Basis for beveridge 2.0

Dr Nigel Wilson
Chief Executive Officer
Legal & General Group
LEGAL & GENERAL GROUP PLC
Being a Disruptor is a Privilege and a
ResponsibilityTCS Summit, Europe 2015
October 2015
Dr Nigel Wilson
Chief Executive Officer
Legal & General Group
Auto-Enrolment: the Basis for Beveridge
2.0?Prospect Magazine
Roundtable
November 2015

22
The changing landscape for UK pension
savings
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029£bn
DEFINED CONTRIBUTION
SAVINGS
We are getting greyer… we need
to save more for a longer old age
which may include care costs.

3
Current Successes
Rigorous analysis by Turner Commission
Cross-Party consensus, well-implemented by Steve
Webb and Ros Altmann
90% + are staying opted-in
Next Challenges
Digital Engagement for SMEs
Reduce charge cap from 0.75% to 0.5%
Auto-escalation
Aggregation/Pot-follows-member
Fairer tax incentives
Auto-Enrolment: Successful so far – Next Steps
Required
EET Tax Treatment Supports Auto-
Enrolment
Flat-rate PTR at 20-25% Optimises
Incentives and Cost

4
Providing our retirement customers with
freedom & choice
Housing,
Lifetime
Mortgages
Freedom
& Choice
Policy
changes
• Retirement housing for the c4
million people looking to right size
• Entered the UK lifetime mortgage
market, the over 60’s having
£1.3trn of housing equity.
• Cash-Out Retirement Plan
• Fixed Term Retirement Plan
• Secondary Annuity Auctions
• 2014: “No-one will have to buy
an annuity” George Osborne
• 2016: Secondary market for
annuities to be introduced
Placeholder
Placeholder

55
Retirement Balance Sheet: Last Time
Buyers, Lifetime Mortgages
• Chronic Shortage of UK housing
• A third of retirees want to
move/rightsize
• Only 2% of housing is built for older
people
• Tailored housing needed in the right
places: Family, Friends, Facilities
• Frees-up housing stock for families
• Part of the care cost solution
• For those who want to stay in the
family home, Lifetime Mortgages
are a solution
• L&G entered this market in March
and is now seeing £10m of
applications per week.

66
Pension Savings as “Slow Money” for
Infrastructure
Media City, Salford, and L&G Investment • Individual Savings are the basis of
all institutional investment
• Recognised by Commissioner
Hill’s Capital Markets Union…
• …and by George Osborne’s LGPS
proposals
• Digital and Data can pinpoint
where a saver’s assets are
invested…
• ..for yield enhancement, local jobs
and growth

77
L&G: Long term direct investments
We continue to
drive risk-adjusted
returns upwards
through direct
investments in long
dated real assets
where the banks
have left behind
‘white space’.
Investment in
housing and
regeneration are
economically useful
for us, for the
£15b
n
Places for people:
£252m, acquiring 4,000
homes, building 7,000
houses, 50 year lease
Thames Valley Housing:
£40m, 25 year facility enabling
500 affordable homes
Royal Liverpool University Hospital:
£429m rebuild
English Cities Fund
schemes in Liverpool,
Plymouth, Canning Town,
Salford and Wakefield:
over 5.4m sq ft of mixed-
use space, brownfield land
Transport and Logistics:
£320m, maturities to 30
years
Aberdeen international business park:
£127m investment, 335,000sq ft office
space
CALA Homes:
£210m investment (47% stake),
further £200m for Banner Homes
Hyde Housing Group:
£102m investment
15 year facility
Sentinel Housing:
private placement
(registered social
housing provider
in Hampshire)
University of Southampton:
£93m, 1,104 beds, 40 years income
Methodist Care Homes:
£70m investment, 30 year lease
Media City, Salford Quays:
£503m investment . 50% ownership
PRS Investment – 100s of new homes
£162m Leeds regeneration
project: 200 acre mixed use
site with potential for 7,000
homes
£400m Cardiff city centre
redevelopment joint
venture
£200m Bracknell
regeneration
partnership with
Schroders

88
Pensions Auto-Enrolment: Basis for
Beveridge 2.0?
“Europe accounts for
just over 7% of the
world’s population,
produces around 25%
of global GDP and has
to finance c.50% of
global social
spending... It’s
obvious it will have to
work very hard to
maintain its prosperity
and way of life”
Angela Merkel, German
Chancellor
*The Economist 1 June 2013. From the print edition
Polling shows 18-24 year-olds
are increasingly likely to see
welfare as a personal, not a
State, responsibility.
Public-private risk-sharing
offers a solution.

99
Welfare reforms: extending fee-capped auto-
enrolment to protection
THE SYSTEMS
ARE ALREADY IN
PLACE.
“Today’s welfare state is a sadly corrupted version
of the triumphant settlement made in 1945. When
William Beveridge laid the foundations for the
creation of a proper national safety net he intended
that most working-age adults would rely on benefits
in temporary periods of hardship and the system
would continue to encourage self-reliance. But over
the years, through a combination of naivity,
cowardice and electioneering, governments distorted
his original intentions.”
Camilla Cavendish, then Sunday Times, now Policy
Unit, 10 Downing Street

1010
Four steps to Beveridge 2.0
Replace pension
tax relief with
flat rate
Phase out
‘contributory’
benefits
Raise employees
NI threshold
1
2
3
4 Support
employers
Net saving to UK Government of £11.8
billion
Introducing a flat rate of pension
contribution tax relief at 20% saves UK
government £13bn p.a.
£13bn
Contributory ESA costs £4.35bn
Contributory JSA costs £480m £5bn
Increasing the employees NI threshold
to £10k costs £4.7bn £(4.7)bn
Increase the Enterprise Allowance to
£4k, benefitting SMEs, costs c£1.5bn £(1.5)bn
Saving /
(cost) to
Government

11
3 minutes to
policy issuance
Micro-insurance launched in
India in 2014
2 Million L&G/IndiaFirst Policies bought in 2
months in India
Quidcover variants will be launched in the UK
Auto-enrolment allows larger contributory
benefits, for lower premiums than currently
through NI.
A Premium of 0.5% of salary can replace 70% of
income for 12 months in the event of earnings
loss due to sickness
This is c. double Contributory ESA/JSA for a
basic-rate taxpayer. Premium of $3-$5
per month for $3k
cover
Quidcover – from India to the UK Big Data, Digital Delivery

12
“Insurance has a powerful social
purpose. We make a promise to
our customers that we will be
there to stand behind that
promise when disaster or
tragedy strikes.
Our clear aim is to be a force for
good in society, make every day
matter for our customers and
colleagues and live by the
promises we make in our high
quality products.”
Every Day Matters: our Social Purpose

Basis for beveridge 2.0

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