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LEGAL & GENERAL INDEPENDENT GOVERNANCE COMMITTEE

IGC Annual Statement.For the year ending 5 April 2016

2 LEGAL & GENERAL INDEPENDENT GOVERNANCE COMMITTEE

Contents.Introduction

The audit of charges and benefits in legacy schemes

Pension freedoms

Value for money

Price

Default investment strategies

Returns

Flexibility

Administration

Communication

Feedback

Conclusion

Appendix 1: IGC members

IGC member profiles

IGC support services

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3LEGAL & GENERAL INDEPENDENT GOVERNANCE COMMITTEE

The requirement for a provider to establish an IGC became effective on 6 April 2015. Whilst Legal & General already had an independent governance committee, the IGC in its current form was established on 6 April 2015 with updated terms of reference. However, the early establishment of the IGC has proved beneficial in a number of areas and, for example, has allowed us to oversee the implementation of the pension freedoms.

IGCs were introduced to protect the interests of members of workplace pension schemes operated by providers. The Legal & General IGC has a duty, as a minimum, to:

• Act solely in the interests of members, such as yourselves

• Operate independently from Legal & General

• Assess and, where necessary, challenge Legal & General on whether these workplace pension schemes provide value for money for members.

The final rules on IGCs can be found on the FCA’s website: www.fca.org.uk/news/ps15-03-final-rules-for-independent-governance-committees

We have been focusing on three main items since we began our work:

• Responding to a study commissioned by the Office of Fair Trading (OFT) in 2013 on charges for pension schemes that were established many years ago;

• Overseeing the implementation of the new pension freedoms (which give you much greater choice about how to take your pension) and ensuring all options were made available to all members; and

• Defining how we will be assessing ‘Value for Money’ for scheme members.

In this report we give you detail on the progress that has been made against each of these subjects in our first year. We also take the opportunity to share with you our plans for assessing value for money further in 2016.

I would like to express my thanks to everyone at Legal & General for their work in helping us to begin the work of the IGC and also to my colleagues on the committee for their determination and commitment.

The IGC has not been without challenge in its first year. The requirement to implement an agreed plan with Legal & General in response to the OFT report was met in line with all regulatory deadlines but the IGC would have preferred this was achieved sooner. Progress improved towards the latter part of the year but the resulting delay has meant that our value for money assessment is not as advanced as we would have liked. We expect Legal & General to improve the speed of their responses in 2016.

Introduction.

Welcome to the first of the Independent Governance Committee’s (IGCs) Annual Statements. I am delighted to share our progress with you and detail the role that we carry out on your behalf.

http://www.fca.org.uk/news/ps15-03-final-rules-for-independent-governance-committees

http://www.fca.org.uk/news/ps15-03-final-rules-for-independent-governance-committees


We are pleased they committed to providing further management information (by 30 March 2016) that will assist us with this.

We are disappointed that we have not been able to make more progress but pleased to report that in discussion with Legal & General they did make some changes to their original proposals for dealing with the cases covered by the OFT report. The IGC has not yet reached agreement with Legal & General in respect of the cost to members of taking pensions earlier than planned. We recognise that Legal & General have a responsibility to balance fairness and equity between with profits fund members and anticipate further discussion about this with Legal & General, not least because the FCA now has a duty to consult on introducing a cap on such charges.

There have been some good news stories too; the implementation plan in response to the OFT report, will deliver improved member outcomes. We are also delighted that all members are able to benefit from the full range of pension flexibilities introduced in 2015, meaning that they can access their pension savings however they wish.

We worked with Legal & General to ensure that we had a full time manager who worked on behalf of the IGC to maintain daily contact with Legal & General and ensure progress has been made. This was beyond the requirement of the IGC and was a major step forward in ensuring our effectiveness and progress has been much better since this appointment.

The basis of pension provision and the expectations of providers has changed dramatically for the better in the last few years and Legal & General hasshown their desire to be at the forefront of these developments. We have no doubt that Legal & General is serious about this issue and the current contracts they use for workplace pensions are well constructed. We will of course keep up the pressure on assessing value for money as this is something which constantly needs to be improved. However, it is clear from our work in looking at the old contracts covered by the OFT review that historic practice is much less clear and the range of charging structures is unnecessarily complex. We do not believe this is a problem confined to Legal & General. It may well be that a wholesale transfer of old policies to new style policies is in the best interests of the majority of members and that is an issue which will eventually have to be addressed.

We will provide you with regular updates on our progress and will communicate to you through our member website, which can be found at: www.landg.com/igc. Here we will also publish details of forthcoming events – such as our Annual Member Forum that will take place on 11 October 2016 – and details of how to contact us.

I hope you find this report of use and we look forward to making further progress in 2016.

Name: Paul Trickett, Chairman of the Legal & General IGC

Date: 21 March 2016

http://www.landg.com/igc


The first subject that the IGC addressed was the OFT Report on charges for pension schemes that were established many years ago.

In January 2013 the Office of Fair Trading (OFT) launched a study into all workplace defined contribution schemes. This was to understand whether competition was capable of driving value for money and good outcomes for all members of workplace pension schemes.

The study found that schemes that were in place prior to 2001 had an annual charge which was 26% higher on average than those set up after this date.

An audit into these schemes was commissioned to examine:

• Schemes that were in place on or before 5 April 2001

• Schemes that started on or after 6 April 2001 where the scheme has multiple types of charges

• Schemes that started on or after 6 April 2001 where member charges exceed 1% of the members pension pot value within a year (this excluded any investment management transaction costs)

The full report from this audit can be found via the following address: www.fca.org.uk/static/documents/defined-contribution-workplace-pensions-ipb.pdf

This audit was across all insurance-based pension providers in the UK that are or were members of the Association of British Insurers (ABI) and not just focused on Legal & General.

Following this audit, IGCs were introduced and we have had to follow up on the report to ensure Legal & General took appropriate action to address members at risk of receiving poor value.

One challenge has been dealing with Legal & General’s structure. The Legal & General pension products within the scope of the IGC are split between two divisions; Workplace Pensions and Mature Savings, where each, of course, has their own business priorities. The IGC understands the business structure but this has resulted in progress being made at differing speeds. The Workplace division houses the more modern products, benefiting from cleaner and more transparent pricing structures. The Mature Savings products are older, more complex legacy arrangements often operating on old computer systems which are difficult to change. Progress on the latter has been more complicated to make.

Within Workplace Pensions £164m of members assets had to be reviewed and a further £263m in the Mature Savings division. Those assets were held by around 9,000 members in Workplace Pensions, based on the data used for the original audit as at 1 April 2014. By December 2015, this had already reduced to just over 4,500 as a result of activity already undertaken. For Mature Savings, this relates to 8,590 members.

Although the scope of the audit and subsequent actions was limited to current members of a workplace scheme, both Workplace Pensions and Mature Savings have proposed to take action to address those members of individual personal pensions who were once a member of a workplace scheme. The Workplace information above includes those members and the Mature Savings area is reviewing a further 102,000 individual pension members to identify those who may have been a member of a workplace scheme in the past. This work is still underway.

Legal & General formally submitted recommendations to us about how to deal with all these issues on 30 June 2015. Discussions continued throughout the remainder of the year and the IGC agreed the final set of actions and a delivery plan with Legal & General in December, meeting regulatory requirements.

The audit of charges and benefits in legacy schemes.

www.fca.org.uk/static/documents/defined-contribution-workplace-pensions-ipb.pdf


The plan itself will see a number of positive member outcomes when fully implemented by 30 September 2016.

For schemes administered within Workplace Pensions:

• A few of the schemes affected will in future be used for ‘auto enrolment’ and the charges for these schemes will not total more than 0.75%. More information on auto enrolment can be found on the government website: www.gov.uk/workplace-pensions/about-workplace-pensions

• For those that are not being used for auto enrolment:

– Members will not be charged to cover the cost of commission payments made by Legal & General to an adviser – this is the practice of making a payment each year to the adviser who first set up the pension scheme. These payments were supposed to cover the cost of continuing provision of advice. We doubt that this continuous advice has been provided in all cases.

– Where a charge exceeds 1% because of a high fund management charge, Legal & General will contact the employer or their advisers to make them aware of the risk that members could be receiving poor value. If this does not prompt a change in the investment strategy, Legal & General will then contact individual members to alert them to the issue. The IGC will review any action taken as a result of these communications once the project has been completed and will consider if any further recommendations will need to be made. We have 543 of these cases across 27 schemes and each will be asked to provide justification by June 2016.

– Where an annual management charge pushes the charge above 1%, this will be reduced to a level that, if members were invested in Legal & General’s current default option of the Multi Asset fund, the total charge would be no more than 1% per year.

– This will reduce member charges by 0.38% on average.

For schemes administered within Mature Savings:

• A voluntary charge cap of 1% will be applied to all current and former members of workplace pension schemes.

– This will reduce member charges by approximately 1% on average.

Overall our work in response to the OFT Report will see member charges reduce by £1 million each year.

The agreed implementation plan including the intended approach and timeline can be found via this address:

OFT Legacy Audit – Project Plan:The full project plan can be viewed on the IGC website:

www.legalandgeneral.com/workplacebenefitsResp/igc/oft-report

The IGC will continue to work closely with Legal & General throughout 2016 to monitor progress against the implementation plan.

www.gov.uk/workplace-pensions/aboutworkplace-pensions

www.legalandgeneral.com/workplacebenefitsResp/igc/oft-report


In April 2015 new pension legislation was introduced, which has become better known as ‘Freedom and Choice’. Pension scheme members now have much greater flexibility in how they can use their pension pot. The subject of Pension Freedoms is outside of the scope of the IGC but we feel it is a key indicator in determining whether Value for Money is being delivered. Members can draw down a regular or occasional income from their pot, buy a pension annuity or withdraw it as one or more cash lump sums.

With the support of Legal & General research was undertaken on how members may react to Freedom and Choice, ahead of its launch. The IGC also reviewed research conducted by other industry participants and commentators.

The research conducted by both Legal & General and other industry participants has proved largely inconclusive. However, the research did confirm to the IGC that we would want our members to have complete freedom of choice and that these services should in no way be limited. The IGC believes that members should be able to do this without having to move their pension savings and, if they choose to do so, they should not incur any costs.

Legal & General hold similar views to the IGC on this subject. Whilst some older products don’t offer the drawdown option Legal & General has put in place a practical solution so that members can still have complete flexibility on how they take their pension savings. Drawdown is where members choose to keep their pension savings invested but decides to take a flexible income.

Where drawdown is not available through the pension product Legal & General have made a solution available to most members by allowing them to transfer to a section of the Legal & General Mastertrust Pension Scheme before they commence drawdown. The governance surrounding this arrangement and associated investments is undertaken by the Trustees of the Legal & General Mastertrust. The IGC has reviewed this solution and the associated charges and are satisfied with this and will continue to monitor this as its popularity increases. You should be aware that the Trustees of the Mastertrust are the same people who are members of the IGC.

A year on from the launch of Freedom and Choice it is still very early days. The IGC will continue to monitor this area closely and our plans in 2016 will see the IGC conduct a market review of the set up charges for drawdown arrangements.

The IGCs views on the administration services offered against the Pension Freedoms are detailed under the Value for Money section of this report.

Pension freedoms.


The IGCs main purpose is to act in the interests of members in assessing and raising concerns about Value for Money. To do this the IGC needs to assess the quality of the scheme against its cost to members.

The IGC has defined the criteria by which believes it can assess the ongoing Value for Money for members of workplace pension schemes operated by Legal & General. We have produced and published a ‘Statement of Intent’ on how we will assess value for money:

www.legalandgeneral.com/workplacebenefitsResp/igc/value-for-money

This document is focused on seven key areas:

• Price – this will cover any costs that relate to your pension arrangement

• Default Investment Strategies – default funds are the fund(s) that your pension contributions are invested in if you do not make an alternative choice

• Returns on your investment

• Flexibility – members should be able to access their pension savings however they wish

• Administration – this will test the level of customer service that you receive and the speed and accuracy of financial transactions

• Communications – these should be clear and available in a variety of ways

• Feedback – each year from 2016 we will carry out a member survey, independently of Legal & General, to gain your view on whether you believe that you are receiving a value for money service. We will publish these results on our website.

Value for money.

www.legalandgeneral.com/workplacebenefitsResp/igc/value-for-money


A charge is deducted from your pension pot to cover the cost of administering your pension scheme and investing contributions to build up your retirement pot. This is referred to as an annual management charge (AMC). An additional fund management charge (FMC) may also apply, depending on the type of scheme you are invested in. Some schemes include the fund management charge in the AMC.

Auto enrolment makes it compulsory for employers to enrol their eligible employees into a pension scheme and each scheme must have a default fund, in which members’ funds are invested if they do not wish to make an active decision to invest their money in different funds within the plan. Pension schemes that are used for this purpose have a charge cap applied to their default fund.

The total charge for these default funds must not exceed 0.75% each year (that is 75p for every £100 in your pot). This can be understood by totalling the annual management charge (AMC) and the fund management charge (FMC).

For schemes not used for auto enrolment their default funds should be tested against a total charge of 1% in line with the level set by the OFT report. Where this total is exceeded and members are not selecting their own investments, these will be reviewed by the IGC.

The IGC insists that pricing structures are clear. A simple AMC and FMC that allows members to add these amounts together to understand the total cost is something we require as an IGC. This goes above the FCA requirement but is something we feel strongly about. Any alternative charging structures must be clearly explained to members; so that they can understand the amount they are paying. Over time we would like to see all funds with a simple AMC and FMC which can be added together to assess the total cost.

We have worked with Legal & General to ensure that the IGC receives regular management information so that we can track this, following the implementation plan that has already been agreed to address members impacted by this under the OFT report. The IGC is comfortable with the actions being taken.

The IGC understands that this will be a more complex issue for members in a With Profits fund, where the investment returns are smoothed over time and where charges are not clear. However, we maintain an ambition to provide greater clarity for these members. We will progress this during 2016 and will share our findings.

Transaction costs form a part of the total costs of managing an investment fund. They are incurred as a result of buying or selling assets. The IGC has requested information from Legal & General

about transaction costs in Legal & General managed funds as well as on funds managed by other managers which are made available to you. Unfortunately, despite trustees and IGCs being expected to assess these costs, there is not yet a regulatory requirement on fund managers to disclose this information in a standard way across the industry. As a result, we have not been able to make progress in this area but working with Legal & General towards getting meaningful information to assess whether or not all investment transaction costs, particularly those that are applied to default investment funds, represent value for money. We understand similar difficulties are being experienced across the industry.

The IGC’s view is that costs relating to individual transactions should be at an appropriate level. This is not just the level of cost associated with each trade; it is also the volume of trades, which together impact the member. The objectives of the fund, its performance, market considerations and any associated trading activity should be relevant to this. The IGC intends to work with Legal & General to ensure such costs represent good value for members, once the IGC has the appropriate information.

The statutory cap on charges does not apply to drawdown. Further, drawdown charges are not a mandatory part of the IGC framework. We have, with the support of Legal & General, reviewed the charges in relation to access to drawdown (variable income) in retirement and believe them to be reasonable. We will continue to monitor these. Any charge set at a level which is materially above typical market rates will result in the IGC assessing whether the level of service being provided justifies this. If not we will request that the charges are reduced. Based on our experience to date, we very much doubt that there will be any issues with drawdown charges.

Price.


The IGC has started to look at all the default investment strategies and the investment performance of all workplace pension plans within our remit. We have been supported by Dean Wetton Advisory Limited. Dean Wetton Advisory is the independent investment advisor to the Legal & General Mastertrust, where they provide a similar service. There are currently 201 employer group schemes using a default investment strategy that differs from Legal & General’s standard option of the Multi-Asset Fund. These are constructed using Legal & General’s existing funds but the design of the asset mix and any “lifestyling” strategies vary from scheme to scheme.

In 2016 we will work with Legal & General to look at how we can engage with each employer who is not using a Legal & General designed default fund, to confirm that they have a process in place for reviewing their default investment strategy. We will do this with the support of Legal & General’s resources and will complete this in a phased approach, starting with any strategies that give us cause for concern, as well as those that impact the largest number of employees. This order of communication will be agreed between the IGC, Legal & General and our independent investment adviser. We anticipate that employers will work with us but if they do fail to engage with the IGC we will utilise the escalation routes that are available to us.

The IGC will continue to do this every three years. Our aim is to be comfortable that these defaults are designed and executed in the best interest of members.

The IGC will continue to require evidence that the investment strategies have clear aims and objectives. This will include default investment strategies that have been specified by employers, their governance committees and their advisers.

We will continue to review default investment strategies where a Legal & General designed default investment strategy is in place, to ensure that these are designed in the best interests of members.

Legal & General has introduced an internal Investment Committee to enhance the governance around default investment selection made for their personal pension and stakeholder pension schemes and has invited the IGC to review this structure. The IGC provided feedback on the Investment Committee’s Terms of Reference and challenged the objectives. Since the IGCs initial input it has had little sight of progress. The IGC will want to monitor how this committee is improving the investment governance and member outcomes in 2016.

Default investment strategies.


The IGC has been reviewing the processes adopted by Legal & General to assess whether investment strategies and the their performance against objectives are in accordance with member interests.

The IGC has a good understanding of the investment due diligence Legal & General has undertaken. During this period the IGC has been provided with assurances as to the governance and monitoring processes, as well as the processes that are followed when new managers and funds come onto Legal & General’s investment platform.

The IGC believes that the reporting of fund performance and benchmarking could be much improved and we are working with Legal & General and our investment adviser to address this. We acknowledge that this is an industry wide issue.

Legal & General has outlined its process for reviewing employer requests for setting up default arrangements to the IGC, as mentioned in the section above. We will look forward to receiving much more performance data than the IGC currently receives. We mentioned above that there are 201 default investment strategies in the arrangements which fall under the remit of the IGC. This seems excessive. We do not doubt the good intentions about the setting up of these options but it is clear

that there is too much complexity here which may not add up to good member outcomes. There is huge scope for further improvement in this area. We believe the number, as well as the design, of these strategies should be reviewed to ensure that they are designed and executed in the best interests of members.

Legal & General has initiated a project to review the current investment offering with the aim of ensuring that the funds available are appropriate and are delivering good member outcomes – closing funds where they believe this is not the case. We expect that active funds, where the manager is paid to make decisions which should deliver better performance, should have an expected return which shows a positive benefit for the extra risk that is being taken by the member. We also expect passive funds, which are designed to deliver a return in line with the market return, should do so within a small margin of error. We will measure returns and monitor performance on a regular basis. However, we are very conscious that achieving good investment returns requires patience and a lot of damage is done by changing investment managers too frequently. We will keep you informed about our work in this area but continue to stress the need to focus on the long term.

Returns.

Flexibility.The IGC has detailed progress under this section of Value for Money in Section 2 of this report, Pension Freedoms.

As mentioned earlier in this report, the subject of Pension Freedoms is outside of the scope of the IGC but we feel it is a key indicator in determining whether Value for Money is being delivered. We want members to be able to access their pension savings however they wish. This area will continue to be monitored along with any charges that relate to drawdown and we are pleased with the options that are currently available.

These options are only part of the changes that were required to support the new Pension Freedoms. The IGC has also reviewed Legal & General’s default investment strategy to ensure that it is appropriate for members changing circumstances. Previous strategies were designed with the understanding that nearly all members would eventually buy an annuity, a guaranteed income achieved by exchanging all your pension savings for the

guarantee of a payment for life from an insurance company. That investment design might still be suitable for some members but it’s no longer right for members who intend to use their pension pots flexibly – either by taking one or more cash payments or taking a regular income whilst leaving their remaining pot invested.

Legal & General has responded to this by introducing a new default investment fund that does not automatically assume a particular retirement option will be chosen. To complement this, three additional solutions have been introduced for members to choose based on their chosen option. The IGC believes this has been designed with the best interests of members in mind.

These investment solutions do require members to make a choice so the IGC is very keen that these options are clearly communicated to members and that they are ‘nudged’ at appropriate times where decisions need to be made.


The IGC believe the quality of service that members receive is a key part of value for money. We looked at the time it takes for Legal & General to respond to member requests, the quality of Legal & General’s servicing and we strive to understand what our members are saying about the service they have received.

The IGC has received service performance updates when requested and now requires a regular service performance management information pack covering a broad range of information about service levels. We expect this information to be delivered monthly from March. We will publish the service levels achieved against the standard expected on our IGC website every six months.

Legal & General made the IGC aware of a significant increase in enquiry volumes and information requests following the introduction of the new Pension Freedoms. This meant that a number of members experienced difficulties and delays in contacting Legal & General and getting access to their pension pot as quickly as they would have liked. We worked closely with Legal & General to ensure that action was taken quickly to increase resources and return service to its expected high levels.

The IGC was pleased with the steps taken to address this, though were disappointed that this situation arose, given the expected demand in light of these increased flexibilities. We would like to apologise to any member who was affected by this deterioration in service standards in the summer and autumn of 2015. The IGC visited the Workplace Member Helpline at Legal & General’s Cardiff administration centre in October 2015 and had the opportunity to listen to some calls from members.

We were impressed with the service offered by the staff in Cardiff. The delays experienced were not the fault of the front line staff. The IGC will be visiting the Savings Member Helpline at Legal & General’s Hove office in 2016.

At the time of writing administration services are stable and we continue to monitor these, as well as customer satisfaction scores.

Legal & General has confirmed to the IGC that, regardless of the date of processing, all transactions are processed in accordance with the contractual terms, ‘backdated’ appropriately to reflect the request or receipt date, ensuring no member loses out because of any delay.

A Group Internal Audit function operates within Legal & General which audits systems and processes regularly and the IGC will be notified of any matters for which it would have concern. We also have sight of all forthcoming audits.

In the short time since IGCs became a requirement we are satisfied that there are no areas of concern in relation to core financial transactions. In time the amount of management information available to us will grow and we will continue to monitor this and publish our findings.

We believe that transactional data only forms a part of the overall picture though. We will monitor customer satisfaction scores from members this year, along with service performance and quality information to get an overall impression of the member customer service experience.

Administration.


The IGC’s desire is for members to be able to access information and make changes to their pension arrangements using a means of communication of their choosing. The IGC will challenge Legal & General’s communications teams to be constantly striving to improve the ways they communicate with customers and the customer experience.

As an IGC we have been very challenging in our desire for Legal & General to invest in communicating and allowing people to access their pension information from their smart phones and tablets. This is of course not for everyone – some prefer paper, others want to speak to someone, others are happy to use the internet from their home but not on a mobile device. Over 1.5 million people are members of Legal & General pension arrangements – we will need every available means

of connecting if we are ever to make it possible for them to understand and get involved with their pension savings. We are pleased with the plans that Legal & General have presented to us so far but we are also firmly of the view that much more needs to be done.

We would like to see appropriate communications being tested through member focus groups and we are keen that the opportunity to provide feedback on these communications is made available.

Communications will feature very highly on our 2016 agenda and given the introduction of Freedom and Choice, they are more important than ever. Members will need to receive communications at certain times in their lives designed to prompt them to review their choices and we will ensure that these are timely, clear and meaningful.

As an IGC we are keen to ensure that the IGC provides the oversight needed to ensure that members are receiving value for money. Our intention is to undertake an independent survey that will seek members’ views on whether they believe they are receiving good value and will ask them to highlight areas that they consider require improvement. We will share these findings on our website.

As in 2015, we will continue to attend Legal & General hosted employer forums to gain employers’ opinions and their views on any service issues. Legal & General has invited the IGC to be a regular contributor at their employer forum and this has provided us a good insight into the challenges that customers are experiencing. The IGC will use this opportunity to share our views with employers and as an opportunity to receive first hand customer feedback.

In 2016, we will introduce an Annual Member Forum, which will be held on 11 October 2016 and will invite all scheme members to attend and share their views with the IGC. Details of this event will be made available on our website.

Communication.

Feedback.


Assessing Value for Money against all of these criteria takes time. It is more difficult for the older policies where obtaining information is harder, takes longer and costs more to find. However, we strongly believe that all of the elements we have identified as being a part of value for money need to be assessed and that they are important in helping members better understand their pension. Sadly pensions are complicated and often are off-putting – giving you clear and helpful information about value for money will, we hope, help to build your confidence in making pension savings and managing the pot of money that you build up. It is important that the IGC has regular management information from Legal & General that will enable us to challenge all of these matters on your behalf. We commit to sharing our progress with you; both with matters that are going well and those that cause us concern.

Following the OFT Report into the charges for pension schemes that were established many years ago, as discussed in Section 1, we are confident that the plan that has been put in place will resolve the issues that we have had to address with Legal & General. We have established a challenging but constructive relationship with Legal & General and have been pleased to evidence them taking significant financial decisions to act in the interests of members.

We are pleased that members have access to the full range of pension flexibilities that were introduced under Freedom and Choice, meaning that they can access their pension savings how ever they wish and we believe that charges across the workplace portfolio are reasonable.

We are disappointed at the time that it has been taken to provide the IGC with meaningful management information against all of the Value for Money features and the elongated decision making processes that we experienced earlier in the year. There have been, in the opinion of the IGC, opportunities for Legal & General to lead the way in encouraging the right Value for Money approach across the industry and these opportunities were not taken, despite challenge from the IGC. We understand that there are commercial sensitivities that need to be considered but sometimes these need to be disregarded in the interest of the member. We believe this will be improved in year two.

It is very early to be delivering an assessment on whether members are receiving Value for Money. We do have some confidence that Legal & General does provide Value for Money and, where we do find issues, we do believe Legal & General will address them.

Conclusion.


There is a lot of room for improvement though and it is important that much greater progress is made throughout 2016 to ensure we are able to fully demonstrate Value for Money to members. In the period between now and the issuing of our next report we will:

• Continue to monitor any scheme that breaches the charge thresholds and request prompt and appropriate action;

• Agree an approach with Legal & General to contact each employer asking how they review their default investment strategy;

• Carry out a review of Legal & General’s designed default investment funds;

• Review Legal & General’s process of assessing whether investment strategies are in the interests of members and enhance the reporting of fund performance;

• Review the opportunities available to members wishing to access their pension benefits and assess how this compares to competitors;

• Publish administration performance standards on our IGC website at six monthly intervals;

• Carry out an independent annual member survey;

• Complete an evaluation of the effectiveness, performance and diversity of the IGC composition and the services it receives (including legal and investment advisers); and

• Host the first IGC Member Forum on 11 October 2016.

We believe that by overseeing all of the above we will have a very clear assessment of the Value for Money that scheme members are receiving in our 2017 report.


The IGC has been established to ensure it has sufficient expertise, experience and independence to act in members’ interests. This will continue to be assessed through an annual evaluation, the next one taking place in November 2016. This evaluation covers the committee’s composition, an assessment of how the committee views its independence and the independence of each of its members and gives consideration to the diversity of its membership, performance, skills and effectiveness.

A candidate profile has been prepared and an ‘executive search agency’ appointed to look for suitable candidates to fill the IGC’s current vacancy.

The full ‘Terms of Reference’ for the IGC can be found via the following address: www.legalandgeneral.com/workplacebenefitsResp/igc/terms-of-reference

Appendix 1: IGC members.

www.legalandgeneral.com/workplacebenefitsResp/igc/terms-of-reference


Paul Trickett, ChairmanPaul has been worked in the UK pensions and investment industry since 1988.

He was the chief executive of the British Coal pension schemes during the privatisation of the industry in the 1990s and then spent 13 years at Watson Wyatt/Towers Watson where he was head of the EMEA investment consulting business and chaired the board risk committee of Watson Wyatt.

From 2011 to 2013 he was managing director and head of the EMEA Global Portfolio Solutions team at Goldman Sachs Asset Management.

He has now embarked on a non-executive career which includes chairing the Board of Trustees of the Legal & General Mastertrust and the Legal & General Independent Governance Committee, for defined contribution contract pension schemes. Paul is Chair of the Trustees of the Zurich UK Pension Scheme, Chairman of Aberforth Smaller Companies Investment Trust and Chairman of Railpen Investments.

Rachel Brougham, IGC MemberRachel Brougham is a trustee executive at BESTrustees Limited. Rachel is a qualified actuary and has worked in the pensions industry since 1988.

Her experience includes advising both defined benefit (DB) and defined contribution (DC) trustee boards and the governance committees of various contract-based DC arrangements through which she has built up a detailed knowledge of the regulatory environment.

With her previous employer, the global consultant Mercer, she led a number of national initiatives including pension fund governance (both DB and DC) and pensions automatic enrolment.

She is a regular commentator on pension matters through speaking at industry events and contributing articles and comment to the industry press.

Having joined BESTrustees in 2014, Rachel’s appointments include two master trust trustee boards and membership of two independent governance committees.

IGC member profiles.Here is the list of IGC members and their individual profiles:


Steve Carrodus, IGC MemberSteve is a director of Pitmans Trustees Limited.

He has worked in corporate pensions and employee benefits since 1973 and has worked for a number of major pension consulting firms including Willis, Sedgwick, Godwins and SBJ. He’s been involved in trusteeship work since 1991.

For much of his career Steve has been advising medium sized pension funds on all areas relating to the setting up and running of pension schemes and in some cases in their closure.

He has a good understanding of investment issues and uses his experience to ensure that the scheme’s advisers are challenged and their advice is fully understood by all trustees.

He served for four years on the council of the Pensions Management Institute and has spoken at a number of technical seminars for clients and on trustee training courses.

Tony Filbin, IGC MemberTony Filbin studied law at Hull University and joined Legal & General in 1979 where he held a number of senior positions rising to Managing Director Workplace Savings.

In his various roles he was responsible for Legal & General’s suite of retail pension and annuity products including the development and implementation of their award-winning auto-enrolment proposition.

Since leaving Legal & General in 2014, he has taken up a number of pension trustee board positions and non-executive director roles.

He is a regular speaker at pension conferences and has held committee positions with the Institute of Actuaries and the Pensions Management Institute.

In 2013 he was named by Financial News as one of the Top 10 Most Influential People In Pensions.


Richard Atkins, Pension Scheme & IGC ManagerRichard Atkins was appointed Pension Scheme & IGC Manager in August 2015.

Richard’s role requires him to assist the Independent Governance Committee to satisfy its regulatory responsibilities, ensuring that pension scheme administration is of the appropriate quality and value for money can be demonstrated to the underlying scheme members.

Richard reports to the independent Chairman of the IGC and he also has an independent non-operational reporting line to the Legal & General Investment Management Risk & Compliance department.

Richard has worked in the pensions industry since 2000 where he has held a variety of senior management roles in both the defined benefit and defined contribution environments.

Andrew Fairhurst, Secretary to the Independent Governance CommitteeAndrew Fairhurst worked on the launch of the Independent Governance Committee and has been Secretary to the IGC, since its voluntary introduction in 2013. Andrew’s role is to ensure the IGC Board operates efficiently and effectively to the highest governance standards and ensures that the IGC both embraces and is at the forefront of changing governance practice.

Andrew reports through to the independent Chairman of the IGC and he also has an independent non-operational reporting line to Legal & General’s Legal & Governance function.

Andrew has held a number of senior company secretarial roles within Legal & General Group and is a Fellow of the Institute of Chartered Secretaries.

IGC support services.

For WPP schemes: Legal & General (Portfolio Management Services) Limited Registered in England and Wales No. 02457525 Registered office: One Coleman Street, London EC2R 5AA

We are authorised and regulated by the Financial Conduct Authority.

For all other schemes: Legal & General Assurance Society Limited. Registered in England and Wales No. 166055 Registered office: One Coleman Street, London EC2R 5AA

We are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Q0053900 NON-ASD

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