Legal & General Group Plc L&G: Well-Placed for New Pensions Regime (7179C)
19 März 2014 - 5:04PM
UK Regulatory
TIDMLGEN
RNS Number : 7179C
Legal & General Group Plc
19 March 2014
LEGAL & GENERAL: WELL-PLACED FOR NEW PENSIONS REGIME
Today's Budget changes to the annuity market will have
far-reaching consequences for the accumulation and decumulation of
pension savings for individuals who need a secure income in
retirement.
For consumers there will be greater choice and the need to make
bigger decisions about their retirement provisioning. For Legal
& General our comprehensive suite of individual retirement
solutions including protection, drawdown, DC funds, Unit Trusts and
ISAs will ensure that we are well-placed to service successfully
these choices and decisions.
The changes, which affect individual annuities only, represent a
further transfer of risk - the government is effectively
transferring longevity risk, or the risk of outliving pension
savings, to the individual. We expect that savers will therefore
increase provisioning for their retirement.
Increase in accumulation expected
Pension "pots" will now become more accessible, but these
reforms have no effect on the fundamental issue for the UK, which
is that pension savings remain too low. We expect pension savings,
and hence the total pool of DC pension savings assets to grow.
LGIM, as a leader in pension fund management with GBP450bn of
assets under management, and Cofunds, as a market-leading savings
platform with GBP64bn AUA, are well-positioned to benefit from
increased savings rates.
To avoid individuals over-spending in early retirement and
running short in later retirement, contribution rates into
pensions, including via auto-enrolment need to rise and, in the
absence of guaranteed lifetime incomes, the time spent in
retirement needs to be shortened. The government therefore needs to
bring forward the planned higher contribution levels under
auto-enrolment, institute a fairer, less regressive tax regime for
the accumulation phase of pension saving, and accelerate the rise
in the retirement age.
Well-placed to adapt to more flexible decumulation
Today's introduction of greater flexibility extends the choice
that is already available to wealthier pensioners to all savers,
for example through providers including Legal & General's
Suffolk Life. Greater flexibility however also creates greater
responsibility. People are living longer, and it is more important
than ever that retirees do not exhaust their pension savings during
their lifetime, potentially at the point when they start to incur
care costs.
Legal & General is well-placed to continue to develop a
product suite that includes good-value drawdown and protection
against longevity risk as well as provision of investment income.
The guidance regime outlined by the Chancellor will be vital in
ensuring that many pensioners do no make choices they subsequently
regret.
Legal & General's Retirement Solutions business is
broad-based, with GBP21.1bn out of a total of GBP34.4bn annuity
assets derived from corporate transactions, which are outside the
scope of the new regulations.
Our cash guidance of Operating Cash of GBP290m (2013: GBP260m)
for Legal & General Retirement given at Preliminary Results on
5(th) March for 2014 remains unchanged.
End
This information is provided by RNS
The company news service from the London Stock Exchange
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