There’s much to get excited about at Legal & General. It runs one of the fastest growing workplace pensions with over £20bn of assets, looking after the staff of Tesco, National Gas and Ford (among others).
It is planning to buy-out £50bn- 65bn a year of occupational scheme liabilities by year end 2028
And it is looking to grow its assets under management in private markets to 85 billion pounds by 2028, compared with 48 billion last year.
These sound exciting and I’m sorry to see the market reaction was underwhelming with L&G’s share price falling 3.2%, taking the insurer to the bottom of the FTSE 100 with KBW analysts describing the new financial targets as “slightly underwhelming“.
Goodbye Nigel and Michelle
Nigel Wilson has left and is replaced by Antonio Simoes. This is his first major announcement and it came with a £200m share buy-back and a dividend strategy.
Financial restructuring and dividend targets are one thing, but there seemed little about the announcements that suggested L&G was maintaining Wilson’s vision. Perhaps this will be a lesson learned for the new CEO.
Michelle Scrimgeour is going and a new head of LGIM has yet to be announced. I hope that they will find a charismatic leader who will link LGIM to L&G and both to the consumer. Ultimately, we save with L&G and L&G pay the pensions of you and me.
Alternatives become mainstream
Perhaps the most important structural change announced is the merger of will combine Legal & General Investment Management, one of the biggest investors in the UK stock market, and its alternative asset platform Legal & General Capital.
LGIM is primarily an asset allocator, a tracker of markets and a stewardship outfit. L&G Capital is about finding opportunities in private markets including VC, PE and infrastructure. If you can call £48bn “niche” , that’s what it was, but talk to LGIM and it was as is its alternative arm didn’t exist.
Let’s hope that by bringing the public and private markets of LGIM together we will start to see more imaginative investment options for UK savers, especially those in L&G’s workplace savings plan (its GPP) and its master trust. These vehicle’s mighty defaults are currently cheap but looking rather less than cheerful. They need spicing up
Master trust default
Time for L&G to get to grips with workplace pensions
L&G are overperforming as an annuity provider and underperforming as an investment house.
At this week’s Pension PlayPen coffee morning , Tumelo admitted that the reason the long-heralded voting expression of wish service had not been turned on for L&G savers was down to lack of will at L&G’s end.
L&G’s investment pathways are weak, it offers nothing by way of a default decumulator for its master trust pension savers. It wins a lot of awards because it has slick marketing but it has failed to impress customers like me. I have more than £700,000 in an L&G workplace pension and I don’t even get an app!
Like the equity analysts, I – an L&G customer, am getting a little tired of waiting for what appear obvious developments. I am sure I am not the only L&G saver looking around the market right now and wondering for developments I’m not getting at home.
A new culture needed
If you had asked me 14 years ago , who I would have picked as a winner in the workplace pension market, I’d have chosen L&G. Indeed I did choose L&G as our company workplace pension and I’m glad we switched from the moribund Prudential.
14 years later, we are being asked to think about change and clearly L&G are doing just that. But the kind of transformational change that we have seen at Standard Life, brought about by its acquisition by Phoenix is eluding L&G which is underperforming its rivals both on the pitch and in the boardroom.
With its charismatic CEO gone, L&G needs to get to grips with its public image. If it is to be more than our top annuity provider , it must re-focus on pensions and the long-term productive assets that deliver them. Right now L&G is a bit of a yawn.
As the saying goes
