The world is getting older and people are living for longer. Individuals often underestimate their outgoings in retirement, life expectancy and the cost of care. Many pensioners will need to rely increasingly on alternative sources of finance to fund this 'savings gap'. The over 60s in the UK are estimated to have some £1.4 trillion of housing equity and we expect increasing numbers of retirees to use this equity to supplement their retirement income.
Ageing populations at the same time expose corporate balance sheets to earnings volatility caused by predominantly legacy defined benefit (DB) pension schemes and the associated financial obligations placed on the sponsoring employer. With fewer members in DB schemes, income from contributions is often projected to be insufficient to meet future liabilities. This is worsened by increasing longevity, low interest rates and volatile equity investments. Large scale derisking of DB pension schemes is inevitable. Globally, the DB pension market is in the very early stages of de-risking. It's been estimated that something of the order of $10 trillion worth of liabilities will be de-risked over the next couple of decades.
We offer DB pension schemes de-risking investment solutions at every stage of their scheme's life cycle. Our pension derisking capabilities include matching scheme liabilities and assets using LDI solutions and longevity risk management. To be competitive in this environment you need integrated asset management strength, LDI capability and longevity expertise. You need capital and you need a track record of effective execution. Legal & General is the only company globally to offer all these de-risking solutions. This comprehensive product capability is matched by almost 30 years of experience in the bulk sector.
Within Legal & General Retirement we have eight drivers of profit which delivered the following achievements in 2016:
Our corporate business provides pensions derisking solutions for defined benefit pension schemes. Our individual business helps customers manage retirement assets, including a growing lifetime mortgage business.
We are primarily UK focused but have recently developed international businesses for pensions risk transfer and reinsurance in the US and the Netherlands.
Chief Executive Officer:
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Legal & General Retirement represent 43% of group divisional operating profit and are our largest business segment.
Market leading customer proposition
Diversified and risk-balanced book