Legal & General engaged with the Financial Services Authority (FSA) and government policy-makers on a variety of issues during 2008.
We supported government intervention in the banking sector and the provision of increased liquidity, but as a major bank shareholder we have raised concerns about compensation in cases of nationalisation, pre-emption rights and dividend policy. While we also support the Financial Services Compensation Scheme (FSCS), we have made clear our reservations about allocating insurers’ capital to compensate depositors in failed banks through the proposed ‘general retail pool’.
Despite industry submissions, the 2008 Budget did not mitigate the negative effects on investment bonds of the government’s changes to the Capital Gains Tax regime. Accordingly, we made further representations, including a Legal & General Pre Budget Report submission, stressing the need for greater stability in the taxation of long term savings.
We continued to work closely with the Department of Work and Pensions (DWP) during the passage of the Pensions Bill, and were encouraged by successful moves to ensure equal treatment for Personal Accounts and existing workplace pension schemes under European law.
During the year, we responded to the [FSA]’s Retail Distribution Review (RDR). This will in time have an impact on how our products are sold to consumers. Our RDR response was one of 37 formal responses issued by Legal & General to Consultation Papers during the year.
At a European level, we remain concerned about aspects of the proposed Solvency II Directive and in particular the risk that a prescriptive capital regime for insurers will reduce income for future annuitants. We have shared these concerns directly with government and the FSA, as well as making our case through industry bodies including the Association of British Insurers (ABI) and the European Insurance [CFO] Forum.
We believe that much work is still required to create a regulatory framework for retail financial services which appropriately balances the rights and obligations of producers and consumers, reduces consumers’ costs and encourages long term saving and investment. Legal & General has well developed policy positions on this and related topics, which we share regularly with politicians of all parties, government officials, think tanks and other participants in the policy process.