirmed to us that they adhere to its code of conduct.

During the year Aon Hewitt, FIT Remuneration Consultants LLP and PricewaterhouseCoopers, were paid less than £20k each and their fees were charged at an hourly rate.

Voting at general meeting

A resolution to approve the directors' remuneration report was passed at the Company's 2013 AGM. Of the total votes cast (109m), 99.7% were voted for the resolution and 0.3% against; 1.8m votes were withheld which represented 1.1% of the total number of shares in issue at the date of the AGM.

Votes For%
For
Votes Against%
Against
Total Votes
Cast
Votes Withheld
To approve the directors' remuneration report108,929,27299.7%357,2120.3%109,286,4841,837,922

On behalf of the Board


Jonathan Dawson
Chairman of the Remuneration Committee