15 Share-based payments.

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	SAYE	SAYE	PSP	PSP
Award date	20 Apr 09	17 Sep 09	6 May 09	16 Oct 09
Weighted average share price	49p	75p	65p	86p
Weighted average exercise price	36p	56p	n/a	n/a
Expected volatility	45%	45%	n/a	n/a
Expected life	3 – 7 years	3 – 7 years	3 years	3 years
Risk free investment rate	2.2 – 2.7%	2.1 – 3.2%	n/a	n/a
Dividend yield	7.0%	4.2%	n/a	n/a

Expected volatility is a measure of the tendency of a security price to fluctuate in a random, unpredictable manner. Expected volatility is determined by calculating the historical volatility of the Group’s share price over the previous ten years. The expected life has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The Group provides the following equity settled share-based long term incentive plans for directors and eligible employees:

Savings related share option scheme (SAYE)

The SAYE allows employees to enter into a regular savings contract over either three, five or seven years, coupled with a corresponding option over shares of the Group. The grant price is equal to 80% of the quoted market price of the Group shares on the invitation date. Options are normally forfeited if the employee leaves the Group.

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	Options 2009	Weighted average exercise price 2009 p	Options 2008	Weighted average exercise price 2008 p
Outstanding at 1 January	29,189,645	90	36,140,337	82
Granted during the year	89,516,287	37	24,847,859	92
Forfeited during the year	(24,932,172)	84	(1,367,401)	97
Exercised during the year	(568,786)	49	(14,557,902)	60
Expired during the year	(2,963,195)	84	(15,873,248)	102
Outstanding at 31 December	90,241,779	39	29,189,645	90
Exercisable at 31 December	754,593	94	763,190	88

The fair values of the [SAYE] options granted during the year have been estimated using the Black-Scholes model. The assumptions used in the model are shown above. The weighted average fair value of each SAYE option granted during the year was 14p (2008: 29p). The Group recognised total expenses of £3m (2008: £2m) relating to the SAYE scheme. The intrinsic value of vested SAYE options was £nil (2008: £nil) at the year end. Intrinsic value of a share option is calculated as the current share price less the option price. The options outstanding at 31 December 2009 had a weighted average remaining contractual life of 4 years.

Company share option scheme (CSOP)/Executive share option scheme (ESOS)

The [CSOP], approved by HM Revenue & Customs (HMRC), and unapproved [ESOS] were designed to provide a long term incentive to directors and managers of the Group. The number of options granted is based on the manager’s level, salary and performance. The options have a ten year life but do not normally vest in the first three years. In order to exercise the options, the Legal & General Total Shareholder Return (TSR) must exceed the median [TSR] of the [FTSE] 100 for a period of at least three years commencing on the date of the grant. Options are normally forfeited if the employee leaves the Group.

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	Options 2009	Weighted average exercise price 2009 p	Options 2008	Weighted average exercise price 2008 p
Outstanding at 1 January	34,441,666	139	38,365,089	138
Granted during the year	–	–	–	–
Forfeited during the year	(5,246,662)	145	(2,911,495)	146
Exercised during the year	(20,000)	78	(640,846)	86
Expired during the year	(3,643,965)	160	(371,082)	149
Outstanding at 31 December	25,531,039	134	34,441,666	139
Exercisable at 31 December	25,531,039	134	34,441,666	139

The fair values of the options granted under the CSOP/ESOS are estimated using a binomial model, reflecting the historic exercise patterns. The assumptions used in the model are disclosed above. No options have been granted since 2004 under these schemes.

The Group recognised total expenses of £nil (2008: £nil) related to the CSOP and ESOS. The intrinsic value of vested share options at the year end was £nil (2008: £nil). The options outstanding at 31 December 2009 had a weighted average remaining contractual life of 2 years.

Share bonus plan (SBP)

[SBP] grants restricted shares which vest with employees three years after the grant date; recipients are entitled to both vote and receive dividends. The rights associated with SBP grants are normally forfeited on leaving the Group.

The fair value of the shares awarded has been calculated as the market value on the grant date.

During the year, 14,546,572 shares (2008: 9,512,807 shares) were awarded under the SBP. The weighted average fair value of the shares issued was 60p (2008: 124p). The Group recognised a total expense of £8m (2008: £11m) relating to the [SBP].

Performance share plan (PSP)

Conditional shares can be granted to top managers under the PSP, based upon individual and Company performance. Under the [PSP], the number of performance shares transferred to the individual at the end of the three year vesting period is dependent on the Group’s relative TSR. The award will vest in full for upper quintile performance. One quarter of the award will vest for median performance. Awards will vest on a straight line prorated basis for performance between the median and upper quintile.

For awards made prior to 2008, the performance condition is based upon the FTSE 100. For awards made during or after 2008, half of each award will be measured using the existing FTSE 100 test, the remaining half is measured against a bespoke group of UK and European insurance companies. The group comprises all UK-listed life insurers that are constituents of the [FTSE] 350, plus all members of the insurance sector of the FTSE Eurotop 300. The two halves are measured independently, thus it is possible that one half may vest, whilst the other does not.

For both comparator groups, the companies used are members of the relevant indices as at the date of award.

Additionally, the Remuneration Committee assesses whether the underlying performance of the Company is reflective of the TSR result. In exceptional circumstances, the Remuneration Committee may exercise their discretion to scale back the vesting of awards, if it is felt that the Company’s performance did not justify the level of vesting. The parameters which the Remuneration Committee use in making this assessment include market share, partnerships gained and maintained, cost constraint, capital management and shareholder perception.

During the year, 14,819,263 performance shares (2008: 2,036,380) were awarded. The weighted average fair value of each award issued was 41p (2008: 232p). The Group recognised a total expense of £4m (2008: £5m) relating to the PSP during the year.

Employee share plan (ESP)

Under the [ESP], approved by [HMRC], permanent UK employees may elect to purchase Group shares from the market at the prevailing market price on a monthly basis. The Group supplements the number of shares purchased by matching the first £20 of the employees’ contributions. From time to time, the Group may make a grant of free shares. Both the free and matching shares must be held in trust for three years before they may vest to the employee. After vesting the shares remain within the Trust until they are transferred to the employee or the employee leaves the Group. The Trust is consolidated into the results of the Group with the unvested shares disclosed as employee scheme shares.

The fair value of the granted shares is equal to the market value at the grant date.

During the year, 1,526,549 shares (2008: 4,329,878 shares) were granted under the ESP. The weighted average fair value of the shares issued was 60p (2008: 117p). The Group recognised a total expense of £5m (2008: £5m) relating to the ESP during the year.

Total recognised expense

The total recognised expense relating to share-based payments in 2009 was £20m (2008: £23m) before tax, all of which related to equity settled share schemes.

Total options

Options over 115,772,818 shares are outstanding under [CSOP], [ESOS] and SAYE at 31 December 2009 as shown below:

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Option price pence per share	Number of shares	Option period ending in		Option price pence per share	Number of shares	Option period ending in
30.01 – 40.00	80,497,865	2012 – 2016		100.01 – 110.00	1,180,480	2010 – 2015
40.01 – 50.00	–	–		110.01 – 120.00	680,824	2010 – 2014
50.01 – 60.00	6,626,981	2010 – 2017		120.01 – 130.00	28,631	2010
60.01 – 70.00	–	–		130.01 – 140.00	–	–
70.01 – 80.00	5,181,247	2010 – 2013		140.01 – 150.00	12,887,532	2011 – 2012
80.01 – 90.00	784,283	2010 – 2016		150.01 – 160.00	5,744,462	2010
90.01 – 100.00	2,160,513	2010 – 2015		160.01 – 170.00	–	–