Legal & General has received a positive report from its independent governance committee, but concerns remain over how long it is taking to rectify high charges in legacy products.
While the committee, which includes former Investment Association chief executive Daniel Godfrey, ruled that overall most members are offered good value for money, excessive costs for some and the failure to remove exit charges on non-unitised products despite the issue being raised last year counted against the firm.
The report reads: “A number of issues have been identified that could have resulted in a number of scheme members being in funds that carry high charges or having charges incorrectly applied. On an individual level, we do not believe that the amounts involved are significant. However, the process for rectification and remediation has extended longer than we would have liked and these are still ‘open’ issues.
“It is worth noting that…additional exit charges were only present where the underlying charging structure included initial units. During 2017, L&G reconsidered these charges and the IGC requested that such exit charges be abolished. However, following input…regarding wider fairness issues, a resolution has not yet been agreed with L&G. The IGC does not consider the matter to be closed and will be pressing for a fair outcome for the scheme members concerned in 2018.”
On a scale of -3 to +3, where +3 is the best, L&G scored positively on all seven of the IGC’s main value for money tests: price; default investment strategies; returns on investment; flexibility; administration; communications and feedback.
On price, L&G scored +1.5. The IGC ruled that this would have been a +2 if not for the exit penalties issue and some members still being subject to higher costs than it would like.
The lowest scoring category was on administration, the test of customer service and the speed and accuracy of transactions, where L&G was given a rating of +0.5.