£5.3 billion lost from over 50s retirement pots throughout the course of the pandemic
4 million over 50s workers are continuing to save less towards their retirement when compared to before the pandemic – with £3,283 lost on average
Those who have cut savings are now putting £155 less monthly towards retirement, however at the peak of the pandemic contributions dipped by more than £200
Legal & General Retail Retirement (LGRR) analysis suggests this reduction in payments could delay the retirement of someone who saved less by more than four years (based on the median average) if contributions remain at reduced levels.
Financial outcomes can be returned to pre-pandemic levels and LGRR encourages people to ‘Spend A Day’ on retirement this Pension Awareness Week with its course with The Open University
Over 50s workers in the UK could have a £5.3 billion hole in their collective pension pot due to cutbacks on retirement savings over the course of the pandemic, according to new research from Legal & General Retail Retirement (LGRR) 1.
The new findings, released as part of Pension Awareness Week, estimate that approximately 10% of pre-retired over 50s – 1.4 million people2 – are continuing to save less every month when compared to before the pandemic. At present, those over 50 saving less have reduced their monthly savings by £155 a month, however at the peak of the pandemic this was an average of £219 less a month. Overall, over 50s saving less towards retirement will have contributed £3,283 less on average over the course of the pandemic than they otherwise would have.
Over 50s workers who are continuing to save less are doing so for a variety of reasons, such as pay decreases (39%), redundancies or job losses (22%) and the impact of being furloughed (13%). One in five over 50s saving less (20%) have also had to reduce their retirement contributions in order to provide more monetary support to their loved ones.
Retirement planning course with The Open University
To help those approaching retirement understand their options – and manage their financial affairs better in later life – Legal & General has a free online course with The Open University, setting out a series of stepping stones to a financially secure retirement.
The introductory 4-hour course combines guidance, short videos and tools and covers various aspects of retirement planning, from how to budget for retirement, how different types of pensions work and what to do if pension income is at risk of falling short.
“It’s completely understandable that those who have faced financial hardship as a result of the pandemic may have looked for opportunities to cut back on their outgoings. However, as our research shows, saving less, particularly for those in their 50s, could have a significant impact on retirement prospects and planning. Our own analysis suggests that those who have saved less would, based on the median average, need to bring their contributions back to pre-pandemic levels, then pay an additional £41 per month to make good on their shortfall. If the same saver does not bring their contributions back to pre-pandemic levels they might need to delay their retirement by more than four years to reach the levels they previously would have saved before cutting back on their monthly contributions.
As we look ahead towards a period of recovery, the best thing people can do is commit to spending a day sorting through their affairs to better understand the options at their disposal, rather than burying their head in the sand. To encourage people to do this, we offer a range of resources, including a free online course that can be completed in an afternoon. Our hope is that by encouraging older workers to engage with their later life finances, growing numbers will be equipped with the tools to enjoy a more comfortable retirement.”
Emma Byron, Managing Director, Legal & General Retirement Solutions
Legal & General’s H1 2021 Results: Strong financial performance – 14% growth in operating profit and 22% ROE
“Thanks to the hard work and dedication of my colleagues across Legal & General, we have delivered a strong set of financial results, with EPS up 21% since H1 2019. And we expect to deliver double digit growth in operating profit at the full year.We’re continuing to make investments that are economically, environmentally and socially valuable, in line with our longterm commitment to delivering Inclusive Capitalism and supporting the Building Back Better and Levelling Up agenda.We are already a leading asset manager and we remain focused on continuing to scale-up our asset origination capabilities which are a unique and important component of our synergistic business model which has driven our 22% ROE.”
Nigel Wilson, Group Chief Executive
Strong financial performance1, now well above pre-COVID 2019 levels
• Operating profit of £1,079m, up 14% (H1 2020: £946m), with double-digit growth or higher in LGC, LGI and LGRR• Earnings per share of 17.78p, up 21% on H1 2019 (14.74p) and up significantly on H1 2020 (4.89p)• Profit after tax2 of £1,065m (H1 2020: £290m) and Return on equity of 22.0% (H1 2020: 6.3%)• Solvency II coverage ratio3 of 183% (H1 2020: 173%)• Interim dividend of 5.18p, up 5% (H1 2020: 4.93p), consistent with our stated ambition
Growing contribution to our five-year (2020-2024) ambitions4• Cash generation of £0.9bn, up 14% year on year. Capital generation of £0.8bn, up 9% year on year• Cumulative cash and capital generation of £2.4bn and £2.3bn respectively, against our ambition of £8.0-9.0bn by 2024• Cumulative dividends declared £1.4bn (H1 2021: £309m, 2020: £1,048m) against our ambition of £5.6-5.9bn by 2024
Good PRT new business volumes and strong net flows• Global PRT new business premiums of £3.1bn (H1 2020: £3.4bn) with £2bn already won/in exclusive negotiations for H2• LGIM external net flows of £27.4bn (H1 2020: £6.2bn), with AUM up 7% to £1.3tn• Individual annuity premiums up 15% and LGI new business annual premiums up 6%
Unique and growing alternative asset origination capabilities• Legal & General Capital (LGC) operating profit doubled to £250m (H1 2020: £123m)• ESG-aligned asset origination expertise in clean energy, residential property, digital infrastructure and SME finance• Third party capital AUM of £6.8bn against our ambition of £14bn by 2025
Long-term, growth-oriented and highly synergistic business model• An established track record: HY11 to HY21 CAGR of 11% in EPS, 12% in DPS and 7% in book value per share• Highly synergistic: five focused divisions that create a virtuous circle of internal demand and supply, supporting c20% ROE• Long-term and predictable value creation: 40+ year duration business with earnings driven by a growing stock of assets• Attractive global growth markets: retirement solutions ($53tn), asset management ($136tn), climate change ($20tn)5• A longstanding commitment to Inclusive Capitalism and a leader in ESG: rated #1 Life & Health insurer by ShareAction
1. The Group uses a number of Alternative Performance Measures (including operating profit, net release from operations, return on equity and LGIM AUM) to enhance understandingof the Group’s performance. These are defined in the glossary, on pages 101 to 105 of this report.2. Profit after tax attributable to equity holders. Performance driven by strong business and market performance, in addition to partial reversal of formulaic impact of rates on LGI.3. Solvency II coverage ratio on a shareholder basis, which is adjusted for the Own Funds and SCR of the Group final salary pension plans. 183% coverage ratio is post £0.8bn paymentof 2020 final dividend and provision for £0.3bn sub-debt redemption.4. Cash generation defined as net release from operations and Capital generation defined as Solvency II operational surplus generation.5. $53tn retirement solutions market, Willis Towers Watson, 2021 Global Pension Assets Study; $136tn asset management market, BCG, Global Asset Management 2021; $20tn climatechange market based on forecast that $130tn of investment is needed to 2050 in order to achieve zero emissions, scaled pro-rata to 2025. BloombergNEF: New energy outlook 2021https://about.bnef.com/new-energy-outlook/
Legal & General agrees c.£420m full scheme buy-in with Commonwealth Bank of Australia pension scheme
This transaction covers all of the Scheme’s defined benefit members (approximately 440 non-retired members and 740 retirees). It represents a significant step on its planned de-risking journey. The Scheme has been a client of Legal & General Investment Management (LGIM) for the last 12 years, enabling them to efficiently lock pricing to their LGIM assets ahead of transacting.
The Scheme’s sole Trustee is Capital Cranfield Pension Trustees Limited. They were advised in the transaction by LCP, acting as specialist de-risking adviser to the Trustee, with CMS providing legal advice to the Trustee, and Mercer acting as administrator and Scheme Actuary. Slaughter and May provided legal advice to Legal & General.
“It was a great pleasure to work with the Trustee, the Sponsor and their advisers on this transaction, after a longstanding investment management relationship. We are delighted to welcome the Commonwealth Bank of Australia’s scheme members to Legal & General as we support the Scheme in providing further certainty to them.”
Dominic Moret, Head of Origination and Execution, Legal & General Retirement Institutional
Legal & General establishes partnership with Sir Michael Marmot to address UK health inequality
Legal & General announces that it has formed a long-term partnership with Sir Michael Marmot, Director of the University College of London (UCL) Institute of Health Equity (IHE) and professor of epidemiology.
The partnership will lead to a multi-million pound charitable Fund – “The Legal & General IHE Places Fund” – to examine how improvements to the design and construction of our towns and cities can help to address health inequalities and support “levelling up” across the UK’s regions.
The Fund will sit alongside a new Legal & General IHE Network for UK public authorities and businesses to support idea creation, sharing of best practice and insight, and innovation which can help increase long-term health span and reduce health inequalities. The Partnership represents a significant step forward as, for the first time, brings business together with local government and the voluntary and community sector to make a real difference to the conditions in which people are born, grow, live, work, and age, and to health equity.
The COVID-19 pandemic has shone a spotlight on the strong link between health, wealth and overall economic performance – “Health Equals Wealth” – and particularly underscored how poor health outcomes are exacerbated for individuals and regions in more deprived areas. The conditions in which people are born, live, and work are the single most important determinant of good health according to the World Health Organisation. In the UK, the rich-poor gap in Healthy Life Expectancy is almost twenty years, with those in the most deprived areas not only having shorter lives but also spending nearly a third of their lives in poor health.
Whilst the correlation between health and wealth has become ever clearer, research in this area has – to date – tended to focus on the health service and role of government in finding solutions. Exploring the role of business as employers, providers of goods and services and as investors and innovators is an important next step. Health inequalities lead to productivity losses of between £31–33 billion each year in England alone, so there is a clear economic and business case for business to help to tackle health inequality by addressing the environmental and social factors which can lead to improved long-term outcomes.
As one of the UK’s leading financial services groups, stewarding over £1.3 trillion of society’s pensions and savings, Legal & General is dedicated to playing its part in supporting the UK’s economic bounce back. It has invested over £30bn into reviving town centres and delivering quality affordable housing, transport and digital infrastructure to support levelling up. Recognising the important role of university and business partnerships in driving forward health innovations, Legal & General is a founding member of both the Longevity Science Panel and The Trinity Challenge; a coalition, including the University of Cambridge and leading academics, seeking to support prevention around future health emergencies. Meanwhile, its long-term partnership with Newcastle Council and Newcastle University continues to deliver at pace, undertaking research into improving ageing health span with The National Centre for Ageing. Legal & General has also formed long-term multi-billion pound partnerships with the Universities of Oxford and Manchester to develop innovation districts which will help incubate spin-out businesses such as those leading the way in developing the COVID-19 vaccinations. Legal & General also established the Advanced Care Research Centre (“ACRC) with the University of Edinburgh last year.
“Our Marmot Review 10 Years On report drew attention to the unacceptably large, and increasing, health inequalities in England. The question was not lack of knowledge of what to do to improve health equity, but how to do it. In light of the pandemic, which amplified social inequalities, our Build Back Fairer report argued that we must seize the opportunity to build a fairer, healthier society. For the first time, with this welcome initiative from Legal and General, we have the opportunity to bring business together with local government and the voluntary and community sector to make a real difference to the conditions in which people are born, grow, live, work, and age, and to health equity. It represents a significant step forward.”
Sir Michael Marmot, Director of the University College of London (UCL) Institute of Health Equity (IHE) and professor of epidemiology
“We are delighted to have partnered with Sir Michael Marmot to bring forward this ground-breaking research and multi-million pound funding partnership. Reducing health inequalities is part of levelling up: literally a matter of life and death. Businesses and ESG (Environment, Social and Governance) investors are proving key to reducing carbon emissions. ESG’s “E” is working, but the “S” is further behind – the impact of corporate activity on population health and its associated costs is not currently adequately addressed. Post-COVID, there is a strong case to consider health and health inequality as crucial to the “S” of ESG – or even to explicitly call out health within a new “ESHG” framework.”
Nigel Wilson, CEO, Legal & General
“We believe that business can be a force for good in society if we work to identify areas where we can sustainably and positively impact people’s lives. That is the aim of this partnership; to work with experts such as Sir Michael Marmot to identify the social role Legal & General and other businesses can play in addressing health inequality. We believe that place-based solutions will be essential and hope our new L&G IHE Network and Fund will empower other businesses and Local and Combined Authorities to co-create solutions in this historically-overlooked area.”
Pete Gladwell, Group Social Impact & Investment Director
Legal & General announces c£17m bulk annuity with John Good & Sons Limited Pension Scheme
Legal & General Assurance Society Limited (“Legal & General”) announced that it has agreed a c£17 million full scheme buy-in transaction with John Good & Sons Limited Pension Scheme (“the Scheme”), covering the benefits for over 80 pension scheme members.
The Scheme is an existing Legal & General client, with the Trustee having appointed Legal & General Investment Management (“LGIM”) as its fund manager in 2003.
Transaction preparation was an important part of the process for the Scheme which involved thorough data cleansing and de-risking of the Scheme’s assets into LGIM’s Buyout Aware funds. These funds are specifically designed for schemes approaching buyout, with an investment strategy which aligns with factors that affect buyout pricing.
When market conditions moved favourably, the Scheme reacted quickly to enter a price lock to its LGIM Buyout Aware fund units. This process ensured that the Scheme had the price certainty it needed to then agree the terms of the buy-in and complete the transaction.
The Trustee was advised on the transaction by XPS Pensions Group, with legal advice provided by Arc Pensions Law.
“This transaction is a great demonstration of the value which can be realised by using Legal & General’s group-wide expertise. We are delighted to have helped a long-standing client on their de-risking journey and look forward to continuing to build on this relationship as the scheme progresses to buyout”, said Adrian Somerfield, Director, Legal & General Retirement Institutional.
Legal & General agrees Pension Risk Transfer transactions for c.£800m with TUI Group UK Pension Trust
Legal & General Assurance Society Limited (“Legal & General”) announced that it has agreed two pension risk transfer (PRT) transactions with the TUI GROUP UK Pension Trust (the “Scheme”).
The two transactions include a £610m partial buy-in for the BAL section and a £184m full buy-in for the TAPS section of the Scheme.
These transactions mark the Scheme’s first PRT transactions with Legal & General and cover two of the three pension sections within the Scheme.
The Trustee was advised on the transaction by LCP and legal advice was provided by Linklaters. TUI was advised by Isio and Herbert Smith Freehills. Legal advice was provided to Legal & General by Eversheds Sutherland.
“We are pleased to have insured two sections of the Scheme and hope that today’s announcement will
provide additional reassurance and security to the pension scheme members. We look forward to
continuing to work with the Trustee in the future.”
Adrian Somerfield, Origination & Execution Director, Legal & General Retirement Institutional
Legal & General commits to growth of its Venture Capital platform as it appoints Peter Maher as Head of Venture Capital Investing
Legal & General Capital (LGC) announces the appointment of Peter Maher as Head of Venture Capital (VC) Investing, supporting the growth of its SME Growth Equity platform.
Within its VC platform, LGC now has 20 active funds under management, worth £230 million, having added 5 new funds to its portfolio over the last 12 months.
Through its SME Growth Equity platform, LGC has continued to invest in the real economy via start-up businesses in the UK and Europe. During a challenging time for smaller scale companies and newly formed businesses, LGC has remained committed to providing funding for over 300 companies, delivering enhanced returns whilst boosting job creation.
As part of its wider commitment to fostering innovation and technology advancements, LGC’s portfolio includes major European and global VC funds such as Balderton Capital, LocalGlobe, Dawn Capital and Sofinnova Partners, as well as NorthZone which incubated Hopin, the virtual events platform which became the fastest European “double unicorn” in history.
Peter has joined LGC from Cambridge Associates’ London office, where he led the team dedicated to European private equity, growth equity, VC fund manager origination, evaluation, and execution. Prior to that, he managed investment portfolios for private families in the US and Europe as a Director in Cambridge Associates’ Boston office. In his new role at LGC, Peter will develop and implement the strategy for LGC Venture Capital’s next stage of growth across all its existing and future VC investments.
“As we look to continue to grow and strengthen our Venture Capital investment arm, we are delighted to welcome Peter to the team. Peter brings with him extensive experience in originating VC investments and will help us continue to invest in new ground-breaking technologies and research which will help deliver job creation whilst ensuring the UK remains at the forefront of innovation.”
Jasan Fitzpatrick, Managing Director of Principal Investing
LGIM launches three Quality Equity Dividend ETFs
Legal & General Investment Management (LGIM) has today launched a range of three Quality Equity Dividend ETFs, which have been designed for investors seeking equity income with quality screens and responsible exclusions.
The three ETFs track FTSE Russell indices and follow proactively designed index investment strategies, which have been tailored for investors by LGIM and FTSE Russell. These indices rely on the quality of the underlying companies, looking for those with strong dividend characteristics while excluding those facing significant ESG risks. The following funds have been listed on the London Stock Exchange and are available to UK intermediary and retail investors.
L&G Quality Equity Dividends ESG Exclusions UK UCITS ETF
L&G Quality Equity Dividends ESG Exclusions Europe ex-UK UCITS ETF
L&G Quality Equity Dividends ESG Exclusions Asia Pacific ex-Japan UCITS ETF
The ETFs have been designed to meet two main objectives for advisers and their clients. On the one hand, with mainstream bond yields at or near all-time lows, the search for income remains a great challenge. On the other, capital preservation also remains a central requirement for investors. The increasing pressure on companies being able to provide investors with sustainable dividends has impacted their capital, and these funds therefore seek consistent dividend payers. They also apply a quality screen to help investors avoid value traps by excluding companies that do not have positive return on equity or robust balance sheets.
The ETFs’ methodology applies a set of three systematic screens for dividends, quality and ESG exclusions. The purpose of the quality screen is to help identify and remove stocks with a fundamentally poor balance sheet and/or income statement characteristics. A quality score is calculated by FTSE as a geometric average of three underlying metrics: company earnings, assessing profitability and cash components; asset growth; and leverage metrics.
The dividend screen aims to maximise exposure to a basket of stocks which have a track record of consistent and rising shareholder distributions and the potential to sustain them into the future. This means identifying companies paying consistent and resilient dividends based on their positive return on equity, a demonstrably positive trend in the dividends distributed per share and a higher consensus forecast on dividend yields.
The purpose of our ESG screen is to exclude companies we believe are exposed to material financial risks based on their business models or operations, applying a number of FTSE exclusion lists to the underlying stocks in the portfolios such as those in breach of the UN Global Compact, involved in manufacturing controversial weapons, and thermal-coal miners and power producers. In addition to exclusions, we apply an active ownership approach with constituent companies, engaging with them on ESG concerns through LGIM’s award-winning Investment Stewardship team, which seeks to raise ESG standards in all holdings.
LGIM sought to work with an index partner in FTSE Russell that covers 98% of the investable market, offering a true picture of global markets and specialist knowledge in developing local benchmarks around the world. Its index design and management are backed up by a transparent rules-based methodology and informed by independent committees of leading market participants.
These three new funds will build on and complement LGIM’s existing suite of core and thematic ETFs across different asset classes, bringing the total range to 41 funds, 33 of which are available on the Italian, German and Swiss stock exchanges. In recent months LGIM has been one of the fastest growing ETF issuers in Europe, with its innovative range of thematic ETF strategies and new ESG fixed income strategies helping to deliver a top 10 position for European net flows in 2020[1].
[1] According to Data from consultancy and research firm ETFGI show Legal & General Investment Management’s ETF arm was one of the biggest winners last year, ending 2020 with $8.5bn in ETF assets — an 89.4% increase from the end of 2019 and the highest rise of any top 20 ETF player.
We apply a rigorous series of quantitative screens to select stocks based on their quality metrics, dividend characteristics, and ESG profile. We look to identify those quality companies that can sustain a consistent dividend and thus believe that this fund range is a powerful proposition for investors seeking to address their search for income, desire for growth potential, and an increasing awareness of ESG risks
Howie Li, Head of ETFs at LGIM
Dependable income is something investors are crying out for in the current environment, but some stocks with high dividend yields may be value traps with poor fundamentals and weak growth prospects. We believe that in giving investors exposure to a range of quality companies, with strong dividend characteristics and avoiding material ESG risks, we are well positioned to help them generate consistent income in their portfolios. These new funds add to what is already an impressive suite of ETFs, increasing the depth and breadth of LGIM’s offering to investors
James Crossley, Head of UK Retail Sales at LGIM
Appointment of Nilufer von Bismarck OBE as a non-executive director of Legal & General Group Plc
The Board of Legal & General Group Plc (the “Company”) is pleased to announce the appointment of Nilufer von Bismarck OBE as an independent non-executive director of the Company with effect from 1 May 2021.
Nilufer is currently Head of the Financial Institutions Group and the Equity Capital Markets practice at Slaughter and May and has spent a large part of her 34-year career working with major international financial institutions. As well as a deep and extensive understanding of the financial services sector, Nilufer also has considerable experience across a range of other industries and sectors, including real estate, green infrastructure and fintech. Nilufer’s appointment will bring further expertise to the Board as the Company’s exposure to these industries and sectors increases.
The Company, as part of a continued focus on achieving best practice in governance, is also streamlining executive representation on the Board of the Company to ensure that there is always a substantial majority of independent non-executive directors. Accordingly, from today, only the Group Chief Executive and Group Chief Financial Officer will sit as executive directors on the Board of the Company. Kerrigan Procter, Chief Executive LGC, and Michelle Scrimgeour, Chief Executive LGIM, who were hitherto also executive directors of the Company, will otherwise continue in their executive roles.
There are no details or disclosures required under LR 9.6.13R of the Financial Conduct Authority’s Listing Rules.
“I am delighted to welcome Nilufer to the Group Board. Nilufer’s many years of experience in the financial services sector will supplement the skills and experience of the Board and I look forward to working with her.”
Sir John Kingman, Group Chairman
Legal & General Mature Savings colleagues raise £100,000 fundraising for hospice care
Legal & General Mature Savings division in Hove have proved that the workplace can be a real force for good by raising an astonishing £102,853 for St Barnabas House in just three years, beating their original target.
When the partnership first began with St Barnabas House in 2017, the hospice had little idea what a huge part the Mature Savings division would play in funding the care of local people living with terminal illnesses.
Over the last three years, a passionate team of colleagues from Legal & General have dedicated hundreds of hours to organising and hosting a wide range of fundraising events, as well as volunteering for the hospice. Legal & General also matched every £500 raised by each employee, further boosting the amount raised.
Determined to hit their £100,000 target during lockdown, the charity team thought outside the box and continued to fundraise – holding a virtual pub quiz and two makeup auctions which raised an incredible £3,000.
A group of 40 colleagues who were due to take part in a cancelled 11-mile sponsored walk between Brighton Pier and Worthing Pier in March, came up with their own 11-mile lockdown challenges and raised £4,722. Whilst some completed the pier to pier walk on their own or in small groups, others ran 11 miles on a treadmill, and one colleague even kayaked the distance with her dog.
Many Legal & General colleagues have a personal connection with St Barnabas House, including Tanya Jones whose mother was cared for by the St Barnabas Hospice at Home team in 2017.
“Since our partnership began with St Barnabas, we’ve arranged sponsored cycle rides and walks, run comedy and quiz nights, held raffles and tombolas, baked a lot of cakes and held a number of successful makeup sales.
The team care passionately about the hospice and have hosted events which are diverse and inclusive, allowing everyone the opportunity to get involved.”
Dawn Watkins, Chair of the Mature Savings Charity Committee, Legal & General
“I will never be able to thank St Barnabas enough for the amazing care they gave Mum and I am so glad that the company I work for can support them and give others the help I received.
With Mum, the nurses and carers were tirelessly solicitous and attentive, and with their help I was able to look after her at home. They kept her pain free and nothing was too much trouble for them; coming in three or four times a day, sending night sitters so I could get some sleep and being there when I picked up the phone. They guided me through what could have been an extremely scary time had I been on my own and supported me for a long time after.”
Tanya Jones, Legal & General Retirement Institutional
“We can’t thank the Mature Savings Charity Committee enough for their unwavering passion and commitment in supporting St Barnabas House.
The team have raised more money than we could have ever imagined and because Legal & General generously match fund their employees’ fundraising, we have been able to reach even more local people in need of our care. As well as their fundraising efforts, they have also contributed hundreds of volunteer hours, including helping with the upkeep of the hospice gardens, sorting donations for our charity shops and marshalling at some of our events. I have loved every second working with this amazing group of people!”
Jo Bacon, Corporate Fundraiser at St Barnabas House