The enormous importance of Legal and General


If one insurer has done more than any other for workplace pensions it is Legal & General.

For early stagers like Marks & Spencer they opened a master trust , they were the first insurer to adopt clean 50bps pricing and they led the way in governance launching the first Independent Governance Committee.

This hasn’t made them popular with other insurers, nor has it made them a favourite of many advisers. So severe the schism with other insurers that they have left the ABI.

It’s their willingness to disrupt, when they see the need, that I admire and I can personally endorse their Worksave Pension Plan that carries most of my retirement savings.

In 2012-13 L&G stole much of the top end of the market and became the auto-enrolment partner for many household names. Perhaps they got indigestion, but last year they had half closed the shutters on Worksave by introducing a one-off implementation fee of £1,000. The barrier to entry was a necessary deterrent. This cost reduced their rating on and L&G struggled to compete with the major mastertrusts who imposed no charge.

The great news is that with the new year, the charge is gone and L&G intend to help all schemes with between 2 and 58 lives looking to stage over the next few years

We like the plan and for many employers going through , it will get top marks. We regard the default fund , LGIM’s Multi-asset fund as a fund producing equity like returns without the volatility, for 0.13% pa, it is something of a bargain demonstrating that diversification is nearly a free lunch.

With the funds platform , comms and HR and payroll interfaces wihin the scope of a 0.37& platform fee, Worksave is one of the best value products on the market place and it works.

A sample  of payroll software houses and leading bureaux rated L&G easiest to deal with of all the major workplace pension providers.

We shouldn’t underestimate the substantial investment being made by the remaining large insurers offering workplace pensions. Aegon, Aviva,Friends,Royal London, Scottish Widows and Standard Life are all regularly quoting on schemes yet to stage. Taken with the mastertrusts (Now, Nest and People, plus a number of smaller mastertrusts) this represents a healthy market.

While we expect some contraction as Aviva and Friends merge later in the year, we are encouraged that employers seeking a workplace pension still have excellent choice with considerable differentiation in investment, at retirement options, payroll and HR interfaces, employee communications and business models.

Far from seeing a capacity crunch, we are seeing innovation driving increasingly competitive products. For the 45,000 employers who are purchasing pensions this year, the re-vamp of Legal and General and the improvements in service of many of their rivals should be celebrated.

Let’s hope that those employers contemplating which pension to use for their staff will put L&G’s on their shortlists and that they will use to assess its merits relative to those other schemes eager for their business.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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