Legal & General WorkSave Mastertrust (RAS) Annual Report. Palmer & Harvey McLane (Holdings) Limited...

1LEGAL & GENERAL WORKSAVE MASTERTRUST (RAS) ANNUAL REPORTLEGAL & GENERAL WORKSAVE MASTERTRUST (RAS) ANNUAL REPORT

Legal & General WorkSave Mastertrust (RAS) Annual Report.For the year ended 5 April 2016Registered Number: 00784167RL

2 LEGAL & GENERAL WORKSAVE MASTERTRUST (RAS) ANNUAL REPORT

NOVEMBER 2014

Contents.Trustees and advisers

Trustees’ report

Investment report

Independent auditors’ report

Fund account for the year ended 5 April 2016

Statement of net assets (available for benefits) as at 5 April 2016

Notes to the financial statements

Member information

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7

13

21

23

24

25

37

DC Statement for the year ended 5 April 201638

3LEGAL & GENERAL WORKSAVE MASTERTRUST (RAS) ANNUAL REPORT

Trustees and advisers.Trustees and directors

Scheme advisers

Legal & General Assurance Society Limited

Legal & General Resources Limited

PricewaterhouseCoopers LLP

Legal & General Assurance Society Limited

Dean Wetton Advisory Limited

Bank of Scotland

Scheme Administrator

Principal Employer

Auditors

Investment Manager

Independent Investment Adviser

Bankers

Enquiries Email: [email protected]

Trustees Directors

Legal & General Trustees Limited P Trickett, Chair (resigned 31 July 2016)T FilbinP McBride (resigned 10 June 2015)M Craston (resigned 18 January 2016) A Toutounchi (appointed 1 June 2016)

Pitmans Trustees Limited

Represented by S Carrodus, Interim Chair of WorkSave Mastertrust

R Butcher, Managing DirectorD Archer, DirectorC Avery, DirectorS Brooker, DirectorS Carrodus, DirectorA Davies, DirectorD Hosford, DirectorP Weaver, Director (resigned 31 July 2015)S O’Brien, Director (appointed 31 July 2015)

BESTrustees plc(Appointed 14 April 2015)

Represented by R Brougham

A Pickering CBE, ChairCM Gilchrist, Deputy ChairG Wardle, Managing DirectorR Tranter, DirectorZ Fazal, DirectorJ R Smart, Director (resigned 2 February 2016)P R Styles, Director (resigned 11 December 2015)H Lewis, Director (appointed 11 December 2015)

Secretary to the Trustees A Fairhurst, Legal & General Group Plc


Scheme advisers (continued)

The Trustees have written agreements in place with each of the advisers listed, as well as a written agreement with the Principal Employer, Legal & General Resources Limited. In addition, the Trustees have a Service Level Agreement with their Administrator, Legal & General Assurance Society Limited (LGAS), which stipulates the contractual rights and obligations of each party, and sets out the required turnaround time for each administrative activity and transaction.

There were no changes in Scheme advisers during the year.

The Trustees commission legal advice on an ‘as required’ basis. Although they will consider firms on Legal & General Group Plc’s approved panel, the Trustees are not constrained from using others. During the accounting year, legal advice was commissioned predominantly from Pinsent Masons LLP of 30 Crown Place, Earl Street, London EC2A 4ES.

The Scheme Administrator, Legal & General Assurance Society Limited, is remunerated through the Annual Management Charges that are deducted from members’ pension pots, and/or fees paid directly by some participants. Fees payable by the Scheme to the Scheme’s advisers are paid by Legal & General Assurance Society Limited.


Employer Joined

J Sainsbury plc – whose deed also incorporates:Sainsbury’s Supermarkets Limited

1 August 2012

Arcadia Group Limited 1 September 2012

BHS Limited 1 September 2012

Debenhams Retail plc 1 October 2012

New Look Retailers Limited 1 November 2012

Ladbrokes Betting & Gaming LimitedLadbrokes plc

1 December 2012

Palmer & Harvey McLane (Holdings) Limited – whose deed also incorporates:Palmer & Harvey McLane LimitedP & H Snacksdirect LimitedP & H Sweetdirect LimitedPalmer & Harvey Direct LimitedPalmer & Harvey Direct Van Sales LimitedW S Retail

1 January 2013

4 September 2013

Anobii Limited 1 January 2013

Pets at Home Limited 4 January 2013

Companion Care (Services) Limited 4 January 2013

Mothercare plc – whose deed also incorporates:Mothercare UK LimitedEarly Learning Centre LimitedMini Club UK Limited

31 March 2013

Participant EmployersThe Participant Employers, as at 5 April 2016 were:

continues


Employer Joined

Turner and Co. (Glasgow) Limited – whose deed also incorporates:Turner Engine Powered Services LimitedTurner Hire Drive LimitedTurner Access LimitedTurner Aviation LimitedTurner Facilities Management LimitedTurner Estate Solutions LimitedBlue Cube Portable Cold Stores LimitedMitchell Diesel LimitedStamford Van & Car Hire LimitedPower Electrics LimitedExcel Pumps LimitedTeam Q Maintenance LimitedTCL Tanker Rental LimitedT.G. Power LimitedPowerplant (Stamford) LimitedNorthern Industrial Services Limited

1 June 2013

1 August 2013

W S Retail Limited 4 September 2013

Halfords Limited 1 December 2013

Electrolux plc 1 January 2014

Sainsbury’s Bank plc 1 February 2015

Independent Parliamentary Standards Authority 1 May 2015

Old Mutual Business Services Limited 17 July 2015

Beck & Pollitzer Engineering Limited 21 October 2015

Tesco Stores Limited 22 November 2015

Tesco Plc 22 November 2015

Tesco Pension Investment Limited 22 November 2015


Trustees’ Report.

IntroductionWelcome to this third Annual Report of the Legal & General WorkSave Mastertrust (RAS) (‘the Scheme’), covering the year 6 April 2015 to 5 April 2016.

Financial reportThe financial statements on the following pages relate specifically to this Scheme (Registered Pension Scheme number 00784167RL), as required by law. There is a sister scheme (The Legal & General WorkSave Mastertrust) which differs from the Scheme only in the way that members gain tax relief on the contributions they pay. We prefer to look at the two Mastertrust schemes as a single scheme. The headline figures for this Scheme and its sister scheme, as at 5 April 2016, are as follows:

At 5 April 2016 At 5 April 2015

Total active members(members for whom contributions are being paid)

473,457 217,705

Total deferred members(members for whom no contributions are being paid)

66,696 36,196

Total assets under management (£000’s) 2,056,234 1,401,055

Constitution of the SchemeThe Scheme offers defined contribution benefits to:

• the current and former workforces of the Participating Employers (see list of Participating Employers on pages 5 and 6);

• Members who have been transferred to the Scheme by the trustees of another pension scheme; and

• Members who have transferred directly from another scheme.

Membership criteria, such as eligibility conditions and contribution rates, are generally determined by each Participating Employer and set out in its Deed of Participation.


Each member’s pension pot is kept separate from every other member. Likewise, each Participating Employer’s membership demographic is kept separate from that of every other Participating Employer.

The Scheme is a Registered Pension Scheme under the Finance Act 2004 (Registered Pension Scheme number 00784167RL). It is governed by a Trust Deed and Rules dated 22 August 2012, by the Deeds of Participation of each Participating Employer, and by any amending documentation.

In addition to the information contained in this report, all Scheme members are entitled to see, or to obtain copies of, certain Scheme-related documents. For this purpose, ‘members’ includes active and prospective members, pensioners, deferred members with a right to future benefits from the Scheme and the spouses and beneficiaries of people in all those groups. The documents concerned are:

• the Scheme Trust Deed and Rules;

• amendments or updates to the Trust Deed and Rules;

• names and addresses of Participating Employers (if not set out in the Trust Deed);

• the payment schedule in respect of their employer (or former employer);

• the Statement of Investment Principles; and

• WorkSave Pension Trust (WPT) Policy.

Copies of these documents are available to members on request, at a charge limited to the expense of copying, package and posting. If copies of the document concerned are already available, the Trustees may tell the person requesting them where copies can be obtained. Recognised trade unions are also entitled to see, or request copies of, the same documents.

Members are entitled to request sight of these documents (although they may only request a Deed of Participation in respect of any Participating Employer through whom they have accrued entitlement to scheme benefits).

TrusteesThe Trustees are responsible for the administration and investment policy of the Scheme, and for the appointment of the Scheme’s advisers.

The current Trustees comprise three Corporate Trustees:

• Legal & General Trustees Limited;

• Pitmans Trustees Limited (Independent Professional Trustee); and

• BESTrustees Plc (Independent Professional Trustee), appointed 14 April 2015.

The Scheme Rules contain provisions for the appointment and removal of the Trustees by the Principal Employer, Legal & General Resources Limited. The Rules also include a provision for an Independent Trustee to be appointed ‘at all practicable times’.

The structure of the Trustees is such that the balance of powers always lies with the Independent Trustees.

No provision has been made to appoint Member Nominated Trustees or Member Nominated Directors recognising that issues of confidentiality or commercial sensitivity involving Participating Employers may arise from time to time. There is no legal obligation to appoint Member Nominated Trustees or Member Nominated Directors. However, we invite each Participating Employer to join our Mastertrust Employer Group, which is a formal group, meeting quarterly, where they can represent the interests of their own membership demographic and can contribute generally to the governance processes and other Scheme related matters. We also host Members’ Forums (see DC Statement on pages 38 to 60).

The Trustees meet formally on a quarterly basis, or more frequently as required, using the most appropriate medium for a given situation (for example, in person, by telephone, video-conference, email or specialist off-site meeting software packages). Due to the significant changes brought by Freedom and Choice, the Trustees met formally during the year on a total of seven occasions (excluding the Members’ Forum).


During the year the following committees held additional meetings:

• the Investment Sub-Committee;

• the Communications Sub-Committee; and

• the Dispute Resolution and Discretionary Payments Sub-Committee.

Each of the Sub-Committees comprises appropriately experienced and qualified personnel drawn from staff employed by Legal & General Assurance Society Limited, chaired by a Trustee representative to identify management actions that are either currently being taken, or that are believed should be taken, in order to mitigate the identified risks. The Terms of Reference for each of the Sub-Committees can be requested from the Trust Services whose contact details are on page 20.

A number of informal meetings and meetings of Trustees’ working groups were also held.

The Trustees have a delegation policy, including the delegation of certain decisions on discretionary benefit payments to the Dispute Resolution and Discretionary Payments Sub-Committee. The delegation policies are reviewed by the Trustees periodically, as are the Terms of Reference for each Sub-Committee.

Risk managementThe Trustees have overall responsibility for internal controls and risk management. They are committed to identifying, evaluating and managing risk and to implementing and maintaining control procedures to reduce significant risks to an acceptable level. In order to meet this responsibility, the Trustees have adopted a risk policy. The objective of this policy is to limit the exposure of the Trustees, and the assets that they are responsible for safeguarding, to business, financial, operational, compliance and other risks where possible.

The Trustees have established a Risk Register for this purpose, which is a standing agenda item at each Trustees’ meeting. The purpose of the Risk Register is:

• to highlight the scope of risk to which the Scheme is exposed from the Trustees’ perspective;

• to highlight the scope of risk to which the Scheme Administrator is exposed;

• to rank those risks in terms of likelihood and impact; and

• to identify management actions that are either currently being taken, or that are believed should be take, in order to mitigate the identified risks.

Additionally, the Trustees require the Scheme Administrator (Legal & General Assurance Society Limited) to maintain a separate Risk Register which covers additional items specific to their role and duties. They are required to present their risk assessment to the Trustees at least quarterly.

The Trustees engaged independent service practitioners to prepare their first Type 1 internal controls report for this Scheme and its sister scheme under the Master Trust Assurance Framework (MTAF) (the Master Trust Supplement TECH 07/14 to AAF 02/07) as at 16 May 2016. The MTAF was developed by The Pensions Regulator in partnership with the ICAEW (Institute of Chartered Accountants in England and Wales). It is designed to help trustees assess whether their scheme has adopted standards of governance and administration that meet the TPR’s DC code and DC regulatory guidance.

A Type 1 internal controls report is intended to provide the user with a description of the relevant control procedures that relate to the control objectives referred to in the above framework and the Trustees’ confirmation that these procedures were suitably designed – such that there is reasonable assurance that the specified control objectives would be achieved if they were operating effectively. The independent practioners report on the design effectiveness of these control procedures. In accordance with the Pensions Regulator’s guidance, the Trustees will issue a Type 2 report, which is intended to cover the operation of these controls over the twelve month period from the date of the Type 1 report.

The Type 1 Internal Controls Report is available on the Mastertrust website: www.landg.com/mastertrust

Brexit – post EU Referendum resultOn 23 June 2016, the UK electorate voted to leave the European Union. This decision is expected to begin an exit process that could take up to two years to complete under the relevant legislation. The UK remains a member of the European Union until such time as this process is effected.

The result of the referendum is likely to cause a period of uncertainty for the UK economy and financial markets and there could, potentially, be significant volatility in the valuation of investment assets – including the impact from fluctuations in foreign exchange rates.

The longer term impact of the referendum decision is clearly yet to be determined. The Trustees will keep the situation under review over the coming months, including implications for future investment strategy and risk management.


Statement of the Trustees’ responsibilitiesTrustees’ responsibilities in respect of the financial statements

The financial statements, which are prepared in accordance with UK Generally Accepted Accounting Practice, including the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102), are the responsibility of the Trustees. Pension scheme regulations require the Trustees to make available to Scheme members, beneficiaries and certain other parties, audited financial statements for each Scheme year which:

• show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of the Scheme year of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year;

• state whether applicable United Kingdom Accounting Standards, including FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements; and

• contain the information specified in Regulations 3 and 3A of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996.

The Trustees are responsible for supervising the preparation of the financial statements and for agreeing suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis.

The Trustees are also responsible for making available certain other information about the Scheme in the form of an Annual Report.

The Trustees also have a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to them to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities, including the maintenance of an appropriate system of internal control.


Members at 5 April 2015 177,997

Active members Number Deferred members Number

At 5 April 2015 155,155 At 5 April 2015 22,842

Adjustment 313 Adjustment 2,721

At start of year 155,468 At start of year 25,563

Add new members 257,443 Add new members 208

Add rejoiners 37 Add rejoiners (37)

Less deferredwith value

(36,599) Less deferredwith value

36,599

Less death in service (150) Less death in service (27)

Less surrendered (20) Less surrendered (15,789)

Less retirement (46) Less retirement (1,523)

Less transferred (26) Less transferred (679)

At end of year 376,107 At end of year 44,315

Members at 5 April 2016 420,422

Financial development of the SchemeThe financial statements on pages 23 to 36 have been prepared and audited in accordance with the regulations made under Section 41(1) and (6) of the Pensions Act 1995.

Scheme membershipThe change in membership of the Scheme during the year is given below:


Notes:

Active members are members in respect of whom payroll contributions are being received, or where a member’s contributions have ceased temporarily but their Participant Employer anticipates their resumption.

Deferred members are members who have left a participant’s employment, or who have opted out of active membership, and for whom the resumption of contributions is not anticipated by their Participant Employer.

Deferred members with value represent a member who was previously in active membership and now has deferred with a fund holding in the Scheme.

All annuities on retirement are secured outside the Scheme by purchasing annuities in the names of the members from one or more annuity providers. The annuities secured are not assets of the Scheme.

Members who have joined the Scheme through employment with more than one Participant Employer, or who have multiple periods of employment with one or more Participant Employer, may be recorded more than once.

Joiners who opt out under the Auto Enrolment Regulations are not included in the membership figures.

New joiners are treated as proposed members until a contribution is received for them. When such a contribution is received their implementation date is the start date of the billing period for the contribution received. This date may be before the start date of the report period, which means that they will show as active members at the start date of the report period instead of new joiners. Therefore, the number of active members showing at the start date of the reporting period can be greater than the number of active members shown at the end of the previous reporting period.

Adjustments to the opening membership figures reflect, for active members, the late notification of new joiners. For deferred members, adjustments relate to late notification of member movements.

Payment scheduleEach Participant Employer pays contributions to the Scheme in accordance with its Deed of Participation. These deeds describe the earnings components on which contributions are based, the different contribution rates payable both by the members and by their Employer (where applicable) and any salary sacrifice arrangements that may apply.

The Trustees are required to monitor that the contributions are paid in accordance with its Deeds of Participation, and have established a risk based process in order to do this. They are also required to investigate late payments, and have an obligation to whistle blow to the Pensions Regulator if they believe a Participant Employer persistently makes late, inaccurate or insufficient payments.

The Trustees are satisfied that the IT interfaces between each Employer’s payroll and Legal & General’s ‘Payroll Gateway’, and all ‘Gateway’ checks and balances, operate efficiently. In addition, a sampling process has been established to provide additional assurance to the Trustees that contributions from Employers are being paid correctly and in a timely fashion.

Following the consultation ‘Better Workplace Pensions: Reducing regulatory burdens…’, new regulations have been laid before Parliament (which took effect on 1 April 2016) and the 1996 Regulations (SI 1996/1975) were amended overnight to reflect these changes. One amendment is to exempt schemes with 20 or more participating employers (which don’t have to be independent) at the start of the year from the requirement to obtain a specific auditors’ statement about contributions. The Scheme has, therefore, not prepared a summary of contributions receivable nor obtained an auditors’ statement about contributions.

DC StatementOn 16 May 2016, the then Chair, Paul Trickett, signed and issued the Mastertrust Annual Governance Statement. This Statement can be read on pages 38 to 60 of this Report. You will also find the Statement on the Mastertrust website: www.landg.com/mastertrust


The Trustees are required by law to develop and to maintain a Statement of Investment Principles, which describes their investment philosophy. They use this to develop their tactical and strategic investment objectives. A copy of the Statement of Investment Principles is included with this Annual Report.

The Scheme offers two options to Participant Employers. They may either delegate all governance responsibility to the Trustees (‘sole governance arrangement’), or they may choose to be involved in the initial and ongoing governance of their scheme (‘shared governance arrangement’).

Sole governance arrangementsUnder a sole governance arrangement, the Trustees select a range of suitable investment funds from the Legal & General Assurance Society Limited (LGAS) investment platform that members may then invest their pension pots in. The funds the Trustees choose are selected in accordance with their Statement of Investment Principles. A ‘default investment’ option is selected for members who do not wish to make an active investment choice. A default investment is an investment option that members will automatically be invested in unless they choose to invest in a different fund. The Trustees choose a default fund which is designed to be suitable for most members, in most circumstances. It is therefore a generically suitable investment. Better investment options may exist for members who wish to play a more active role in the ongoing management of their pension pot.

This range of funds and the default fund (Legal & General (PMC) Multi-Asset – 3-Pen) in particular, are reviewed regularly by the Trustees and the Investment Sub-Committee. The Trustees also commission periodic advice about the sole governance funds from their independent investment adviser, Dean Wetton Advisory.

Shared governance arrangements Employers who have internal Governance Committees may choose to operate a shared governance arrangement, whereby the Employers’ committee works in collaboration with the Trustees in respect of their membership demographic. Typically, shared governance arrangements obtain their own investment advice to provide bespoke investment options for their membership. They will then propose these ‘bespoke’ options to the Trustees, who then decide whether or not to agree to the proposal.

All shared governance clients also have a default fund, which may be different to the default fund under sole governance arrangements.

Scheme investments All of the Scheme contributions are invested in insured pension and life assurance funds, or Open Ended Investment Companies (OEICs). Legal & General Assurance Society Limited is the custodian.

The types of funds that are currently available are as follows:

• Internal funds – funds that are managed by Legal & General Investment Management Limited.

• External funds – funds that invest in funds managed by a company other than the Legal & General Group of Companies

• Blends – funds that invest in a combination of internal and external funds.

The investment funds in which members’ pension pots are invested, their return and benchmarks, are listed on pages 15 to 19.

All members’ investment returns vary depending on the specific investment funds they were invested in and the timing of their contributions.

The investment returns (net of fees) of each category of investment funds (annual or from inception to 5 April 2016) are set out in the respective tables on pages 15 to 19. The returns applicable to individual members are shown on their Annual Statements along with the returns of their specific investment funds. The performance of all funds available for members to invest in can be accessed from Legal & General’s online services.

The Occupational and Personal Pension Schemes (Disclosure of Information) regulations 2013 requires the Trustees to provide an overall investment return for the Scheme as a whole over the year to 5 April 2016 and over a longer period of between 3 and 5 years to the Scheme year end. Whilst the Trustees acknowledge this requirement they have decided not to include the Scheme performance within this report. The Scheme offers defined contribution benefits and is designed for members to select their choice of funds. As a consequence the Trustees consider it is the individual fund investment returns shown within this report that are relevant to the readers of this Annual Report and Financial Statements.

Investment report.

continues


Rights attaching to investments The Trustees recognise the importance of exercising shareholder rights (including voting rights) attached to investments. As the Scheme’s investments are in pooled investment vehicles, the rights attaching to the underlying investments in these vehicles are exercised by Legal & General Investment Management (LGIM) who are expected, so far as is possible, to exercise those rights in accordance with their own corporate governance policy and in the best interests of the investors in these vehicles.

Social, environmental and ethical issues The Trustees’ policy regarding social, environmental and ethical considerations is taken into account as part of the day-to-day investment decisions delegated to LGIM. It is expected that LGIM understands that the Trustee’s primary responsibility is to act in the best financial interests of the members.

Where a participating employer opts to operate its own governance, the Trustees will expect that such governance also recognises the principle of best financial interest for its members.


Internal Funds – Passive

Investment fund name

Return 1 year %

Performance deviation 1 year %

Return 3 years %

Performance deviation 3 years %

Return 5 years %


L&G (PMC) Multi-Asset 3-Pen

(0.66) 0.21 14.47 0.17 - -

L&G (PMC) Global Equity Fixed Weights 50:50 Index 3-Pen

(6.53) 0.12 20.17 0.12 6.62 0.12

L&G (PMC) Over 15 Year Gilts Index 3-Pen

2.93 0.03 26.26 0.03 10.94 0.02

L&G Retirement Income Multi-Asset (PMC) 3***

0.42 4.00 - - - -

L&G (PMC) Consensus Index 3-Pen*

(2.10) 0.09 16.71 0.12 5.59 0.07

L&G (PMC) World (Ex-UK) Equity Index 3-Pen

0.25 0.08 30.88 0.08 8.83 0.09

L&G (PMC) All Stocks Index Linked Gilts Index 2-Pen

1.07 0.02 15.37 0.04 8.46 0.04

L&G UK Equity Index (PMC) 3

(4.69) 0.07 13.32 0.11 5.26 0.11

L&G Global Equity 70:30 Index 3-Pen*

(4.30) 0.05 23.64 0.10 6.80 0.10

L&G (PMC) Ethical UK Equity Index 3-Pen

(4.76) 0.06 13.19 0.07 5.68 0.05

L&G (PMC) Ethical Global Equity Index 3-Pen

(0.81) 0.05 30.19 0.01 9.03 0.03

L&G (PMC) AAA-AA-A Corp Bond All Stocks Index 3-Pen

0.58 0.04 13.88 (0.04) 6.53 0.04

continues



Return 1 year %

Performance deviation 1 year %

Return 3 years %


Return 5 years %


L&G (PMC) Asia Pacific Ex-Japan Equity Index 3-Pen

(6.40) 0.18 (0.03) 0.16 2.23 0.16

Over 5 Years Index Linked Gilts (PMC) 3

1.13 0.03 17.03 0.03 9.62 0.02

L&G (PMC) North America Equity Index 3-Pen

4.67 0.03 44.70 0.05 12.78 0.06

L&G (PMC) Pre-Retirement 3-Pen**

1.81 0.05 19.03 0.24 8.76 0.09

L&G (PMC) Europe (Ex-UK) Equity Index (PMC) 3-Pen

(5.24) 0.16 20.89 0.15 4.54 0.17

L&G (PMC) Japan Equity Index 3-Pen

(4.31) 0.07 21.51 0.03 7.03 0.06

(PMC) World Emerging Markets Equity Index 3

(11.83) 0.13 (7.11) 0.15 (2.68) 0.15

Asia Pacific (Ex-Japan) Dev Equity Index (PMC) 3

(6.52) 0.21 (2.50) 0.14 1.65 0.13

L&G AAA-AA-A Corp Bond Over 15 Years Index (PMC) 3

0.04 0.07 25.31 0.03 9.64 0.12

Source: LGIM

Tracking deviations

All passive funds performed in line with their target tracking error during the annual reporting period.

*These funds’ main objectives are to maintain asset allocation; hence they have a composite benchmark instead of a single benchmark with a tracking error target.

**Please note that tracking deviation figures are loosely applied on these funds due to the fact that although the funds are passively managed they do not have specific tracking targets of traditional index tracking funds.

***Scheme has not held investment for more than 1 year. The full fund performance for 1 year is shown in this table for information purposes only.


Internal funds – active


Return 1 year %

Benchmark 1 Year % (ABI sector)

Return 3 years %


Return 5 years %


L&G Property 3-Pen 9.61 7.08 38.00 34.32 7.28 6.87

L&G Cash 3-Pen 0.49 (0.06) 1.44 (0.20) 0.69 (0.01)

L&G Fixed Interest 3-Pen

3.31 2.19 13.92 11.30 6.64 6.06

L&G Growth 3 3.66 (3.76) 29.81 17.73 5.84 6.29

Source: Lipper

External funds


Return 1 year %


Return 3 years %


Return 5 years %


L&G Threadneedle Global Equity 3-Pen

(0.07) (3.49) 21.49 16.03 6.88 5.17

L&G Investec Cautious Managed 3-Pen

(3.31) (2.66) 2.60 9.79 3.48 4.61

L&G Neptune Balanced 3-Pen

(8.04) (3.35) 7.21 14.06 3.14 5.07

L&G Henderson Preference & Bond 3-Pen

0.85 (1.39) 16.98 10.15 6.51 4.90

L&G Invesco Perpetual High Income 3-Pen

(0.66) (3.76) 27.17 17.73 10.88 6.29

L&G M&G Corporate Bond 3-Pen

0.88 (0.44) 14.46 11.81 6.89 6.10

L&G JP Morgan Emerging Markets 3-Pen

(9.01) (9.53) (7.77) (5.88) (1.54) (2.55)

L&G Pension Artemis Global Growth 3

(0.82) (2.44) 40.24 21.51 11.04 6.45

Source: Lipper


External funds (continues)


Return 1 year %


Return 3 years %

Benchmark 3 Years % (ABI sector)

Return 5 years %

Benchmark 5 Years % (ABI sector)

L&G Pensions Jupiter European Special Situations 3-Pen

(0.43) (3.36) 22.60 23.69 6.58 5.86

L&G Pension Schroder Global Real Estate Secs 3

1.21 2.15 17.51 16.87 8.21 3.57

L&G Ecology 3-PEN (0.41) (2.44) 24.31 21.51 6.01 6.45

L&G Invesco Perpetual Corporate Bond 3-PEN

0.32 (0.44) 12.65 11.81 5.83 6.10

L&G Blackrock UK 3-Pen

0.53 (3.76) 18.32 17.73 5.33 6.29

L&G Artemis Income 3-Pen

(1.98) (2.75) 19.79 21.06 8.45 7.89

L&G Investec UK Special Situations 3-Pen

(5.49) (3.76) 10.43 17.73 6.66 6.29

L&G Old Mutual UK Mid Cap Fund 3-Pen

8.30 (3.76) 51.28 17.73 15.34 6.29

L&G Schroder UK Mid 250 3-Pen

(1.56) (3.76) 26.57 17.73 11.29 6.29

L&G UK Smaller Companies 3-Pen

8.53 9.48 44.85 40.12 13.72 11.52

L&G Blackrock UK Smaller Companies 3-Pen

7.99 9.48 34.17 40.12 9.70 11.52

L&G Pension HSBC Life Amanah Global Equity Index Fund 3

3.72 (2.44) 35.15 21.51 – –

Source: Lipper

Internal funds are either passive or active funds. Active funds, which include all external funds, are compared to their ABI Sector average.

A positive performance deviation indicates that the fund return is higher than the applicable benchmark or index, a negative performance deviation indicates that it is lower. Negative figures are displayed in brackets.


Blends

Blend name Commencement Pricing Date

3 Months % 6 Months % 12 Months % From Inception%

Tesco Growth Fund 30/12/2015 5.24 N/A N/A 3.40

Tesco Equity Fund* 30/12/2015 4.17 N/A N/A 2.08

Tesco Diversified Fund*

30/12/2015 6.45 N/A N/A 7.23

Tesco Corporate Bond Fund*

30/12/2015 3.18 N/A N/A 4.15

Mastertrust Multi-Asset Transitioning Blend *

29/09/2015 6.56 5.05 N/A 5.10

Tesco Cash Fund* 31/12/2015 0.13 N/A N/A 0.14

Tesco Shariah Fund* 07/01/2016 N/A N/A N/A 7.45

Tesco Ethical Fund* 04/01/2016 3.27 N/A N/A 3.22

Tesco Index-Linked Gilts Fund*

14/01/2016 N/A N/A N/A 4.38

Tesco Annuity Target Fund*

13/01/2016 N/A N/A N/A 3.91

Source: LGIM

Benchmarks and performance deviations are not supplied for blends as they represent multiple funds. The individual funds within these blends are shown separately above with the internal and external funds.

*Scheme has not held investment for more than 1 year.


The Trustees’ Report and Investment Report were approved by the Trustees and signed on their behalf by:

Name: Steve Carrodus Interim Chair of the Legal & General WorkSave Mastertrust RAS Pension Scheme

Date: 31 August 2016

Further informationMember information has been included on page 37. Requests for additional information about the Scheme generally, or relating to members’ benefits should be sent to the Trust Services at the address below:

Address: Trust Services Legal & General Assurance Society Limited Legal & General House St Monica’s Road Kingswood Surrey KT20 6EU

Tel: 01737 374369

Email: [email protected]


Independent auditors’ report to the Trustees of the Legal & General WorkSave Mastertrust (RAS).Report on the financial statementsOur opinion

In our opinion, the Legal & General WorkSave Mastertrust (RAS)’s financial statements:

• show a true and fair view of the financial transactions of the Scheme during the year ended 5 April 2016, and of the amount and disposition at that date of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the year;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• contain the information specified in Regulations 3 and 3A of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act 1995.

What we have audited

Legal & General WorkSave Mastertrust (RAS)’s financial statements are comprised of:

• the statement of net assets available for benefits as at 5 April 2016;

• the fund account for the year then ended; and

• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’.

In applying the financial reporting framework, the Trustees have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

Responsibilities for the financial statements and the auditOur responsibilities and those of the Trustees

As explained more fully in the statement of Trustees’ responsibilities, the Trustees are responsible for the preparation of the financial statements and being satisfied that they show a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinion, has been prepared for and only for the Trustees as a body in accordance with Section 41 of the Pensions Act 1995 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.


What an audit of financial statements involves

We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

• whether the accounting policies are appropriate to the Scheme’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the Trustees; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the Trustees’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London


(a) The maintenance and integrity of the Legal & General WorkSave Mastertrust website is the responsibility of the Trustees; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


Fund account for the year ended 5 April 2016.

Year ended 5 April 2016

Year ended 5 April 2015

Note £000’s £000’s

Employer contributions 4 283,951 135,628

Member contributions 4 24,758 14,811

308,709 150,439

Transfers in 5 29,150 4,502

337,859 154,941

Benefits 6 (17,799) (6,689)

Payments to and on account of leavers 7 (5,064) (3,243)

Transfers to other schemes 8 (9,128) (5,500)

Administrative expenses 9 (2,140) (1,716)

(34,131) (17,148)

Net additions from dealings with members 303,728 137,793

Net returns on investments

Change in market value of investments 10 (13,540) 63,395

Net increase in the Fund during the year 290,188 201,188

Net assets of the Scheme

As at the start of the year 736,311 535,123

As at the end of the year 1,026,499 736,311

The notes on pages 25 to 36 form an integral part of these financial statements.


Statement of net assets (available for benefits) as at 5 April 2016.

The financial statements summarise the transactions of the Scheme and deal with the net assets at the disposal of the Trustees. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Scheme year.

The notes on pages 25 to 36 form an integral part of these financial statements.

These financial statements were approved by the Trustees and signed on their behalf by:

Name: Steve Carrodus Interim Chair of the Legal & General WorkSave Mastertrust RAS Pension Scheme


Note 5 April 2016 5 April 2015

£000’s £000’s

Investment assets Pooled investment vehicles

10 1,022,769 733,250

Current assets 11 3,836 3,322

Current liabilities 12 (106) (261)

Net assets of the scheme 1,026,499 736,311


Notes to the financial statements.1. General informationThe Scheme is a Registered Pension Scheme under the Finance Act 2004 (Registered Pension Scheme number 00784167RL). It is governed by a Trust Deed and Rules dated 22 August 2012, by the Deeds of Participation of each Participating Employer, and by any amending documentation.

The Scheme offers defined contribution benefits to:

• the current and former workforces of the Participating Employers (see list of Participating Employers on pages 5 and 6);

• Members who have been transferred to the Scheme by the trustees of another pension scheme; and

• Members who have transferred directly from another scheme.

The Scheme is registered for Relief at Source on Members’ contributions.

2. Statement of complianceThe individual financial statements of the Legal & General WorkSave Mastertrust (RAS) have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, Financial Reporting Standard (FRS) 102 – The Financial Reporting Standard applicable in the UK and Republic of Ireland issued by the Financial Reporting Council (‘FRS 102’) and the guidance set out in the Statement of Recommended Practice ‘Financial Reports of Pension Schemes’ (revised November 2014) (‘the SORP’).

In adopting FRS 102, the Trustees have been early to adopt the provisions of ‘Amendments to FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland – Fair value hierarchy disclosures (March 2016)’.

3. Accounting policiesThe following accounting policies have been adopted consistently:

FRS 102

The Scheme has adopted FRS 102 in these financial statements for the first time. Details of the transition to FRS 102 are disclosed in note 19.

Currency

The Scheme’s functional currency and presentational currency is pounds sterling (GBP).

Pension contributions

Employer and member contributions remitted by the Participant Employers are accounted for on an accruals basis based on the pay period to which they relate. Refunds for members who opt out of the Scheme are accounted for in the period that the member gives notification of their intention to opt out.

Tax relief on pension contributions

Where employee contributions are received under ‘relief at source’ arrangements, the Administrator advances any income tax credits at the time the contributions are received or committed and then reclaims them from HMRC. Any tax relief in respect of members’ contributions is included in the financial statements as Tax Relief at Source.

Investment of pension contributions

Pension contributions are invested on the next available valuation date after receipt, except for contributions received and held in cash within a member’s automatic enrolment opt out window.

Member benefits

Benefits payable to members are accounted for on an accruals basis from the date they are claimed.


Transfers in have been received as cash.

5. Transfers in

Year Ended 5 April 2016 £000’s


Individual transfers in from other schemes 24,539 4,502

Group transfers in from other schemes 4,611 -

Total 29,150 4,502



Employers 283,951 135,628

Members 19,806 11,849

Tax Relief at Source 4,952 2,962

Total 308,709 150,439

Transfers to and from other schemes

Transfer values represent the capital sums either receivable in respect of members from other pension schemes of previous employers or payable to the pension schemes of new employers for members who have left the Scheme. They are accounted for on an accruals basis on the date the trustees of the receiving scheme accept the liability. The liability normally transfers when a payment is made, unless the trustees of the receiving scheme have agreed to accept the liability in advance of receiving the funds.

Group transfers, where the Trustees have agreed to accept the liability prior to the receipt, are accounted for in accordance with the agreement.

Charges

Administrative charges are accounted for on a period end basis and represent the amount deducted by the period end date.

Fund Management Charges are included in the unit price and vary from fund to fund.

Valuation of investments

Investment assets and liabilities are included in the financial statements at fair value. Investments are included in the net assets statement at their value based on the unit price at the period end date, as provided by Legal & General Assurance Society Limited. All unit prices are single priced.

4. Contributions


6. Benefits



Lump sum death benefits 1,317 675

Purchase of annuities 1,319 2,250

Income drawdown payments 4,313 141

Partial Uncrystallised Funds Pension Lump Sums 565 -

Cash lump sums paid to members 9,463 724

Triviality payments 822 2,899

Total 17,799 6,689

7. Payments to and on account of leavers



Short service refunds on leaving service 5,064 3,243

Total 5,064 3,243

8. Transfers to other schemes



Individual transfers to other schemes 9,128 5,500

Total 9,128 5,500


10. Investment assetsInvestments purchased by the Scheme are allocated to provide benefits to the members on whose behalf the corresponding contributions were paid.

Accordingly, the assets identified as designated to members do not form a common pool of assets available for members generally.

All investments are provided by the WorkSave Pension Trust Insurance Policy offered by Legal & General Assurance Society Limited and are held as pooled investments.

The crediting of units to the Policy operates only as a means of calculating benefits. All units under the Policy are owned by Legal & General Assurance Society Limited.

Members each receive an annual statement confirming the contributions paid on their behalf and the value of their money purchase rights.

There are no employer-related investments, as per the WPT Policy.

The movements in investments during the year were:



Market value at the start of the year 733,250 536,154

Purchases 337,450 153,541

Sales (34,391) (19,840)

Change in Market Value of Investments (13,540) 63,395

Market value at the end of the year 1,022,769 733,250

Administrative charges, which vary between Employers, are charged by Legal & General Assurance Society Limited, against the value of each pension pot and are payable by the member. Charges are deducted from members’ pots by the encashment of units. These are calculated daily and deducted on the monthly anniversary of each member’s pot. The charges shown here are those that have been deducted from members’ pots in the year ended 5 April 2016. Some Employers may choose to reduce the annual management charge by paying fees direct to LGAS which are not included above.

9. Administrative expenses



Administrative charges 2,140 1,716

Total 2,140 1,716

The purchases represent the cash value of contributions received, and the sales represent the cash value of units disinvested. Sales and purchases of units in funds which relate to switching when members change their fund strategy are not included in these figures.


The market value of investments can be analysed as follows:

Investment fund name 5 April 2016 £000’s

5 April 2015£000’s

Multi-Asset (PMC) 3 395,125 296,385

L&G (PMC) UK Equity Index 3B 296,524 303,468

Tesco Growth Fund 92,102 –

Tesco Equity Fund 43,094 –

L&G Fixed Interest 3 41,199 36,035

Global Equity Fixed Weights 50:50 Index (PMC) 3 37,337 35,634

Over 15 Year Gilts Index (PMC) 3 23,213 26,807

L&G Cash 3 23,047 20,386

Tesco Diversified Fund 22,358 –

Tesco Corporate Bond Fund 10,222 –

Mastertrust-Multi-Asset Transitioning Blend 9,581 –

Long-Term Growth Strategy 9,011 6,438

Retirement Income Multi-Asset (PMC) 3 5,081 –

Consensus Index (PMC) 3-Pen 4,649 3,335

World (Ex-UK) Equity Index (PMC) 3 2,672 2,077

Tesco Cash Fund 1,772 –

L&G Property 3 1,474 508

All Stocks Index Linked Gilts Index (PMC) 3 691 489

UK Equity Index (PMC) 3 665 251

Global Equity 70:30 Index 3 628 –

Ethical UK Equity Index (PMC) 3 367 249

L&G Pension HSBC Life Amanah Global Equity Index Fund 3 271 –

L&G Pension Threadneedle Global Equity 3 265 260

continues



5 April 2015£000’s

Ethical Global Equity Index (PMC) 3 231 56

AAA-AA-A Corp Bond All Stocks Index (PMC) 3 151 253

Asia Pacific Ex Japan Equity Index (PMC) 3 134 127

L&G Pension Investec Cautious Managed 3 132 71

Over 5 Year Index Linked Gilts Index (PMC) 3 125 –

L&G Neptune Balanced 3 117 91

L&G Henderson Preference & Bond 3 85 53

North America Equity Index (PMC) 3 83 39

Pre-Retirement (PMC) 3 81 26

L&G Invesco Perpetual High Income 3 77 41

L&G M&G Corporate Bond 3 49 14

L&G Pension Artemis Global Growth 3 21 –

Europe (Ex-UK) Equity Index (PMC) 3 18 14

Japan Equity Index 3-Pen 16 –

L&G JP Morgan Emerging Markets 3 14 3

L&G Pensions Jupiter European Special Situations 3 12 –

Tesco Shariah Fund 10 –

World Emerging Markets Equity Index (PMC) 3 8 –

L&G Pension Schroder Global Real Estate Secs 3 7 –

Asia Pacific (Ex-Jap) Dev Equity Index (PMC) 3 7 –

Tesco Ethical Fund 6 –

L&G AAA-AA-A Corp Bond Over 15 Yr Index (PMC) 3 6 –

Tesco Index – Linked Gilts Fund 5 –

L&G Pension Jupiter Ecology 3 5 –

continues



5 April 2015£000’s

L&G Invesco Perpetual Corporate Bond 3 5 –

Tesco Annuity Target Fund 2 –

L&G Pension BlackRock UK 3 2 –

L&G Pension Growth 3 2 –

L&G Pension Artemis Income 3 2 –

L&G Pension Investec UK Special Situations 3 2 –

L&G Pension Old Mutual UK Mid Cap Fund 3 2 –

L&G Pension Schroder UK Mid 250 3 2 –

L&G Pension UK Smaller Companies 3 1 –

L&G Pension BlackRock UK Smaller Companies 3 1 –

L&G Pension HSBC Life Amanah 3 – 140

Total 1,022,769 733,250


Year Ended 5 April 2015£000’s

Equities 382,484 342,359

Bonds 75,834 63,677

Property 1,474 508

Diversified Growth 538,158 306,320

Cash 24,819 20,386

Market value at the end of the year 1,022,769 733,250

All of above assets are designated to members. The companies operating the pooled funds are registered in the United Kingdom.

The market value of investments (pooled investment vehicles) by type can be analysed as follows:


11. Fair value of investments The fair value of financial instruments has been determined using the following fair value hierarchy:

• Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.

• Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

Level

Investment assets 1£000’s

2£000’s

3£000’s

2016 Total £000’s

Pooled Investment Vehicles - 1,022,769 - 1,022,769

Total - 1,022,769 - 1,022,769

Level

Investment Assets 1£000’s

2£000’s

3£000’s

2016 Total £000’s

Pooled Investment Vehicles - 733,250 - 733,250

Total - 733,250 - 733,250

Funds representing more than 5 % of the Scheme net assets

Investment Fund Name 5 April 2016 % of net assets

5 April 2015 % of net assets

L&G (PMC) Multi-Asset 3-Pen 38.5 40.3

L&G (PMC) UK Equity Index 3B-Pen 28.9 41.2

Tesco Growth Fund 9.0 -


12. Investment risks FRS 102 requires the disclosure of information in relation to certain investment risks.

Credit risk: this is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Market risk: this comprises currency risk, interest rate risk and other price risk.

• Currency risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in foreign exchange rates.

• Interest rate risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market interest rates.

• Other price risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

Under a sole governance arrangement, the Trustees select a range of suitable investment funds from the LGAS investment platform that members may then invest their pension pots in including a default investment option for members who do not wish to make a deliberate investment choice. The Trustees also work with governance committees of those employers under a shared governance arrangement, on the range of bespoke investment options for the members of that employer.

The Scheme has exposure to these risks because of the funds it makes available to and are invested in by the members of the Scheme.

Further information on the Trustees’ approach to risk management, credit and market risk is set out below.

Investment strategy

The Trustees’ objective is to make available to members of the Scheme an appropriate range of investment options designed to generate income and capital growth, which together with new contributions from members and their employer, will provide a retirement amount with which the member can purchase a pension annuity (or other type of retirement product). The SIP outlines the investment objectives and strategy for the Scheme.

The investment funds offered to members are as follows:

• Internal funds – funds that are managed by Legal & General Investment Management Limited

• External funds – funds that invest in funds managed by a company other than the Legal & General group of companies

• Blends – funds that invest in a combination of internal and external funds.

These funds in which members’ pension pots are invested are listed in note 10 of the financial statements. An analysis by type of underlying investments is also found in note 10.

The Trustees have an investment management agreement in place with LGAS that sets out guidelines for the underlying investments held by the funds. The day to day management of the underlying investments of the funds is the responsibility of LGAS, including the direct management of credit and market risks.

The Trustees monitor the underlying risks by quarterly investment reviews with LGAS.

The risks disclosed here relate to the Scheme’s investments as a whole. Members are able to choose their own investments from the range of funds offered by the Trustees and, therefore, may face a different profile of risks from their individual choices compared with the Scheme as a whole.


The following table summarises the extent to which the various classes of investments are affected by market risks:

5 April 2016 £000’s

5 April 2015 £000’s

Currency Risk

Interest Rate Risk

Other Price Risk

Equities 382,484 342,359

Bonds 75,834 63,677

Property 1,474 508

Diversified Growth 538,158 306,320

Cash 24,819 20,386

Market value at the end of the year

1,022,769 733,250

ü

û

ü

û

ü

û

û

ü

ü

ü

ü

ü

ü

û

û

Credit risk

The Scheme is subject to direct credit risk in relation to LGAS through its holding in unit linked insurance funds provided by LGAS.

LGAS is regulated by the Financial Conduct Authority and maintains separate funds for its policy holders. The Trustees monitor the creditworthiness of LGAS by reviewing published credit ratings.

In the event of default by LGAS the Trustees on behalf of the members may be entitled to full compensation from the Financial Services Compensation Scheme.

The Scheme is also subject to indirect credit and market risk arising from the underlying investments held in the pooled funds. Member level risk exposures will be dependent on the funds invested in by members.

At the year-end the Bond, Cash and Diversified Growth funds totalling £638,811,000 (2015: £390,383,000) were exposed to underlying credit risk. The Trustees only invest in funds where the financial instruments and all counterparties used are at least investment grade rated.

Market risk

The Scheme is subject to indirect foreign exchange, interest rate and other price risk arising from the underlying financial instruments held in the funds managed and/or made available by LGAS.


14. Current liabilities

5 April 2016 £000’s

5 April 2015£000’s

Tax-free cash due to members - 6

Purchase of annuities - 30

Income drawdown 46 -

Lump sum death payments - 104

Refunds on members leaving service 56 114

Tax 4 7

Total 106 261

Tax is owed to HMRC in respect of Short Service Refunds to members. All of the above balances are designated to members.

13. Current assets

All contributions due to the Scheme relate to the month of March 2016 and were paid in full to the Scheme within the timescale required by the payment schedules currently in force. All of the above numbers are designated to members apart from the bank balances.

5 April 2016 £000’s

5 April 2015£000’s

Contributions due in respect of:EmployersMembers

2,660317

2,305333

Tax relief at source 79 83

Bank balances 780 601

Total 3,836 3,322


15. Trustee remunerationLegal & General Trustees Limited comprises Independent and Non-Independent Directors. Independent Directors are directors who otherwise have no business connection with the Legal & General Group. Non-Independent Directors may carry out a variety of other remunerated work for the Legal & General Group. In the period to 5 April 2016, the Independent Directors of Legal & General Trustees Limited were remunerated by fees; Non-Independent Directors were salaried employees of the Legal & General Group.

Pitmans Trustees Limited and BESTrustees Plc are paid by a combination of retainer and time cost fees.

During the year, fees and expenses for all of the scheme advisers, Legal & General Trustees Limited directors, Pitmans Trustees Limited and BESTrustees Plc were paid by Legal & General Assurance Society Limited. In the Scheme year this amounted to £218,000 (2015: £110,624) for this Scheme and its sister Scheme. None of these costs and expenses are reflected in these financial statements.

16. Related partiesLegal & General Resources Limited is the Principal Employer. It does not participate in the Scheme and derives no income or other financial (or non-financial) benefit from it. It is responsible for appointing the Trustees but is otherwise not involved in any of the Scheme’s commercial undertakings or appointments.

Legal & General Assurance Society Limited (LGAS) is the Scheme Administrator. It provides the administration services, including collecting and investing contributions, and paying benefits as and when members leave or retire. It provides a suite of communications materials, including member booklets and investment guides, and delivers an on-line portal for each Participating Employer and their members. LGAS also provides the insurance policy that provides access to the investment platform of Legal & General Investment Management Limited (LGIM), with whom the Trustees have no direct relationship.

LGAS is remunerated for its services through charges (Annual Management Charge (AMC) and Fund Management Charge (FMC)) deducted from members’ pension pots and fee income from those participating employers who choose to reduce the Annual Management Charge by paying fees direct to LGAS.

LGAS pays all the Scheme expenses on behalf of the Trustees, including fees, expenses and other disbursements of the Trustees’ advisers. The Trustees are responsible for the appointment of all parties.

Legal & General Trustees Limited (LGTL) is a wholly owned subsidiary of LGAS. It is an independently chaired company.

The Trustees are satisfied that all Related Party transactions are transparent and free of any commercial bias.

17. Contingencies and commitmentsIn the opinion of the Trustees, the Scheme had no contingent assets, liabilities or contractual commitments as at 5 April 2016 (2015: Nil).

18. Subsequent eventsThere were no subsequent events requiring disclosure in the financial statements.

19. Transition to FRS 102This is the first year that the Scheme has presented statements under FRS 102 and the SORP. The last financial statements under existing UK GAAP and the previous SORP (revised May 2007) were for year ended 5 April 2015. The date of the transition to FRS 102 was 6 April 2014. There have been no changes to 2015 figures as a result of this transition.


Member information.Registrar of occupation and personal pension schemesThe Registrar’s main purpose is to provide a tracing service for members (and their dependents) of previous employers’ schemes, who have lost touch with earlier employers and Trustees. To trace a benefit entitlement under a former employer’s scheme, enquiries should be addressed to:

Pension Tracing Service, The Pension Service 9, Mail Handling Site A, Wolverhampton, WV98 1LU Telephone: 0345 600 2537

The information provided includes details of the address at which the Trustees of a pension scheme may be contacted. This Scheme has been registered with the Registrar.

The Pensions Advisory Service Any concern connected with the Scheme should be referred to the Trust Services at Legal & General Assurance Society Limited (see page 20 for contact details), who will try to resolve the problem as quickly as possible. Members and beneficiaries of occupational pension schemes who have problems concerning their scheme which are not satisfied by the information or explanation given by the administrators or the Trustees can consult with the Pensions Advisory Service (TPAS). A local TPAS adviser can usually be contacted through a Citizens Advice Bureau. Alternatively TPAS can be contacted at:

11 Belgrave Road, London, SW1V 1RB Telephone: 0300 123 1047

Pensions ombudsmanIn cases where a complaint or dispute cannot be resolved, normally after the intervention of TPAS, an application can be made to the Pensions Ombudsman for him to investigate and determine any complaint or dispute of fact or law involving occupational pension schemes. The address is:

11 Belgrave Road, London, SW1V 1RB Telephone: 020 7630 2200


DC Statement for the year ended 5 April 2016.

IntroductionIn April 2015, new governance standards were introduced for all occupational defined contribution schemes. Trustees are now required to provide a governance statement within the scheme’s annual report and accounts, setting out how the Trustees have met these minimum governance standards.

The Trustees are required to:

• Design default arrangements in the best interests of the scheme members and keep these under review;

• Ensure that core financial transactions are processed in a timely and accurate manner; and

• Assess whether member-borne costs and charges represent good value.

To enable the above to be demonstrated the Trustees developed a statement of intent which confirms how they will assess whether the scheme is delivering value for money to scheme members.

This statement covers:

• Price – any costs that relate to your pension arrangement.

• Default Investment Strategies – default funds are the funds 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 quality 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.

The Trustees are focused on adopting a best-practice standard of governance. This report is focused on specific areas that we are required to disclose but we apply this level of governance across the whole of the Mastertrust Pension Scheme. Further

information about our approach can be found in the Annual Report and Accounts for 2015/16.

The scheme is governed by an independent board of Trustees with a wealth of experience in pensions’. More information on each Trustee’s experience can be found in Appendix 2 of this report. We have also

worked with Legal & General in the appointment of a full-time manager who works on behalf of the Trustees to progress all day-to-day Trustee matters.

To help share more about what we do – and to increase both the transparency and accessibility of the Trustees – we have launched a member website. This can be found at www.landg.com/mastertrust

We will provide you with regular updates on the Mastertrust and will communicate to you through this website. Here we will also publish details of forthcoming events, such as our third Annual Member Forum that will take place on 5 September 2016, and details of how to contact us.

I hope you find this report helpful and we look forward to providing further updates in 2016.

The following pages are taken from the Mastertrust Annual Governance Statements, signed on 16 May 2016. This document detailed the role carried out by the Trustees of the Legal & General Mastertrust and the progress made during the year.

Paul Trickett Chair of the Legal & General WorkSave Mastertrust

Date: 16 May 2016

https://entry.landg.com/CAWeb/LandGEntry?targetApp=MANAGEYOURSCHEME_DOCUMENTLIBRARY_ENTRY&reference=Value_for_Money_Mastertrust_Q0053229.pdf

http://www.landg.com/mastertrust


Executive summary.The Trustees invest in a policy of insurance through Legal & General Assurance Society Limited and have a Statement of Investment Principles that describes the principles governing investment decisions made by the Trustees of the Legal & General Mastertrust.

There are two forms of investment governance available within the Mastertrust: Sole Governance and Shared Governance. Shared Governance is available to employers who wish to establish their own investment strategy for their members. Under a Sole Governance model the Trustees select a range of suitable funds that members may invest their pension savings in, which includes a default investment fund.

The Trustees, along with their investment adviser, Dean Wetton Advisory Limited, reviewed their default investment fund ahead of the introduction of Freedom and Choice, in 2015. The Trustees concluded that a design that assumed most members would purchase an annuity was no longer suitable and a strategy needed to be put in place for members who intended to use their pot flexibly, as well as retaining the option for those who favoured a more traditional retirement solution.

The new default investment strategy uses the LGIM Multi-Asset Fund and does not automatically assume a particular retirement option will be chosen; three additional solutions have been introduced for members to choose based on their benefit preferences.

The default fund is reviewed by the Trustees and their adviser at least annually.

There are a number of areas that the Trustees monitor to determine whether members are receiving value for money. This report details how the Trustees review the processing of administration relating to member transactions e.g. a request to claim pension benefits. This includes the time taken for a member to receive their pension funds, how long a member waits for a call to be answered and member satisfaction with the service they receive.

The Trustees also monitor charges and costs associated with administering the pension scheme and for the funds that members invest in. The Trustees are making progress on detailing transaction costs, which form a part of the total costs of managing an investment fund. More progress is needed here which has taken time as there is not yet a regulatory requirement on fund managers to disclose this information.

The Trustees believe that demonstrating ‘value for money’ extends beyond the assessment of member-borne costs and charges, reviewing the default investment strategy and administration performance. The Trustees’ Statement of Intent sets out a range of additional criteria that the Trustees use to assess the value that is being provided to members, which includes the availability of suitable products for members following the introduction of Freedom and Choice, the quality of member communications and member views on the service they receive. The Trustees intend to carry out an independent survey later on this year to provide them with a valuable insight into members’ thinking in this area.

The Trustees welcome members’ and employers’ views and will continue to offer and attend an Annual Member Forum and the Mastertrust Employer Group, for employer representatives to continue to communicate directly with the Trustees.

The Trustees believe that the Mastertrust does offer good value for members. We will work with Legal & General in a process of continuous improvement which will enable us to offer greater services, communications and value for our members.


Default arrangement.Statement of Investment PrinciplesThe Trustees invest in a policy of insurance through Legal & General Assurance Society Limited. This insurance policy allows participating companies, and their members, access to Legal & General’s WorkSave Investment Platform, which comprises approximately 180 funds and 27 lifestyle profiles. A lifestyle profile is an investment strategy that automatically adjusts where your pension pot is invested as you approach your selected retirement age. A typical lifestyle profile is designed to offer the potential for growth in the long term but as you get closer to retirement, your money is gradually moved into funds that are more stable. The investment strategy can also be targeted to suit a particular retirement outcome.

The investment managers and funds on the platform have been carefully selected and offer investment management and funds that are appropriate to the needs of companies and their employees. The platform is kept under regular review by Legal & General, with the expectation that there will be funds added and removed from time to time.

There is a Statement of Investment Principles (SIP) in place that describes the principles governing investment decisions made by the Trustees of the Legal & General Mastertrust. A copy of this can be found in Appendix 1.

The Mastertrust offers two forms of investment governance; Sole Governance and Shared Governance:

Sole Governance is available to employers who do not wish to establish their own investment strategy for their members.

Shared Governance arrangements require the employer to take their own investment advice with subsequent approval to any proposal required from the Mastertrust Trustees. Under Sole Governance the Trustees select a range of suitable funds that members may invest their pension savings in, which includes a default investment fund.

An Investment Committee, chaired by a Trustee, helps support the Trustees by providing technical investment support, assistance and guidance in both their day-to-day activities and to help meet their strategic investment objectives. The committee meets monthly and also acts as the point of contact between Participating Employers’ Governance Committees and the Trustees on investment matters.

The Trustees review performance and the ongoing suitability of the Scheme on a bi-monthly basis at Trustee meetings (and more frequently where appropriate). All Trustee meetings are attended by the Secretary to the Trustees.

Default Investment StrategyIn 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 savings. 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.

The Trustees reviewed their default investment arrangement ahead of the introduction of Freedom and Choice, with their independent investment adviser, Dean Wetton Advisory Limited. The Trustees concluded that they required an investment strategy for these changing member 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.

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Asset allocation of the LGIM Multi-Asset Fund (default investment option)

Figures shown are as at 5 April 2016.

Equities39.5%

Investment Grade Credit

18.0%

GovernmentBonds13.5%

Alternative Credit15.0%

Alternatives14.0%

Asia Pacific ex Japan Equity

Emerging Market Equity

GBP Corporate Bonds

Japan Equity

Europe ex UK Equity

North America Equity

Developed Small Cap

UK Equity All CapGlobal Private Equity

Global Real Estate

Global Infrastructure

High Yield Bonds

EmergingSovereign Debt

(Local)

EmergingSovereign Debt

(USD)

Euro Inflation-Protected Bonds

US Inflation-Protected Bonds

Index-Linked Gilts

Developed (ex UK)Sovereign Debt

Conventional Gilts

EUR Corporate Bonds

USD Corporate Bonds

The new default investment strategy uses the LGIM Multi-Asset Fund and 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 benefit preferences.

These investment solutions do require members to make a choice so the Trustees ensure that members receive clear communications about their options. The Trustees are working with Legal & General to create further communications that ensure that members are prompted at appropriate times where decisions need to be made.

Having been adopted in the run-up to April 2015, the default investment strategy was further reviewed by the Trustees and their adviser in May 2015 and will continue to be reviewed at least annually.


The Performance of the Multi-Asset Fund, against equities and the Retail Price Index (RPI) is shown below.

*Returns for the LGIM Multi-Asset Fund are reported before the deduction of the annual management charge and based on the mid-price fund valuations.

**Developed Market Equities returns are 50% currency hedged to Sterling. Returns are calculated using a basket of 50% FTSE AW Developed Index and 50% FTSE AW Developed (Hedged to GBP) Index.

Past performance is not a guide to future performance.

A review of the LGIM Multi-Asset Fund for the period 6 April 2015 to 5 April 2016 can be found in Appendix 2 of this report.

LGIM Multi- Asset Fund*

Developed Market Equities**

Retail Price Index (RPI)

1 Year 0.519% -1.959% 1.556%

3 Year 5.053% 9.231% 1.635%

5 Year N/A N/A N/A

Total return since fund established 37.449% 63.616% 9.064%

Average yearly return since fund established 7.825% 12.369% 2.076%


Administration (core financial transactions).The Trustees believe the quality of service that members receive is a clear indicator of an effective pension scheme. Our role includes assessing whether member-borne costs and charges represent good value (see section 4), and one of the things we look at when assessing value is whether members receive a good service from the scheme’s administrator. As part of this we monitor the time it takes for Legal & General to respond to member requests, and the quality of Legal & General’s servicing and we strive to understand what our members are saying about the service they have received.

The Trustees receive a monthly service information pack which covers all of the processes that Legal & General administer on behalf of the Trustees. The information pack covers the numbers of transactions processed, the service levels achieved, quality performance and trend analysis. The Trustees have worked with Legal & General to improve service quality and the content of the information pack. Senior Legal & General representatives attend each Trustee meeting to update the Trustees on service performance, recruitment levels, systems capacity and accuracy levels.

The Trustees were made 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 in getting access to their pension savings 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 normal high levels.

The Trustees were pleased with the action taken by Legal & General to address the significant increase in enquiries. The Trustees were disappointed that this situation arose, given the anticipated demand in light of these increased flexibilities. We would like to apologise to any member who was affected as a result of this in the summer and autumn of 2015. The Trustees visited the Workplace Member Helpline at Legal & General 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.

At the time of writing, the Trustees are content with Legal & General’s administration services. The Trustees will continue to monitor these, as well as customer satisfaction scores.

Legal & General has confirmed to the Trustees 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.

In addition, a group internal audit function operates within Legal & General which audits systems and processes regularly and the Trustees are notified of any matters arising from the audits that should be drawn to the Trustees’ attention. The Trustees are made aware of all forthcoming audits. This is an important part of monitoring core financial transactions, and sits alongside the work that the Trustees carry out to monitor the quality of the Legal & General administration service.

In summary, the Trustees believe that the difficulties experienced in the summer and autumn of 2015 should not recur, and they are content that Legal & General have the right processes in place and operate these effectively. So at the time of writing and looking forward, the Trustees are satisfied that there are no areas of concern in relation to core financial transactions and are comfortable that the volume of information made available to us enables us to effectively monitor this.

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Charges and transaction costs.

A charge is deducted from members’ pension pots to cover the cost of administering the pension scheme. This is referred to as an annual management charge (AMC). An additional fund management charge (FMC) is applied to cover the cost of managing the investment. The size of the FMC depends on the investment funds you have chosen to invest in.

Auto enrolment makes it compulsory for employers to enrol their eligible employees into a pension scheme. Each scheme must have a default fund in which members’ pension pots are invested if they do not wish to make an active investment decision 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 of savings each year. More information on auto enrolment can be found on the government website: www.gov.uk/workplace-pensions/about-workplace-pensions Details of the Mastertrust default fund are contained in Section 1 above.

The total charge applying to your fund choices can be understood by totalling the annual management charge (AMC) and the fund management charge (FMC).

The FMC for the Trustees’ Sole Governance default fund is 0.13%. For members invested in this fund the total charge, including the AMC, will not exceed 0.5%, that is 50p for every £100 of savings each year, which falls below the required charge cap.

The Trustees receive regular management information from Legal & General that allows us to track the charges that are applied to all participating employer sections of the Mastertrust.

The FMC for all funds available under the Scheme, for sole and shared governance participants, ranges between 0.03% and 1.79% per annum. Not all funds are available to all participants, as employers are permitted to design and restrict certain options to members of their particular section of the Scheme; separate information is available to members on the options available within their part of the Scheme.

*The Fund Management Charge (which is calculated by totalling the Investment Management Charge and Additional Expenses) includes investment management fees, fund administration fees, custody/custodian fees, auditing and accounting fees, and regulatory charges.

Investment Management Charge

Additional Expenses

*Fund Management Charge

Lower 0.03% 0.00% 0.03%

Upper 0.87% 0.92% 1.79%

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http://www.gov.uk/workplace-pensions/about-workplace-pensions


The table below sets out all charges and costs, as currently made available to the Trustees, for the sole governance range.

*The full spread is the difference between the cost of buying more assets for the fund and the price that the fund’s assets could be sold for. The fund will generally be valued at the higher, or offer basis when the fund is growing in size, and valued at the lower, or bid basis when the fund is shrinking.

Fund Investment Management Charge

Additional Expenses

Fund Management Charge

*Full Spread 29 Feb 2016

L&G Henderson Preference & Bond Fund 3

0.68% 0.04% 0.72% Not available

L&G HSBC Amanah Global Equity Index Fund 3

0.55% 0.00% 0.55% Not available

L&G Investec Cautious Managed Fund 3

0.62% 0.09% 0.71% Not available

L&G Cash Fund 3 0.09% 0.01% 0.10% 0.02%

L&G Property Fund 3 0.30% 0.45% 0.75% 5.30%

L&G (PMC) AAA-AA-A Corporate Bond All Stocks Index Fund 3

0.12% 0.00% 0.12% 0.68%

L&G (PMC) All Stocks Index Linked Gilts Index Fund 3

0.08% 0.00% 0.08% 0.13%

L&G (PMC) Consensus Index Fund 3 0.10% 0.00% 0.10% 0.42%

L&G (PMC) Ethical Global Equity Index Fund 3

0.30% 0.00% 0.30% 0.16%

L&G (PMC) Global Equity Fixed Weights 50:50 Index Fund 3

0.10% 0.00% 0.10% 0.53%

L&G (PMC) Multi-Asset Fund 3 0.13% 0.00% 0.13% 0.13%

L&G (PMC) Over 15 Year Gilts Index Fund 3

0.08% 0.00% 0.08% 0.10%

L&G (PMC) Retirement Income Multi-Asset

0.28% 0.02% 0.30% 0.56%

L&G (PMC) UK Equity Index Fund 3 0.10% 0.00% 0.10% 0.76%

L&G (PMC) World (Ex-UK) Equity Index Fund 3

0.12% 0.00% 0.12% 0.25%

L&G Neptune Balanced Fund 3 0.77% 0.01% 0.78% Not available

L&G Threadneedle Global Equity Fund 3

0.79% 0.19% 0.98% Not available


Transaction costs form a part of the total costs of managing an investment fund. These are incurred as a result of buying or selling assets. The Trustees have requested information from Legal & General about transaction costs in their managed funds, as well as on the available funds managed by other managers. Whilst we are able to show some costs relating to Legal & General funds, we have not yet received these from all fund managers. Unfortunately, despite trustees 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. We are working with these fund managers to obtain more meaningful information and hope to include this in our report in 2017. We understand similar difficulties are being experienced across the industry.

The Trustees’ 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 includes 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 Trustees will work with Legal & General to ensure such costs continue to represent good value for members, once we have the appropriate information from the relevant investment managers.

The statutory cap on charges does not apply to funds that are being used to access income flexibly (often called drawdown). We have, with the support of Legal & General, reviewed the charges in relation to access to drawdown 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 Trustees assessing whether the level of service being provided justifies this. If not we will request that the charges are reduced. We do not anticipate any issues of this type with drawdown charges.


Value for money.

FlexibilityFollowing the announcement of Freedom and Choice, in the 2014 Budget, the Trustees, with the support of Legal & General, conducted some research to gauge how members were likely to react to Freedom and Choice, ahead of its launch. The Trustees also reviewed research conducted by other industry participants and commentators.

Freedom and Choice became available from April 2015. One year on, there remains uncertainty across the pensions industry about how members of pension schemes will use the new flexibilities. However, the research did confirm it was very important to the Trustees that our membership should have complete freedom of choice and that these services should in no way be limited. The Trustees believe 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 Trustees on this subject and became one of the first providers to confirm that they would be making the full range of flexibilities available.

More recently, Legal & General have worked with the Trustees to put in place a facility for schemes which are unable to offer drawdown. This allows members – from outside the Mastertrust – to transfer across to a discrete section of the Mastertrust, before they commence drawdown. The governance for this is provided by the Mastertrust Trustees. The Trustees have also agreed to allow transfers from some older Legal & General pension products, so that holders of those products can benefit from the same service.

The Trustees will continue to monitor member responses to the flexibilities and member behaviour in 2016 and intend to conduct a market review of the set-up charges for drawdown arrangements, to ensure that these remain fair.

CommunicationsThe Trustees want members to be able to choose how they access information and make changes to their pension arrangements.

The Trustees’ Communications Committee provides oversight of member communications and bespoke client communications. This covers communications in both paper and electronic form. The Trustees have been very challenging in their desire for Legal & General to invest in communicating and allowing people to access their pension information from their smartphones and tablets. 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. This is the area that the Trustees believe requires the greatest improvement in the short to medium term.

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

Communications feature very highly on our 2016/2017 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.

FeedbackThe Trustees will undertake a number of initiatives to better understand whether members believe they are receiving value for money. These are detailed in Section 6 of this statement.

The Trustees are required by law to monitor whether the Mastertrust provides good ‘Value for Money’ for its members.

This assessment involves looking at the level of charges and transaction costs that apply for the Mastertrust’s members. As explained in Section 3, the Trustees are content that the charges and costs are at an appropriate level.

The Trustees believe that demonstrating ‘Value for Money’ also extends beyond the assessment of member-borne costs and charges, reviewing the default investment strategy and administration performance. The Trustees Statement of Intent on Value for Money sets out a range of additional criteria that the Trustees use to assess the value that is being provided to members.

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AccreditationThe Mastertrust has achieved the Mastertrust Assurance Framework accreditation. This framework is designed to help trustees assess whether their scheme has adopted standards of governance and administration that meet the TPR’s DC code and DC regulatory guidance.

Obtaining master trust assurance enables providers to demonstrate that their scheme has adopted governance and administration processes to address a range of risks in master trusts by providing an independent review of the description and design of the scheme’s governance controls against a defined set of control objectives.

The Mastertrust also holds the Pensions Quality Mark Ready accreditation from the Pensions & Lifetime Savings Association (PLSA).

Taking all of the above into consideration the Trustees believe that the Mastertrust does offer good value for members. We are working with Legal & General to improve the aforementioned areas, which will enable us to offer greater services, communications and ensure the Mastertrust remains a good value pension scheme.


Trustee knowledge and understanding.

Non-affiliation of trustees and member representation.

The Trustees are required to have sufficient expertise, experience and independence to act in the interests of scheme members. This is assessed annually through an independent evaluation. The most recent evaluation was completed in November 2015.

This evaluation focused on the Trustee Board’s composition, an assessment of how the Trustees view their independence and the independence of each member of the Trustee Board and gave consideration as to the diversity of the Trustee Board’s membership, performance, skills and effectiveness.

The combined knowledge and skills of the Trustees, together with the advice available to the Trustees through their appointed legal advisers (Pinsent Masons) and their independent investment adviser (Dean Wetton Advisory Limited), enable them to fully exercise their responsibilities as Trustees.

The Trustees’ profiles can be found in Appendix 2 of this report.

For all master trusts the law requires that a majority of the Trustees must be non-affiliated to the provider. This requirement has been met during the Scheme year.

The Trustees are also members of the Legal & General Independent Governance Committee (IGC). Individuals who sit on IGCs can still be considered non-affiliated, as is set out within the Pensions Regulator’s Code of Practice on Defined Contribution Schemes.

The Trustees operate an open and transparent recruitment process. This is managed by the Secretary to the Trustees who prepares the candidate profile in conjunction with the Chairman of the Trustees. An executive search agency is appointed to identify suitable candidates.

The Trustees encourage the views of their members to be shared and they have put the following facilities in place:

• Mastertrust Employer Group – All our participating employers are invited to join our employer group, which is Trustee led and focuses on scheme matters, forthcoming regulatory change and member communications and feedback. Input to the agenda is invited from participants and guest speakers regularly attend to cover topical matters.

This forum represents the views of 49 participating employers and more than 500,000 members and the Trustees place great importance on the views we are able to gain from employer representatives across a range of differing sectors. The forum is held every three months.

• Annual Members’ Forum – The Trustees invite all scheme members to their Annual Members’ Forum to hear about scheme matters, development, corporate social responsibility and most importantly to provide a forum for members to hear directly from the Trustees on how their scheme is being managed and to ask questions. The third forum will be held on 5 September 2016.

• Member Survey – We shortly be undertaking 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.

• Member Website – Our member website can be found at www.landg.com/mastertrust and on this you can find regular updates on our progress, Trustee profiles, details of the governance structure and details of forthcoming events. Members can also use the ‘contact us’ facility to make direct contact with the Trustees.

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6

http://www.landg.com/mastertrust


Appendix 1: Statement of investment principles.The Trustees of the Legal & General WorkSave Mastertrust and the Legal & General WorkSave Mastertrust RAS.This Statement, prepared in terms of the Pensions Act 1995, as amended by the Pensions Act 2004, and having regard to the Occupational Pension Scheme (Investment) Regulations 2005, describes the principles governing decisions by the Trustees of the Legal & General WorkSave Mastertrust and the Legal & General WorkSave Mastertrust RAS (‘the Trustees’) about the investments of the Legal & General WorkSave Mastertrust and the Legal & General WorkSave Mastertrust RAS (‘the Mastertrusts’).

Investment AdviceBefore preparing this Statement, the Trustees have considered written advice from its Investment Committee (IC) comprising officers, employees and investment committees of Legal & General Assurance Society Limited and Legal & General (Portfolio Management Services) Limited supported, as appropriate, by independent research conducted by Old Broad Street Research Limited, and by independent investment advice commissioned by the Trustees.

The Trustees will continue to receive advice from the IC on a regular basis in accordance with the Terms of Reference and will from time to time commission independent external advisers to provide such advice as is deemed necessary.

The Trustees will review this Statement at least every three years or without delay after any significant change in investment policy. No change will be made without first consulting the affected participating employers and without due consideration of the written advice of the IC or such other advisers as are commissioned for this purpose. However, the ultimate power and responsibility for determining the investment policy lies solely with the Trustees.

Structure of the Mastertrust for MembersEach Member of each participating scheme has an individual Pension Account derived from the accumulated contributions from their employer and (where applicable) from themselves and (where applicable) from one or more transfers-in from other Registered Pension Schemes. The Pension Account is used to secure such benefits as are permitted by law and prescribed by the rules pertaining to that participating company. Different constituent parts of each member’s Pension Account can be invested in any of the different investment funds made available to them.

Structure of the Mastertrust for Participating EmployersThe structure of the Mastertrust is designed to accommodate two categories of participating employer.

First is where participating employers wish to delegate the entirety of the fiduciary and governance responsibilities to the Trustees. This is referred to below as ‘sole governance’.

Second is where the participating employer operates a Governance Committee and will be actively involved in the governance of their membership demographic, including the investment strategy. This is referred to below as ‘shared governance’. Scheme leavers from a shared governance section may, at the participating employer’s request, and with the agreement of the Trustees, be moved directly into a sole governance section.

This structure gives rise to two distinct sets of general investment objectives. These are dealt with separately below.


Choosing Investments (general)The Trustees invest in a policy of insurance through Legal & General Assurance Society Limited. This insurance policy allows participating companies, and their members, access to Legal & General’s WorkSave Investment Platform, which comprises approximately 170 funds. The investment managers and funds on the platform have been selected following formal procedures and reflect the mainstream of investment management and funds that are most appropriate to the needs of corporate customers and their workforces. The platform is intentionally dynamic, with the flexibility and expectation that there will be fund additions and fund deletions.

All day-to-day investment matters are delegated to each of the respective fund managers.

High level overview• Currently, there are 29 different Investment

Managers on the platform.

• Over 50 funds are offered by Legal & General Investment Management Limited (LGIM) and over 100 from external Investment Managers.

• 30 passive funds exist within the range, the rest being actively managed.

• All the main assets classes are represented.

The Governed Fund RangeWithin the overall range of funds exists a subset called the ’Governed fund range‘. Currently there are some 56 funds which make up this subset. These are funds that are subject to a high degree of regular and ongoing scrutiny and monitoring by the Investment Management Review Unit, a committee sitting within Legal & General (Portfolio Management Services) Limited, a firm which is regulated by the Financial Services Authority (Firm reference number 1467856).

Choosing InvestmentsUnder the first category (‘sole governance’), the Trustees aim:

To provide members with access to a diverse universe of investment funds to suit different age demographics, different risk appetites and different retirement income strategies.

Under the second category (‘shared governance’) the Trustees aim:

To enable participant companies to commission and implement such investment advice as they consider appropriate or necessary for their membership demographic, subject to the Trustees’ agreement.

Where they are solely responsible for governance (sole governance), the Trustees will design a default investment option that aims to:

1. To target a positive real return net of fees with lower risk than that of equities;

2. Support flexibility in how and when members take their benefits;

3. Avoid overly conservative de-risking; and

4. Combine well with other de-risking options available to members.

They will then select a range of funds from the platform that satisfy the objective described above.

The Trustees will apply the following principles to fund selection:

1. Simplicity – members should not face complex investment choices that hinder engagement

2. There should be sufficient choices to cover all investment risk appetites and tolerances

3. The options should cover all major asset classes

4. We should avoid funds with high charges whose value add cannot be readily identified

5. There should be a single fund multi-asset option

6. A number of pre-retirement de-risking options should be available

7. Regard should be paid to investment manager pedigree and their responsible investment and stewardship capabilities

8. There should be a continuous internal governance procedure

9. Wherever practicable, funds should be drawn from the Governed Fund Range

10. There should be an ethical choice or choices

11. There should be a sharia-compliant fund

12. There should be at least one fund managed by an external investment manager available for each major asset class

13. A (number of) post-retirement/drawdown option(s) should be available.

Based on these criteria, the recommendations of the IC, as accepted by the Trustees are shown at Appendix 1. This range of funds can be expected to change from time to time.

continues


Shared Governance participants can, with due regard given to the above principles, choose a range of funds from all of the funds available on the fund platform for their scheme. With the prior approval of the Trustees, via a recommendation from the IC, such participating companies may add a new blend or new fund: such additions may be added to the WorkSave investment platform to be made available to other participants, or they may be isolated for that particular participant’s scheme. Default investments should:

• Reflect the likely needs of the employees who will be auto-enrolled into it;

• Have a clearly stated high level objective in line with the above;

• Have an appropriate balance between risk and return; and

• Manage risk through diversification.

The Trustees retain ultimate fiduciary responsibility for all investments under the Mastertrusts and must, therefore, monitor the performance and/or relevance of the funds requested by all employers who choose their own investment options.

Rights Attaching to InvestmentsThe Trustees recognise the importance of exercising rights (including voting rights) attaching to investments. For reasons of practicality, the Trustees delegate responsibility for the exercising of such rights to the relevant fund managers who are expected, so far as is possible, to exercise these rights in the best interests of the Trustees.

Social, Environmental and Ethical IssuesThe Trustees’ policy regarding social, environmental or ethical considerations is that the extent to which such issues are taken into account in making day-to-day investment decisions is delegated to the investment manager groups. It is expected that each investment manager understands that the Trustees’ primary responsibility is to act in the best financial interests of the members.

The Trustees expect that shared governance participants recognise the principle of best financial interest for their members, even where they choose a number of socially responsible, ethical and/or belief-based funds.


Performance MeasurementPerformance measurement will be undertaken on a regular basis by the IC or other appropriate body or persons using various data and reports including those produced by the Investment Management Research Unit. The IC will report quarterly or more frequently to alert the Trustees to any corporate or performance issues or to any concerns raised by or actions proposed by any other of Legal & General’s investment committees (including but not restricted to the Investment Management Research Unit).

The Trustees will obtain independent advice, from time to time, on the sole governance fund range and default structure, and may obtain independent advice in respect of any shared governance proposals before granting approval.

Information for MembersDetailed information on funds available to members is made available on Legal & General’s website and/or on an intranet site of the participant company.

Realisation of InvestmentsThe assets of each Member’s Personal Account are held in unitised investment funds that are generally readily realisable. Some funds (e.g. property funds) are less liquid in nature and, therefore, contain risk warnings describing the potential for realisation delays.


Appendix 2: LGIM Multi-Asset Fund Performance (6 April 2015 – 5 April 2016)Provided by Martin Dietz, Fund Manager, LGIM Multi-Asset FundThe Multi-Asset Fund aims to achieve long-term investment growth through exposure to a diversified range of asset classes. The asset allocation of the Fund is designed to be robust for a range of possible market outcomes by focusing on long-term asset allocation and extensive asset-class diversification. The Fund predominantly uses LGIM’s index funds as its underlying constituents, which are a transparent and cost-effective way to gain broad market exposure.

The period from 6 April 2015 to 5 April 2016 was generally difficult for growth assets, and market concerns were varied. Investors saw issues with Greece and the stability of the euro, growth concerns in China, weakness in commodity prices and their effect on exposed countries and producers, and uncertainty around the first rate rise by the U.S. Federal Reserve in nearly a decade. It is, therefore, no surprise that global equities were volatile and ended the period with negative returns (FTSE All Share TR -6.1%, FTSE World hedged TR, in GBP –6.2%). In such an environment, the diversification of the Multi-Asset Fund gave investors some protection. For example, developed equities (FTSE World, 50% hedged to sterling) suffered from a sharp loss of -11.0% from the end of 2015 to a trough on 11 February 2016, while the Multi-Asset Fund only showed a decline of -3.8% over the same period. Over the full time period, the Multi-Asset Fund generated returns (before fees) of -0.5%, outperforming developed market equities which lost -3.4%.

Key contributors to the Fund’s performance were a number of nominal and inflation-linked bond markets. For any UK investor, currency movements can affect the value of overseas investments. As such, we hedge around 50% of the Fund’s overseas exposure to reduce the impact of currency volatility on returns. Sterling weakness in early 2016, likely driven by concerns about the forthcoming EU referendum, meant that the value of non-sterling assets increased for UK investors.

In general, however, most risk assets (including the majority of equity markets) performed poorly over the year and weighed on the Fund’s returns. In particular, emerging markets lost –12% and deducted -0.7% from the Fund’s returns. As expected, the Fund’s overall performance of -0.5% sits within the range of asset class returns observed across its underlying constituents.

Source: LGIM

While the Fund focuses on long-term asset allocation, the fund manager will make gradual adjustments to the allocation over time (e.g., incorporating new asset classes) as part of a regular review process. However, in exceptional circumstances, more significant changes may be implemented at short notice. Over the past year, small adjustments were made to the asset allocation, predominantly a small reduction in the allocation to government bonds (-2.5%) and a corresponding increase in corporate bonds.

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Appendix 3: Trustees of the Legal & General Mastertrust.The Board of Trustees 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.

Trustee profiles.

Paul Trickett, Chair (resigned 31 July 2016)

Paul has been 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, TrusteeRachel Brougham is a trustee executive at BESTrustees Plc. 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 Mastertrust trustee boards and membership of two independent governance committees.

Steve Carrodus, Trustee Interim Chair (appointed 1 August 2016)Steve 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, TrusteeTony 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.

Ali Toutounchi, TrusteeAli was formerly Managing Director of Legal & General Investment Management’s Global Index Funds and a Fund Director for a number of LGIM’s major clients. Following his appointment in June 2016, Ali has become the chairman of Mastertrust’s Investment Committee.

Ali joined Legal & General in 1995 from NatWest Securities. He has held senior roles at UBS Asset Management and Wood Mackenzie Stockbrokers. He has a first class honours degree in economics and statistics from University College, London, and a PhD in actuarial mathematics from Heriot-Watt University, Edinburgh.


Richard Atkins, Mastertrust Pension Scheme ManagerRichard Atkins was appointed as the Mastertrust Pension Scheme Manager in August 2015.

Richard’s role requires him to assist the Trustees with the smooth running of the Mastertrust Pension Scheme, acting as an intermediary between the Trustees, the Participants (employers) and the Service Provider (Legal & General).

Richard reports to the independent Chairman of the Trustees 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 TrusteesAndrew Fairhurst worked on the launch of the Mastertrust and has been Secretary to the Trustees since its inception in 2011. Andrew’s role is to ensure the Board of Trustees operates efficiently and effectively to the highest governance standards and that Trustees both embrace and are at the forefront of changing governance practice.

Andrew reports through to the independent Chairman of the Trustees 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.

Mastertrust support services.


Definition of TermsAnnual Management Charge (AMC)

This is the charge deducted from members’ pension pots to cover the cost of administering the pension scheme.

Communications Committee

This is a group established by the Trustee Board comprising specialists in the field of communicating to scheme members and employers.

Defined Contribution

Member’s benefits are determined by the contributions paid into the scheme by the member and their employer together with the investment return achieved and charges deducted.

Default Investment Strategy

This is the investment option provided by the Trustees where the member has not made their own choice.

Drawdown

This is a method of taking income directly from pension savings without the need to secure an annuity. It is possible to draw the income in one go or take it as and when it is needed.

Freedom and Choice (also referred to as Pensions Flexibilities)

This describes the opportunities for members to draw their pension savings in a manner that best suits them including drawdown, buying a guaranteed income (annuity), or a combination of all the options available. Up to 25% of the pension savings can be taken as a tax-free lump sum.

Fund Management Charge (FMC)

This covers the cost of investing the member’s pension pot. The level of FMC depends on which fund(s) the member chooses to invest in.

Investment Committee

This is a group established by the Trustee board comprising specialists in the field of investment. The committee make recommendations to the Trustee board regarding the investment strategy of the funds available.

Master Trust Assurance Framework

The Master Trust assurance framework has been developed by the ICAEW (Institute of Chartered Accountants in England and Wales) in partnership with The Pensions Regulator, and has been designed to help trustees assess whether their scheme has adopted standards of governance and administration that meet the DC code and DC regulatory guidance.

Obtaining Master Trust assurance enables trustees to demonstrate that their scheme has adopted governance and administration standards that address a range of risks in master trusts by providing an independent review of the description, design and effective operation of your scheme’s governance controls against a defined set of control objectives.

Multi-Asset Fund

This is the Sole Governance default investment fund. The aim of this fund is to provide long-term investment growth through exposure to a diversified range of asset classes.

Pension Flexibilities (also referred to as Freedom and Choice)

Since April 2015 it has been possible to draw pension savings in a variety of ways. These include taking income as and when it is needed, taking all the savings in one go, buying a guaranteed income (annuity) or drawdown, or a combination of all the options available. Up to 25% of the pension savings can be taken as a tax-free lump sum.

Pensions Quality Mark (PQM) Ready

A PQM READY scheme is one which is able to accept multiple employers. The scheme has already been assessed as having good governance, low charges and clear member communications. If an employer chooses a PQM ready scheme they only have to pass the contributions element of the PQM assessment process to be awarded a Pension Quality Mark in their own right.

continues


Retail Price Index

This is a measure of inflation published monthly by the Office for National Statistics.

Statement of Investment Principles

A written statement provided by the Trustees governing decisions about investments within the scheme.

Sole Governance

Under a sole governance arrangement, the Trustees select a range of suitable investment funds that members may then invest their pension pots in. The funds the Trustees choose are selected in accordance with their Statement of Investment Principles. This range of funds and the default fund in particular, are reviewed regularly by the Trustees and the Investment Committee. The Trustees also commission periodic advice about the sole governance funds from their independent investment adviser, Dean Wetton Advisory.

Shared Governance

Employers who have internal Governance Committees may choose to operate a shared governance arrangement, whereby their Committee works in collaboration with the Trustees in respect of their membership demographic. Typically, shared governance arrangements obtain their own investment advice to provide bespoke investment options for their membership. They will then propose these ‘bespoke’ options to the Trustees, who then decide whether or not to agree to the proposal.

All shared governance clients also have a default fund, which may be different to the default fund under sole governance arrangements.

As with sole governance arrangements, the Trustees review the investments regularly, in conjunction with their committees and advisers, but also with the Employer’s Governance Committee.

Transaction Costs

These are the costs and charges incurred as a result of the buying, selling, lending or borrowing of investments.

Trustees

The Trustees of the Mastertrust are Legal & General Trustees Limited (LGTL), Pitmans Trustees Limited and BESTrustees Plc. The Trustees are responsible for the management and administration of the plan in accordance with the formal documents that govern the plan and relevant UK legislation. They are also responsible for the safekeeping of the money and investments belonging to the Scheme.

Trustee: Legal & General Trustees Limited Registered in England and Wales No. 07776739 Registered office: One Coleman Street, London EC2R 5AA

Administrator: 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.

Q0054434 08/16

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