Report on the Governance and Administration Control ... · AS AT 16 MAY 2016 LEGAL & GENERALWORKSAVE MASTERTRUST AAF 02/07 REPORT Report on the Governance and Administration Control

AS AT 16 MAY 2016 LEGAL & GENERALWORKSAVE MASTERTRUST AAF 02/07 REPORT

Report on the Governance and AdministrationControl Procedures of the Legal & GeneralWorkSave MastertrustLEGAL & GENERAL WORKSAVE MASTERTRUST AAF02/07 REPORTAs at 16 MAY 2016

Contact name:Title:

Richard AtkinsPension Scheme Manager

Tel:Email:

020 3124 [email protected]

Legal & General Investment Management LimitedOne Coleman StreetLondon EC2R 5AA

AS AT 16 MAY 2016 LEGAL & GENERAL MASTERTRUST REPORT

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Table of Contents

Introduction ..........................................................................................................................................................................3

Disclaimer Letter for release of this report...........................................................................................................................4

Assertion by Trustee of the Legal & General WorkSave Mastertrust..................................................................................5

Business overview ...............................................................................................................................................................8

Control environment ......................................................................................................................................................... 12

Summary of control objectives.......................................................................................................................................... 17

Control objectives and control procedures ....................................................................................................................... 27

This report is strictly confidential and is intended only for use by Legal & General WorkSave Mastertrust. Unauthorised

use of this report in whole in or in part is strictly prohibited. If you are receiving this ISAE 3000 and AAF 02/07 report in

your capacity as a new or prospective institutional customer (i.e. post 16 May 2016) of the Legal & General WorkSave

Mastertrust, then your attention is drawn to the Disclaimer Letter on page 4 which outlines the basis on which you have

received this ISAE 3000 and AAF 02/07 report and the Service Auditor’s Assurance Report therein.


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Introduction

I am pleased to present the Legal & General WorkSave Mastertrust’s first report describing the controls over ourgovernance and administration procedures. This covers controls in place as at 16 May 2016 and has been prepared inaccordance with international standard on Assurance Engagements (ISAE) 3000 – “Assurance Engagements Other ThanAudits or Reviews of Historical Financial Information”, and the illustrative control objectives for Master Trusts in the MasterTrust Supplement TECH 07/14 to AAF 02/07 issued by the Institute of Chartered Accountants in England and Wales.

The purpose of this report is to set out how we manage the risks associated with the governance and administration ofour Master Trust. We believe this will help you understand how our people, systems and day to day processes worktogether to provide a sound framework for internal controls and demonstrates our commitment to effective governance.

Paul Trickett

ChairmanLegal & General WorkSave Mastertrust


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Disclaimer Letter for release of this report

PRIVATE AND CONFIDENTIALThe Directors

Legal and General WorkSave Mastertrust

Dear Sirs,

RELEASE OF THE 2016 AAF 02/07 CONTROLS REPORT TO PROSPECTIVE CUSTOMERS OF LEGAL & GENERALWORKSAVE MASTERTRUST

The 2016 AAF 02/07 controls report, prepared in accordance with the illustrative control objectives for Master Trusts inthe Master Trust Supplement TECH 07/14 to AAF 02/07 issued by the Institute of Chartered Accountants in England andWales, and the International Standard on Assurance Engagements (ISAE) 3000 – “Assurance Engagements Other ThanAudits or Reviews of Historical Financial Information”, which covers the internal controls relating to governance andadministration provided by the Legal & General WorkSave Mastertrust (the “service organisation”) as at 16 May 2016,has been prepared by the directors of the service organisation principally for the purpose of demonstrating its governanceand administration procedures with reference to the aforementioned Master Trust supplement and for no other purpose.You have asked us to agree to you providing to prospective customers with the necessary knowledge and experience, acopy of the 2016 AAF 02/07 controls report which includes our service auditor’s assurance report (“our assurance report”)dated 17 May 2016.

We confirm that we are agreeable to you so doing on the clear understanding that our assurance report was addressedto you and was prepared on your instructions as set out in our engagement letter dated 14 January 2015 and thereforeitems of possible interest to prospective customers may not have been specifically addressed by the 2016 AAF 02/07controls report the work supporting our assurance report. Nor does PricewaterhouseCoopers LLP warrant or representthat the information in the 2016 AAF 02/07 controls report or work done in connection with our assurance report isappropriate for the interests or purposes of prospective customers. For the foregoing reasons, the 2016 AAF 02/07controls report cannot in any way serve as a substitute for enquiries and procedures that prospective customers would(or should) undertake and judgements they should make for the purpose of satisfying themselves regarding any mattersof interest to them. Furthermore, we accept no duty or responsibility and deny any liability to prospective customers or toany other third party in relation to our assurance report or otherwise, whether or not the 2016 AAF 02/07 controls reportor our assurance report therein influences the decision or action of any prospective customer or any other party.

Prospective customers are also bound by a duty of confidentiality to PricewaterhouseCoopers LLP, as well as to you.Consequently, the 2016 AAF 02/07 controls report, and information obtained from it, must not be made available orcopied, in whole or in part to any other person without our prior written permission which we may, at our discretion, grant,withhold or grant subject to conditions (including conditions as to legal responsibility or absence thereof).Notwithstandingour consent to the release of the 2016 AAF 02/07 controls report to prospective customers with appropriate knowledgeand experience, our assurance report remains addressed to you and it is a matter for you to decide whether the releaseof the 2016 AAF 02/07 controls report is appropriate in the circumstances.

To ensure that prospective customers have a clear understanding of the terms under which our assurance report is beingprovided to them, a copy of this letter should accompany our assurance report.

Yours faithfully

PricewaterhouseCoopers LLP17 May 2016


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Assertion by Trustee of the Legal & General WorkSave Mastertrust

As trustee directors of the Legal & General WorkSave Mastertrust, we are responsible for:

the identification of control objectives to be applied for the purpose of demonstrating sound governance and

administration procedures; and

the design and implementation of the control procedures of Legal and General WorkSave Mastertrust to provide

reasonable assurance that the control objectives on pages 27 to 63 are achieved.

The control objectives identified include all of those control objectives listed in Appendix 1 of the Master Trust supplementTECH 07/14 issued by the Institute of Chartered Accountants in England and Wales.

The report, the controls and control objectives described within it, are intended to address the Mastertrust’s governanceand administration processes and activities from the point at which information is submitted by the administrators andany other relevant third parties. It includes how the Trustee exercise governance over the administrators and otherrelevant third parties where appropriate to meet the requirements of the control objectives and not the activities,processes or control environment of the administrators or other relevant third parties.

In carrying out these responsibilities, we have regard not only to the interest of employers (who have entrusted theiremployees’ DC contributions to the Mastertrust, or are considering doing so) and the members of the Mastertrust butalso to the requirements of the business and the general effectiveness and efficiency of the relevant operations.

We have evaluated the fairness of the description and suitability of and the effectiveness of the Legal & GeneralWorkSave Mastertrust’s control procedures having regard to ICAEW’s Technical Release AAF 02/07 including its MasterTrust supplement and the control objectives set out therein.

We set out on pages 27 to 63 in this report a description of the relevant control procedures together with the relatedcontrol objectives which were in place as at 16 May 2016 and confirm that:

the report describes fairly the control procedures that relate to the control objectives referred to above which werein place as at 16 May 2016; and

the control procedures described were suitably designed such that there is reasonable assurance that the specifiedcontrol objectives would be achieved if the described control procedures operated effectively at 16 May 2016.

Chairman

Signed on behalf of the Trustee board of Legal and General WorkSave Mastertrust


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Independent practitioners’ assurance report on the governance and administration controlprocedures of the Legal & General WorkSave Mastertrust

To the Trustee Directors of the Legal & General WorkSave Mastertrust

We have been engaged to report on the description and design, as at 16 May 2016, of the Legal & General WorkSaveMastertrust’s control procedures over your governance and administration procedures designed to achieve the controlobjectives as at 16 May 2016 as set out on pages 27 to 63 of your report.

Use of Report

This report is intended solely for and use of Legal & General WorkSave Mastertrust (the “Mastertrust”) in accordance withthe terms of our engagement letter dated 14 January 2015 (the “agreement”), in order to assist the Mastertrust todemonstrate its governance and administration procedures and for no other purpose.

Our report must not be recited or referred to in whole or in part in any other document nor made available, copied orrecited to any other party, in any circumstances, without our express prior written permission. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than the Mastertrust for our work, for thisreport or for the opinions we have formed.

Trustee’s responsibilities

The Mastertrust’s Trustee’s responsibilities and assertions are set out on page 5 of your report. The control objectivesstated in the description include those control objectives set out in the Master Trusts Supplement TECH 07/14AAF toAAF 02/07 that are considered relevant by the Trustee.

Independent Practitioner's responsibilities

Our responsibility as the Independent Practitioner is to form an independent opinion, based on the work carried out inrelation to the control procedures of the Mastertrust as described in your report and report this to you.

We conducted our engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 andwith ICAEW Technical Release AAF 02/07 including its Master Trust Supplement TECH 07/14AAF. ISAE 3000 and AAF02/07 require, among other things, that we comply with ethical and other professional requirements and plan and performour procedures to obtain reasonable assurance about whether, in all material respects, the Mastertrust’s report fairlydescribes the relevant control procedures and the control procedures are suitably designed. The criteria against whichthe control procedures were evaluated are the control objectives developed for Master Trusts as set out within the MasterTrust Supplement TECH 07/14AAF to AAF 02/07 and identified by the Mastertrust as control objectives to be applied forthe purpose of demonstrating ‘sound governance and administration procedures’.

Our work involved performing procedures to obtain evidence about the presentation of the Mastertrust’s description of itsgovernance and administration control procedures, and the design effectiveness of the control procedures. Ourprocedures include assessing the risks that the description is not fairly presented, and that the control procedures werenot suitably designed. An assurance engagement of this type also includes evaluating the overall presentation of thedescription, and the suitability of the objectives stated therein.

We did not perform any procedures regarding the operating effectiveness of the controls stated in the description and,accordingly, do not express an opinion thereon.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Inherent limitations

Control procedures designed to address specified control objectives are subject to inherent limitations and accordinglybecause of their nature, control procedures at the Mastertrust may not prevent or detect and correct all errors or omissionsin performing administrative and accounting procedures. Control procedures cannot guarantee protection against (amongother things) fraud, especially on the part of those holding positions of authority or trust. Additionally, control proceduresidentified are designed to give reasonable protection but cannot guarantee absolute protection against all risks, includingall possible threats of malicious cyber-attack. The Mastertrust’s description of control procedures was prepared to meetthe common needs of a broad range of users and may not, therefore, include every aspect of control procedures thatmay be relevant to each employer company or member of the Mastertrust. In addition, due to their nature, control


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procedures may not prevent or detect and correct all errors or omissions in performing governance or administrationactivities.

Our opinion is based on historical information. The projection of any evaluation of the fairness of the presentation of thedescription, or opinion about the suitability of the design or operating effectiveness of the control procedures to futureperiods would be inappropriate.

The information included on pages 8 to 16 describing the Mastertrust’s overall control environment and businessinformation is presented by Legal & General WorkSave Mastertrust to provide additional information and is not part ofLegal & General WorkSave Mastertrust's controls over their governance and administration procedures. In particular, asnoted in the Assertion by the Trustee, the controls and control objectives do not address the control environment of theadministrator and other relevant third party. Such information has not been subjected to the procedures applied in theengagement to report on Legal & General WorkSave Mastertrust's controls over their governance and administrationprocedures, and accordingly, we express no opinion on it.

Opinion

In our opinion, in all material respects:

i. the accompanying Mastertrust’s report on pages 27 to 63 describes fairly the control procedures that relateto the control objectives referred to above which were in place as at 16 May 2016. The control objectivesidentified include all of those control objectives listed in Appendix 1 of the Master Trust supplement TECH07/14AAF to AAF 02/07;

ii. the control procedures described on pages 27 to 63 were suitably designed such that there is reasonable,but not absolute, assurance that the specified control objectives would have been achieved if the describedcontrol procedures operated effectively at 16 May 2016.

PricewaterhouseCoopers LLP

Chartered Accountants

17 May 2016


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Business overview

History

The Legal & General WorkSave Mastertrust Scheme was established to provide a solution to help employersthrough their auto enrolment duties, and to deliver the best possible outcomes to members. It was made to bedurable, flexible, well governed and to provide good value for members.

We are delighted that so many employers have shared our belief in the Scheme and our ambitions for it. This iswitnessed by its impressive growth in such a short time frame. By the end of 2015 there were over 500,000 membersin the Trust, made up of 47 participating employers. Scale of this nature is vitally important. It ensures that memberscan continue to benefit from low charges, and that we can continue to secure the best services and advice possibleto help with the efficient running of the Trust.

In 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 pot. They candrawdown a regular or occasional income from their pot, buy a pension annuity or withdraw it as one or more cashlump sums. It was very important to the Trustee that the Mastertrust was able to offer all of these solutions and weare delighted that since 6 April 2015 our members have been able to access their pension savings however theywish.

We know that many other pension schemes have made the decision not to offer flexible options to their members, whowill be forced to transfer to another scheme or provider in order to take full advantage of Freedom and Choice. Wheredrawdown is not available through an individual’s provider a solution has been made available whereby individuals maytransfer to a section of the Legal & General Mastertrust Pension Scheme before they commence drawdown. Thesemembers benefit from the same level of governance as any other member would.

The Mastertrust is accredited as Pension Quality Mark Ready (PQMR). PQMR is designed for defined contribution multi-employer schemes that meet certain standards covering governance and communications. This means that employerswithin the Mastertrust will find it easier to get the Pension Quality Mark for themselves.

Governance Structure

The current Trustee comprises three Corporate Trustees:

Legal & General Trustees Limited

Pitmans Trustees Limited (Independent Professional Trustee)

BESTrustees Plc (Independent Professional Trustee)

The diagram on the following page shows roles and responsibilities and the way that we run the trust to provide servicesto participating employers and members.


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Ownership and Funding

As stated above, the Legal & General Worksave Mastertrust comprises three corporate Trustees; Legal & GeneralTrustees Limited, Pitmans Trustees Limited and BESTrustees Plc. Legal & General Trustees Limited comprisesindependent and non-independent directors. Independent directors are directors who otherwise have no businessconnection with the Legal & General Group. Non independent directors may carry out a variety of other remuneratedwork for the Legal & General Group. Pitmans Trustees Limited and BESTrustees Plc are paid by a combination of retainerand time cost fees.

As with all other professional fees in respect of services provided to the Trustee, the Independent Directors of Legal &General Trustees Limited and fees for Pitmans Trustees Limited and BESTrustees Plc are paid by Legal & GeneralAssurance Society Limited.

Legal & General Resources Limited is the Principal Employer. It does not participate in the Trust and derives no incomeor other financial (or non-financial) benefit from it. It is responsible for appointing the Trustee but is otherwise not involvedin any of the Trust’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 asuite of communications materials, including member booklets and investment guides, and delivers an on-line portal foreach Participating Employer and their members. LGAS also provides the insurance policy that provides access to theinvestment platform to Legal & General Investment Managers Limited (LGIM).LGAS is remunerated for its servicesthrough 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 Chargeby paying fees direct to LGAS.

All charges levied by LGAS (AMC and FMC) are based on their standard underwriting criteria, i.e. on standard commercialterms. The FMCs deducted relate to the costs to LGAS of incorporating, maintaining and valuing funds on the investmentplatform.

LGAS pays all the Trust expenses on behalf of the Trustee, including fees, expenses and other disbursements of theTrustee’s advisers. LGAS is not responsible for any such appointment.

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


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The Trustee is satisfied that all related party transactions are transparent.

Legal & General Resources Limited, and Legal & General Assurance Society Limited, provides services to the Trusteewithout recharge. Legal & General Investment Management Limited are remunerated via a percentage charge of thefunds under their management in accordance with a pre-determined scale agreed from time to time with Legal & GeneralAssurance Society Limited.

Management Oversight

The Trust offers defined contribution benefits to:

the current and former workforces of the Participating Employers.

Members who have been transferred to the Trust by the Trustee of another pension scheme.

Members who have transferred directly from another scheme.

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

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

The Trust is a Registered Pension Scheme under the Finance Act 2004. They are governed by a Trust Deed and Rules,by the Deeds of Participation of each Participating Employer, and by any amending documentation.

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

the 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

Copies of these documents are available to members on request. Recognised trade unions are also entitled to see, orrequest copies of, the same documents.

Trustee

The Trustee is responsible for the administration and investment policy of the Trust, and for the appointment of the Trust’sadvisers.

The current Trustee comprises three Corporate Trustees:

Legal & General Trustees Limited

Pitmans Trustees Limited (Independent Professional Trustee)

BESTrustees Plc (Independent Professional Trustee)

The Trust rules contain provisions for the appointment and removal of the Trustee by the Principal Employer, Legal &General Resources Limited. The rules also include a provision for an Independent Trustee to be appointed ‘at allpracticable times’ and the composition of the board is updated in line with changing regulatory requirements.

The structure of the Trustee is such that the balance of powers always lies with the independent trustees.


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No provision has been made to appoint Member Nominated Trustees or Member Nominated Directors recognising thatissues of confidentiality or commercial sensitivity involving Participating Employers may arise from time to time. There isno legal obligation to appoint Member Nominated Trustees or Member Nominated Directors, however, we invite eachParticipating Employer to join our Mastertrust Employer Group, which is a formal group, meeting quarterly, where theycan represent the interests of their own membership demographic and can contribute generally to the governanceprocesses and other Trust related matters. We also hosted an Annual Members forum each September.

The full board meets 6 times a year, and more frequently as required.

During the year the following committees hold additional meetings:

the Investment Sub-Committee

the Communications Sub-Committee

the Dispute Resolution and Discretionary Payment Sub-Committee

Each of the Sub-Committees comprises appropriately experienced and qualified personnel drawn from staff employedby Legal & General Assurance Society Limited, together with a Trustee representative, who acts as the Chairman.

A number of informal meetings and meetings of Trustee working groups are also held.

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

Further details on the Mastertrust and the Trustee can be located at www.landg.com/mastertrust


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Control environment

Management control framework

The Trustee’ stated aim is to co-ordinate the underlying trust governance to deliver a value-for money, efficient, durableand valued workplace pension scheme to employees and ex-employees of client companies. Where applicable, theTrustee must pay due regard to the different requirements of ‘sole governance’ and ‘combined governance’ schemes andmembership demographics. This distinction is particularly marked in matters relating to communication and investment.

In order to achieve this aim it is necessary for the Trustee:

to maintain high standards of compliance, governance and communications;

to nurture good and effective relations with Participating Employers (and, where applicable, with their GovernanceCommittees), the Trust’s advisers and with regulators;

to identify and implement changes to adopt emerging best practice in all these areas.

Each area of responsibility will be broken down into the following sections:

Trustee’ Policy Statement.

Trustee’ Main Objectives.

Trustee’ Aims in the inaugural period.

Areas of Responsibility

The following key areas of responsibilities have been identified:

Administration.

Communication.

Trusteeship.

Financial & Risk Management.

Investment.

As detailed above there are 3 Trustee Committees; the Dispute Resolution and Discretionary Payments CommitteeCommunications Committee and Investment Committee. Each has their own Terms of Reference which can be found onthe Mastertrust member website: www.landg.com/mastertrust.

Risk management

The Trustee has 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 anacceptable level. In order to meet this responsibility the Trustee has adopted a risk policy. The objective of this policy isto limit the exposure of the Trustee, and the assets that they are responsible for safeguarding, to business, financial,operational, compliance and other risks where possible.

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

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

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


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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 taken, in orderto mitigate the identified risks.

Additionally, the Trustee requires the Scheme Administrator (Legal & General Assurance Society Limited) to maintain aseparate risk register which covers additional items specific to their role and duties. They are required to present theirrisk assessment to the Trustee at least quarterly.

Outsourced operations

The Trustee has outsourced the pension administration and investment services to Legal & General Assurance SocietyLimited. There is a Service Agreement in place that sets out all the services and performance standards required by theTrustee. Legal & General Assurance Society Limited report quarterly to the Trustee on the service level performance,Trust activity, member movements, fund performance and complaint volumes and details. Reporting is consistent withthe service level agreement and the deeds of participation and this monitored at the board meetings.

Compliance

The Trustee has in place a services level agreement with Legal & General Assurance Society Limited. The functionsoutlined below are within the Legal & General Assurance Society Limited’s control environment. The Trustee monitorsadherence to the service level agreements through its review of the quarterly stewardship reports. There are establishedstrategies for managing market, insurance, credit, liquidity and operational risk. Formal policies define the approaches torisk management and the minimum control standards that should be applied in managing our significant risk exposures.

Legal & General Assurance Society Limited deploy a range of risk management techniques to manage and mitigaterisks, thereby controlling our risk exposures in line with their risk limits. The effectiveness of these measures isoverseen through a governance framework. As a minimum, risk exposures and mitigations are reviewed monthlyby management.

Legal & General Assurance Society Limited operate a risk identification and assessment process under which theirbusinesses regularly consider changes in the profile of existing and emerging risks. The assessment processevaluates the risks that are inherent in their products as well as those that are presented from changes in theenvironments that they operate in.

Legal & General Assurance Society Limited’s risk management information is structured to enable all significantrisks to be monitored; compare actual risk exposures and capital positions to targets, limits and tolerancesestablished as part of our risk appetite framework; and assess the delivery of the target customer outcomes.

Legal & General Assurance Society Limited’s Group Chief Risk Officer (CRO), who is independent of the businessline, leads the group risk team. The group CRO works closely with the Group Risk Committee and the Group Boardon articulating acceptable risk taking and ensuring the effective operation of the risk and capital framework. Thegroup risk team supports all the businesses and provides objective advice and guidance on a range of risk mattersto the business managers and Mastertrust trustees, including matters such as product development, businesstransactions and key business decisions. The team also carries out assessment of the group’s economic capitalrequirements to confirm that they meet regulatory solvency requirements.

Legal & General Assurance Society Limited have appointed divisional risk officers to each of their divisions. Thisalignment reinforces our risk framework with each of our divisional leaders having a risk expert on theirmanagement team. Each divisional risk officer also has a reporting line to the group CRO to maintain theirindependence. The Corporate pensions business is supported by risk specialists in the CRO team.

The Trustee has in place a risk register covering the Trustee’s view of risk for the WorkSave Mastertrust and therisk register is reviewed and revised at Trustee meeting minutes.

Human Resources

The Trustee is required to complete an annual fitness and propriety questionnaire and each Trustee Director is requiredto have completed the Pensions Regulator’s Trustee toolkit. Legal & General Assurance Society Limited is committed tothe development of their people, and have a variety of structured and tailored development programmes available toemployees to complement on-the-job learning. This includes process and technical training, leadership programmes,


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mentoring programmes, and career development workshops. Development of employees ensures that we continuallybuild our capability to continue an excellent service offering and proposition to our customers.

Performance management and talent programmes have at their core, a focus on clear objectives, tailored personaldevelopment plans, and reviews of the aspirations and potential of employees. Through these programmes, continualregular dialogue with employees focussing on:

The right people in the right roles

Building for the future

Career progression and development

Destination and retention of our talent

There are around 150 staff supporting the administration of the Mastertrust (and other Legal & General bundled DCschemes) across sites in Kingswood and Cardiff. The average service period for these employees is 7 years and staffturnover figures are well below 5%.

Monitoring

External Audit

PwC performs our external audit of the Annual Report & Accounts and this is performed under International Standardson Auditing (UK & Ireland) (“ISAs”) and followed the approach set out in the Audit Plan that is agreed by the Trustee.

The trustee regularly reviews and monitors all processes and procedures. Checkpoints are scheduled within theMastertrust Trustee Business plan.

The Trustees also provide an Annual Report to the Legal & General Board and business escalation routes are in placeand are utilised as required.

Internal Audit

A Group Internal Audit function operates within Legal & General which audits systems and processes regularly and theTrustees are notified of any matters for which it would have concern. The Trustee has sight of all forthcoming audits.

The Mastertrust Pensions Manager receives a monthly management information pack which highlights performance andformal monthly meetings take place with the Chief Operating Officer of the Administration Operation to discuss servicematters.

Governance and Administration procedures of the Mastertrust

Details of the Governance and Administration procedures of the Mastertrust are detailed in the “Control objectives andcontrol procedures” section of this document.

IT system – business and data recovery, data quality and security

The Trustee has in place a Service Level Agreement which covers the provision of IT services by Legal & GeneralAssurance Society. Legal & General Assurance Society Limited’s data and systems are backed up regularly, retained offsite and regularly tested for recoverability. Business and information systems recovery plans are documented, approved,tested and maintained.

The capacity of an administration system to take on new business is assessed, approved and regularly monitored. Newbusiness take-ons are properly established in accordance with the Mastertrust’s rules and contractual arrangements. Asnew business grows the Trustee monitors the scalability of the Legal & General Assurance Society Limited’sadministration platform and they receive updates from Legal & General Assurance Society Limited’s senior managementon systems capability and development.


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Member data is complete and accurate and is subject to regular data evaluation. Data transmissions are secure andappropriate measures are implemented to counter the threat from malicious electronic attack. Physical and logical accessto computer systems, and member and Mastertrust records and data, is restricted to authorised persons. IT equipmentis maintained in a controlled environment and the maintenance and development of systems, applications and softwareis authorised, tested approved and implemented. The Trustees monitor Legal & General Assurance Society Limited’scompliance with the Service Level Agreement through the review of the monthly MI reporting.

Assessing Value

From April 2015 new governance standards apply to all occupational defined contribution schemes. The Trustee providesa governance statement within the Trust's annual report and accounts, setting out how the Trustee will meet theseminimum governance standards, which are:

Design default arrangements in the best interests of the Trust members and keep these under review.

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

Assess whether member borne costs and charges represent good value.

The Trustee has set out a Statement of Intent which confirms how they will assess whether the Trust is delivering valuefor money to Trust members. This statement covers:

Price - this will cover any costs that relate to members ‘pension arrangements.

Default Investment Strategies - default funds are the funds that members’ pension contributions are invested inif they do not make an alternative choice.

Returns on investment

Flexibility - members should be able to access their pension savings however they wish.

Administration - this will test the level of customer service members receive and the speed and accuracy offinancial 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 AssuranceSociety Limited, to gain member views on whether they believe that they are receiving a value for money service.We will publish these results on our website.

The full statement can be found on www.landg.com/mastertrust

Assessment of investment options

The Trustee is required by law to develop and to maintain a Statement of Investment Principles, which describes theirinvestment strategy. The SIP is used to develop the Trustee’s tactical and strategic investment objectives. .

The Trustee invests in a policy of insurance through Legal & General Assurance Society Limited. This insurance policyallows participating companies, and their members, access to Legal & General’s WorkSave Investment Platform, whichcomprises approximately 180 funds and 27 lifestyle profiles. The investment managers and funds on the platform havebeen selected following formal procedures and reflect the mainstream of investment management and funds that aremost appropriate to the needs of corporate customers and their workforces. The platform is intentionally dynamic, withthe 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.

The Trustee offers 2 investment governance options;

Sole Governance

The Trustee selects a range of suitable funds that members may invest their pension pots in

Investment options are selected in accordance with the Trustee’s Statement of Investment Principles (SIP)


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A ‘default investment’ option is selected that members will be automatically invested in unless they choosean alternative investment option(s)The investment range is regularly reviewed by Trustee, their InvestmentCommittee and their Independent Investment Adviser

Shared Governance

Employers who have internal Governance Committees may choose to operate a shared governancearrangement

The employers’ governance committee works in collaboration with the Trustee in respect of theirmembership demographic

Shared governance arrangements obtain their own investment advice to provide bespoke investmentoptions for their membership, which are then reviewed by the Trustee

The Mastertrust Trustee review this investment design and may refuse a design if not deemed suitable orappropriate

A different default investment option may be selected to that of the sole governance range

The strategy is reviewed regularly and recorded in the Board and Investment Committee minutes.


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Summary of control objectives- together with the Rationale and Risks

Set out below is a complete representation of the independent assurance framework as detailed in TECH 07/14 AAF, theMaster Trust Supplement to ICAEW AAF 02/07.

The risks are intended to provide context for the control objective. In some cases the control objective is supported byfurther information to assist trustee and Reporting Accountants. (Reference to trustee includes both individual trusteesand directors of corporate trustees).

Commercial and Business risks

Trustees of Master Trusts need to take steps to help ensure that business and commercial risks do not compromise thedurability of their Master Trust and ensure that the interest of the scheme membership are protected.

Risk

Member’s assets or entitlements may be put at risk due to a failure such as an insolvency event at the provider.Commercial or business risks result in a decision to close down, transfer or sell the Master Trust operations and thisleads to a loss to members due to inadequate safeguards.

Control Objective

1. Discontinuance plans, which address how member assets or entitlements are safeguarded in the event ofthe Master Trust or any key service provider failing, are documented, approved and maintained.

The discontinuance plan should include activities for managing and protecting member assets of entitlements in theevent;

a decision is made to wind up or close the Master Trust; or

the Master Trust’s operations/ownership are or need to be transferred to another entity; or

a provider becomes insolvent or unable to continue supporting the Master Trust for any other reason.

This plan should reflect requirements in the trust deed and rules, be periodically reviewed and any deficiencies addressed.

a) Business and disaster recovery

Administration and other systems need to be underpinned by adequate business and disaster recovery arrangements.Systems need to be able to manage increased capacity and scale when accepting new business

Risk

Member Assets or entitlements are put at risk due to loss of data following system failure

Control Objectives

2. Data and systems are backed up regularly, retained offsite and regularly tested for recoverability.Business and information systems recovery plans are documented, approved, tested and maintained.

3. The capacity of an administration system to take on new business is assessed, approved and regularlymonitored.

Trustees regularly review and assess administration systems to determine whether they can manage increasedvolumes of administration processing and data handling.

4. New business take-ons are properly established in accordance with Master Trust’s rules and contractualarrangements.

Contractual arrangements between the Master Trust and participating employer(s) are documented and authorisedand should include the terms of engagement between various parties, including the responsibilities or each party.


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Data quality and security

Data quality is key to ensuring members receive the appropriate benefits. Also due to the sensitive nature of theinformation held by a Master Trust, data security is essential.

Risk

Incorrect benefits are paid out or incorrect calculations are made at other times. E.g. utilisation due to poor quality memberdata.

Control Objectives

5. Member data is complete and accurate and is subject to regular data evaluation. Data transmissions aresecure and appropriate measures are implemented to counter the threat from malicious electronic attack.

Member data may either be common or conditional data as described in the Regulator’s DC code of practice.Member data and records across all membership categories should be regularly reconciled and a data reviewexercise should be conducted annually or at other intervals appropriate to the Master Trust. Data errors are subjectto exception reporting and where data integrity issues are identified a data improvement plan is produced toaddress poor quality data, including arrangements to resource and fund the cost of addressing any widespreadmaladministration.

6. Physical and logical access to computer systems, and member and Master Trust records and data, isrestricted to authorised persons.

7. IT equipment is maintained in a controlled environment and the maintenance and development of systems,applications and software is authorised, tested approved and implemented.

Protection of assets

Trustees of Master Trusts need to ensure that there are adequate safeguards over member assets or entitlements.

This risk is particularly important as Occupational DC Trust based Pension Schemes do not, in their structure, containany element of capital adequacy or compensation similar to the employer underpin and Pension Protection Fundprotection provided in defined benefit schemes or, in certain cases, access to the Financial Services CompensationScheme available to contract based schemes. Therefore members bear the investment risk and so it is essential thatthere are controls over the protection of assets and consideration is given to the availability of compensation whenselecting investments.

Risk

Trustees and members are unaware of their exposure to risks associated with investing in unregulated markets toinvestments not eligible for compensation in the event of a default, resulting in a loss to member funds through ill-informedinvestment decisions.

Control Objectives

8. Member assets or entitlements are safeguarded from loss, misappropriation and unauthorised use inaccordance with a defined policy.

Trustees should authorise a policy setting out whether any form of collateralisation is permitted, for example stocklending. All members’ assets are segregated from assets of the provider and entitlements or rights are the subjectof other regulatory requirements and safeguards that relate to asset protection (for example, FCA rules that relateto insured schemes (and rights under the insurance policy)).

9. Cash is safeguarded and all payments are suitably authorised and controlled.

10. Financial protection available to members in the event of default is assessed and documented, andcommunication to employers and members on request.

Whilst investment decisions should not be based primarily on the availability of compensation, trustees shouldunderstand the levels of financial protection which may be available to members. Trustees should acknowledgethe reasons for selecting investments where compensation arrangements are not in place.

11. Investment decisions relating to the selection of investments on regulated markets and unregulatedinvestments are researched, authorised and monitored.


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Trustees must predominantly invest member funds in assets which are admitted to trading on regulated markets.Where unregulated investments are offered to members or investments are made through investment managerswhich are not regulated in either the UK or other jurisdictions;

the decision to select and offer these investments in approved by the trustees and this decision is formally recorded;

the trustees review the suitability of these investments and this review should be documented;

monitoring mechanisms are established to evaluate the performance of unregulated investments; and

information communicated to members clearly indicates investment choices which are not subject to regulationand highlights the implication of this.

Assessment of value for money

Members participating in a Master Trust should receive value for money. Costs and charges should be commensurate tothe quality of pension provision offered to the membership.

Risk

Member outcomes are reduced due to excessive costs and charges which outweigh the value of the pension provision.

Control Objective

12. A value for money review is undertaken and this review is documented, approved and findings actioned.

A scheme offers VFM where the costs and charges deducted from members’ assets of entitlements of contributions(the costs of membership) provide good value in relation to the benefits and services provided (the benefits ofmembership) when compared to other options available in the market. Trustees should carry out a periodicstrategic VFM review, for example every three years. The VFM review should take into accounts guidelines setout in the Regulator’s DC regulatory guidance requiring trustees to obtain administration and investment reportsand market data which enable them to assess the quality of service provided and the level of costs and chargesapplied to different classes of membership. A VFM report should be made available to customers (i.e. existing andpotential participating employers) upon request. Where trustees determine that VFM is not being provided,documented action is taken.

Communication of costs and charges

Master Trusts need to clearly and accurately disclose the charging structure of the Master Trust.

Employers should consider the charging structure of Master Trust and compare with other arrangements when selectinga new pension product. They should be provided with a complete breakdown of all costs and charges that will be incurredby members.

Members should be informed about costs and charges that reduce their fund.

Risk

Members’ retirement funds will be at risk if an employer selects a pension scheme with high charges that does not offervalue for money.

Risk

Insufficient information provided to members about costs and charges prevents members from assessing whether theyare getting value for money from their pension provider.

Control Objectives

13. A complete and accurate list of the types of costs and charges incurred by members and employers isdocumented, monitored and approved.

The trustees regularly assess costs and charges to ensure accuracy and completeness.

14. Disclosure of information on costs and charges borne by members is provided to Employers at the pointof selection and is complete and accurate.

Employers are provided with clear information about costs and charges when choosing a pension scheme for theiremployees. The form and content of this information should take into account Government and industry standards,for example the Joint Industry Code: Pension charges made clear (which is available at www.napf.co.uk)


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15. Disclosure of information to members of costs and charges (rates (%) and amounts (£)) are complete andaccurate.

Trustees should provide members with a breakdown of costs and charges they incur in a readily accessible formand in line with industry and Government standards. This should be provided to members at appropriate points oftime, for example;

on joining

annually thereafter (for example, in the members’ annual benefit statement)

prior to members carrying out transactions that incur costs (for example, switching funds)

on request

on leaving the scheme/employer (in particular, increased charges for deferred members should be clearly flagged)before charges or funds change.

Appropriateness of the default strategies

The default investment strategies set up by master Trusts should take into account of the likely characteristics and needsof employees who will be automatically enrolled into it.

It is likely many employees in the default strategies will not be engaged in financial decisions, so decisions will need tobe taken for them about their risk profile. As such therefore should be an appropriate balance between risk and return forthe likely membership profile and the charging structure should reflect this balance.

Risk

Retirement Income will be at risk if the default strategies are not designed with the likely membership risk profile in mind.

Control Objectives

16. The design and on-going suitability of the default strategies is regularly reviewed and monitored. Thisreview is documented and approved.

Trustees should take into account changes in regulatory requirements, the demographics of the schememembership and innovations in the decumulation market and DC investment products. The governance of thedefault strategy should also take into accounts standards set out in the DWP “Guidance for offering a default optionfor defined contribution automatic enrolment pension schemes” and the investment strategy. The design andcontinued suitability of default strategies should undergo a full review at least every three years.

17. The performance of the default strategies and fund within the default strategies are regularly reviewed andmonitored.

The performance of the default option should undergo a full review at least every three years and the performanceof the funds within the default strategies should be checked at regular intervals throughout the year, taking intoaccounts the DWP “Guidance for offering a default option for defined contribution automatic enrolment pensionschemes”.

Appropriateness of the other investment options (i.e. non default strategy investment options)

Members need to be offered a range of investment choices that provides an appropriate variety of risk profiles, so thatthey can set their own investment strategy.

Risk

The member’s ability to make an appropriate investment decision is hindered by an inadequate range of options. Thisincludes situations where the investment options do not provide a sufficient range of risk profiles, where the number ofoptions is bewildering long or where the range of options assumes an inappropriate level of financial literacy.


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Control Objectives

18. The range and risk profile of other investment options are documented, approved and regularly reviewedfor suitability.

When determining the range and suitability of other investment options offered to members, trustees;

Should have regard to the needs of the membership.

Can demonstrate that they have considered the financial literacy of the membership.

Should ensure that characteristics of other investments are clearly described.

19. The performance of other investment options is regularly reviewed against relevant investment objectivesand (where available) industry benchmarks. This review is documented and approved.

Identification of investment objectives and assessment against them.

To enable trustees to effectively monitor the suitability and range of investment choices they need to understand theaims, objectives and characteristics of each investment fund.

Risk

If investment options are not monitored against investment objectives then poor performance, lack of appropriateness orother issues will not be identified and rectified, leading to potential financial detriment for members.

Control Objectives

20. A complete and accurate description of all investment options is maintained and approved.

Trustees should make this available for distribution by the employer to prospective members on a timely basis.

21. A Statement of investment Principles (“SIP”) is documented, approved and regularly reviewed.

The SIP, which sets out the investment objectives and the principles governing how decisions about investmentsare made, should include the investment policies set out in the Regulator’s DC code of practice. The SIP shouldbe reviewed at least every three years and without delay after any significant change in investment policy.

Conflicts of interest

Trustees need to make sure all actual, potential or perceived conflicts of interest are actively identified, monitored andmanaged. In Master Trusts, provider representation on the trustee board may result in non-trivial conflicts of interest andso need to be managed.

Risk

If decisions about the scheme and its governance (e.g. investment or administration) are influenced by the needs ofparties other than membership (e.g. senior management of the product provider) this increases the risk of financialdetriment for members

For example, decisions are coloured by non-trivial, acute or pervasive conflicts of interests resulting from providerappointed trustees or services offered by related entities, resulting in financial detriment to members.

Control Objective

22. Conflicts of interest are identified, recorded and managed in accordance with a defined policy which isregularly reviewed and approved.

Trustees should maintain a documented conflicts of interest policy which sets out their approach for identifying,recording and managing conflicts of interest that affect or could affect the Master Trust and its trustees, employers,members and providers.

As part of the conflicts management procedures, trustees maintain a register of interests for all trustees and theconflicts of interest identified. These are managed in accordance with the conflicts of interest policy. In particular,conflicts which need to be managed carefully arise when employees of the provider are appointed as trustee and/or


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the provider (or a related party) of the Master Trust is also providing investment management, and/or administrationservices or when they also provide annuities. Trustees need to be able to demonstrate that the use of relatedparties is in the interest of the membership. The trust deed and rules give the trustees the power to change anyservice supplier including the scheme administrator and investment manager.

Fit and proper trustees

Master Trusts need to be run well by sufficiently skilled and competent trustees in accordance with the trust deed andrules.

All trustees should act with integrity, honesty and need to be financially sound to undertake their role.

Risk

Member’s entitlements are put at risk if trustees are not fit and proper (including competent) to carry out their duties.

Control Objectives

23. Fitness and propriety requirements are recorded and managed in accordance with a defined policy whichis regularly reviewed and approved.

The policy should address matters relating to the trustee’s;

Honesty and integrity;

Competency and capability, including trustee skills and knowledge; and

Financial soundness.

Standards associated with each of the above criteria can be found in the Regulator’s Prohibition Orders Statement.

24. The fitness and propriety of trustees is regularly reviewed and monitored prior to appointment andthereafter. This review is documented and approved.

Trustees are only appointed and their appointment maintained where the trustee board (or other trustee appointingbody) has assessed, against requirements set out in the policy, and concluded that the individual is fit and properfor the role.

25. Trustee skills and knowledge are managed and maintained in accordance with an approved trainingprogramme. The training programme is regularly reviewed and updated.

Each year an assessment is undertaken to identify knowledge and skill gaps on the trustee board and assesswhether trustees have sufficient knowledge and skills for their role. Training records are maintained by all trustees.Trustees should successfully complete the Regulator’s Trustee toolkit within 6 months of their appointment ordemonstrate that they otherwise meet the requirement for appropriate knowledge and understanding.

Resource Planning

Due to the scale and complexity of Master Trust governance activities, it is important that sufficient time and resourcesare made available to run the scheme properly.

Risk

Important tasks are not undertaken properly due to the lack of suitable resources.

Control Objective

26. A plan is maintained and regularly reviewed to ensure that resources are properly allocated.

Trustees should use this plan to determine whether key tasks, for example trustee meetings, risk management,data evaluation exercises, a review of the Statement of Investment Principles and investment governance, aresufficiently resourced, by trustees with appropriate skills to undertake this activity.

Scheme Management


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The appointment and ongoing effectiveness of firms offering services are properly monitored and managed even wherepowers of appointment are vested with the provider.

Risk

Service providers: Poor performance by service providers presents a risk to the security and size of members’ retirementoutcomes.

Scheme adviser: A lack of accountability means that quality advice may not be guarantees and there may be no recourseif advice results in member detriment.

Control Objectives

27. Roles, responsibilities, and duties of all trustees, advisers, and service providers are documented,approved, and regularly reviewed.

Services provided by all third parties and/or organisations related to the Master Trust (including fund managers)are specified clearly in contractual documents, including the roles, responsibilities and duties or each party.

28. Activities undertaken by all scheme advisers and service providers are properly managed and subject toregular performance reviews which are documented and approved.

The performance and quality of all scheme advisers and service providers (including fund managers) are managedand monitored through application of formal agreements, regular documented reviews (for example assurancereviews) and service quality measures (including service level agreements). Trustees will need to determine whatlevels of assurance can be provided by service providers in the absence of independent assurance reviews, in thecase of administration for example. The trustees have a mechanism for measuring poor performance which isacted upon. Due diligence is carried out before appointing advisers and service providers prior to appointment, orcompliance with other defined procurement requirements.

Internal Control framework

Trustees need to develop robust systems and controls that detect, mitigate and manage risk.

Risk

Members are enrolled into a pension scheme that does not carry out any monitoring to mitigate the operational, financial,regulatory and compliance risks. For example, inadequate internal controls expose the final outcome of members’pensions to a higher level of risk and uncertainty.

Control Objective

29. A risk management framework is established to identify, manage, and monitor significant operational,financial, regulatory, and compliance risks.

These risks should be evaluated for impact and likelihood and adequate mitigating actions should be implemented.Risks should be recorded in a risk register. Trustees should review the risk register at least annually and evaluatetheir risk assessment arrangements, procedures and systems for material changes. They should record thesechanges (usually on the risk register itself) with any agreed actions to mitigate the risk.

The risk management and internal controls framework should take into account requirements set out in theRegulator’s DC code of practice. As part of the overall risk management process, trustees should have access torelevant information held by the Master Trust provider in order to manage business and commercial risks that mayaffect the Master Trust.

Core Scheme transactions

Core scheme financial transactions impact on the benefits of all classes of members (for example active and deferred)and beneficiaries and include:

Bulk transfers in and out


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Member fund switches and redirections

Receipt of contributions

Member unitisation and investment contributions

Investment and disinvestment of scheme assets

Individual transfers in and out

Benefits payable on death

Purchase of annuities and payments of lump sums.

Trustees need to make sure that core scheme financials transactions are managed, taking into account the high volumeof transactions.

Risk

Members’ benefits are at risk if there are delays or administration errors that are made when processing key memberevents such as retirement, fund switches, receipt and investment of contributions.

Control Objectives

30. Contributions, benefit payments, investment transactions, and calculations and related income andexpenditure are completely and accurately processed in a timely manner and recorded in the properperiod.

Trustees must establish and operate adequate internal controls to ensure that all core scheme financialtransactions are processed promptly, even where this has been outsourced.

Where the processing of core scheme financial transactions are outsourced, trustees should describe how theymonitor these outsourced activities and should ask their service providers to demonstrate how their arrangementsensure that the Master Trust meets relevant legal and regulatory requirements in relation to those servicesprovided. The service provider may, for example, prepare an internal controls report covering the general controlenvironment under which the Master Trust’s outsourced services operate which may be used by the trustees.

Where member assets or entitlements are unitised (whether by the Master Trusts or external service provider)controls should include a reconciliation of member units (between those records held by the administrator and theunit allocations held by fund managers). This should be undertaken at least on a monthly basis and followingcontribution and switching exercises.

31. Contributions are invested in accordance with member instructions or the default policy.

Trustees should have controls in place to check whether there is a matching transaction for each contributionrecorded and that the contribution has been invested at least within five working days of receipt of monies andrelevant data.

32. Transaction errors are rectified and members are treated fairly as a result of the rectification.

Where core scheme financial transactions are not processed promptly and accurately, there is an agreed andtransparent resolution process for errors including how members’ funds will be adjusted. Trustees should ensurethat arrangements are in place to fully fund the cost of administrative errors that might reasonably be expected toaffect member benefits, for example financial resources and/or insurance policies maintained by the administratorsto fund the cost of addressing maladministration, and regularly assess the suitability of these arrangements.

Receipt of contributions

Trustees must collect contributions in accordance with the Payment Schedule and within legal due dates.

Risk


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Member benefits are at risk if the employer is not making the required contributions and the trustees of not pursue theoutstanding amounts.

Control Objective

33. Late and inaccurate contributions are pursued and resolved.

Trustees monitor contributions on an ongoing basis, in accordance with the Regulator’s code on reporting latepayment of contributions, so that they are able to report to the Regulator where they identify that a material paymentfailure has arisen. Trustees have a duty to check that contributions falling to be paid under the scheme rules aretaken into the scheme in accordance with the payment schedule and have a duty to seek to recover anyoutstanding payments and debts to the scheme.

Retirement process

Members need to take advantage of retirement options that optimises the conversion of their fund into a pension whichoffers the most suitable level of income at retirement. Master Trusts may offer use of annuities offered by relatedcompanies, but should also ensure that all retirement products, including the availability of the open market options, areclearly and fairly presented.

Trustees need to be confident that retirement processes help streamline the retirement process effectively and enablemembers to select a retirement product that best suits an individual member’s circumstances.

Risk

Members choose a sub optimal retirement product offering a lower income at retirement than other options available.

Control Objectives

34. Retirements are managed in accordance with a documented process which is regularly reviewed andapproved.

Trustees should produce a documented retirement process taking into account requirements set out in theRegulator’s DC regulatory guidance, for example key activities and who is responsible and timeframes.

35. Retirement products selected by members are monitored and the range of retirement products madeavailable is reviewed regularly for ongoing suitability.

Trustees need to be confident that the retirement process enables, as far as reasonably possible, members toselect a product that optimises their retirement income. Prior to execution, trustees should determine (as far asreasonably possible) whether members are taking advantage of the full range of options.

Trustees should review the design and operation of the retirement process at least every three years and monitordata that shows the range of retirement products selected by members at retirement.

36. Members are regularly made aware of their investment choices, the importance of reviewing the suitabilityof their investment choices and that their level of contributions is a key factor in determining the overallsize of their pension fund.

Communications

To help members understand their pension and make informed investment related decisions, trustees should ensure thatinformation is accurate, clear, concise and engaging. Members need quality information to help choose the most suitableproduct at retirement; highlighting advantages and disadvantages of different products.

Risk

Information provided is overwhelming and does not help members make important decisions on a timely basis.

Control Objectives

37. Scheme communications are accurate, clear and understandable and are produced in accordance with adocumented communications plan. The plan is regularly reviewed and monitored.

The communications plan should include:


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The process for assessing the accuracy and quality of communications.

The process for gauging whether communications are understandable and engaging.

The frequency of communications.

Information requirements for different members at different stages of the pensions lifecycle.

The timescales for reviewing all communications.

38. Communications contain information to support the decisions members need to make at retirement.

Trustees communicate relevant information at the right time to support the decisions members need to make atretirement. The timing of information sent to members to help inform retirement decisions should take into accountthe communication timeframes (throughout the scheme lifecycle) set out in the regulator’s DC regulatory guidance


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Control objectives and control procedures

Control Objective Process Control activities

1. Discontinuance plans,which address howmember assets orentitlements aresafeguarded in theevent of the MasterTrust or any keyservice providerfailing, aredocumented,approved andmaintained.

The discontinuance plan shouldinclude activities for managing andprotecting member assets orentitlements in the event;

a decision is made to

wind up or close the

Master Trust; or

the Master Trust’s

operations/ownership

are or need to be

transferred to another

entity; or

a provider becomes

insolvent or unable to

continue supporting the

Master Trust for any

other reason.

This plan should reflectrequirements in the trust deed andrules, be periodically reviewed andany deficiencies addressed.

The Trustee invests in a policy of insurance through Legal &General Assurance Society Limited. This insurance policy allowsparticipating companies, and their members, access to Legal &General’s WorkSave Investment Platform, which comprisesapproximately 180 funds and 27 lifestyle profiles. The investmentmanagers and funds on the platform have been selected followingformal procedures and reflect the mainstream of investmentmanagement and funds that are most appropriate to the needs ofcorporate customers and their workforces. The platform isintentionally dynamic, with the flexibility and expectation that therewill be fund additions and fund removal.

There is a Statement of Investment Principles (SIP) in place thatdescribes the principles governing investment decisions made bythe Trustee of the Legal & General WorkSave Mastertrust.

The Mastertrust offers two forms of investment governance; SoleGovernance and Shared Governance. Under Sole Governancethe Trustee selects a range of suitable funds that members mayinvest their pension pots in. With Shared Governance employerswho have internal Governance Committees may choose tooperate a shared governance arrangement with the Trustee. Thelatter requiring investment advice and agreement to the proposalby the Mastertrust Trustee.

An Investment Committee supports the Trustee and has theobjective of providing technical investment support, assistanceand guidance to the Trustee in both their day to day activities andin meeting their strategic investment objectives. The committeealso acts as a conduit between Participating Employers’Governance Committees and the Trustee.

The Investment Committee meets monthly to review allinvestment related matters

1.1 The Trustee permits investment inregulated investments in the Statementof Investment Principles, which isreviewed and approved on a triennialbasis.

1.2 A Service Level Agreement is in placebetween Legal & General TrusteesLimited and Legal & General AssuranceSociety setting out termination rights.

1.3 The Trustee’s Discontinuance plan hasbeen reviewed by the Trustee and isreviewed on an annual basis and thereview is minuted in Trustee meetingminutes.

1.4 The Trustee reviews the financial positionof the Trust on a bi-monthly basis at theMastertrust Trustee Board meetings.These are minuted by the Secretary tothe Trustee.


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The Trustees review the financial position of the Trust on a bi-monthly basis at the Mastertrust Trustee Board meetings. Theseare minuted by the Secretary to the Trustees.

There is a service agreement in place, dated 2 July 2013, betweenLegal & General Trustees Limited and Legal & General AssuranceSociety. Contained within the Service Level agreement arereciprocal termination rights providing each party with the right toterminate at any time. In addition there is a material breach clausewhereby if either party fails to remedy the breach within 60 daysthe other party has the right to terminate the agreement. Thetermination also covers the unlikely event of either party fallinginto administration. Clauses within the agreement set out thesteps that need to be taken.

In addition the Trustees have a Discontinuance plan in place thatconfirms the process that they must follow should the Trust needto be discontinued.


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2. Data and systems arebacked up regularly,retained offsite andregularly tested forrecoverability.Business andinformation systemsrecovery plans aredocumented,approved, tested andmaintained.

There is a comprehensive Disaster Recovery / BusinessResumption Plan, which is kept under ongoing review by Legal &General Assurance Society Limited. Legal & General AssuranceSociety Limited have main offices in London, Kingswood (Surrey),Hove, Cardiff and Birmingham and have the facility to transferoperations between these locations if required. In addition Legal& General Assurance Society Limited also have other locationsavailable to them, which are used for their six monthly disasterrecovery testing.

The testing ensures that they are able to restore critical functionsto full operation within required service levels. The individualbusiness areas take part in the testing and take ownership of theBusiness Resumption Policy while a team of specialists from theIT department arrange and manage the testing BusinessContinuity Policy. Legal & General Assurance Society Limited hasa comprehensive Business Resumption Policy, which representstheir current policy towards business contingency planning andhas been established to provide a framework for the managementand maintenance of effective contingency plans throughout theGroup.

The Trustee is reassured by the approach that Legal & GeneralAssurance Society Limited take to disaster recovery planning,which includes:

Disaster Recovery cascade tests being carried out on ahalf yearly basis, with a very high pass rate

Site test occur annually Scenario planning occurs at least once a year All servers and back up are held remotely (at North

Harbour with latest security protocol provided by IBM). The DR plan is reviewed, updated and version controlled

half yearly.

DR plans are held at team, divisional, and at group level.The Trustee is updated annually on the Disaster Recoveryprocedures that are operated by Legal & General AssuranceSociety Limited.

2.1 There is a Service Agreement in placebetween the Trustee and Legal & GeneralAssurance Society which sets out theservice standards that are required inrespect of IT services.

2.2 Details of the disaster recovery testingis supplied to the Trustee on an annualbasis and minuted at a board meeting. TheTrustee tracks any follow-up actionsarising from the testing and these areconsidered and minuted in subsequentTrustee meetings.

2.3 The annual review of DisasterRecovery / Business Resumption Plan,which covers administration andinvestment management operations, isreflected in the Trustee’s Business Planand the results are included in Trusteemeeting minutes.


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3. The capacity of anadministration systemto take on newbusiness is assessed,approved andregularly monitored.

Trustees regularly review andassess administration systems todetermine whether they canmanage increased volumes ofadministration processing anddata handling.

Legal & General Assurance Society Limited regularly reviewthe capacity of its administration systems and resources. Legal& General Assurance Society Limited’s Head of DC Distributionattends the Trustee Board Meetings to provide detail on allTrust activity on a bi-monthly basis and Legal & GeneralAssurance Society Limited’s ability to meet its clientcommitments.

In addition to requesting regular updates on Legal & GeneralAssurance Society Limited’s administrative capacity andsystems scalability the Trustee has attended Legal & GeneralAssurance Society Limited’s Cardiff operation to see how thework is processed first hand and to gain assurance onknowledge, skills, resource availability and customer servicelevels. The Trustee will continue to visit the service centres tomonitor this annually.

The Trustee also invites the Legal & General Workplace DCPensions Leadership team to present on their strategy on anannual basis. These updates include detail on systemsdevelopment, scalability, investment and controls.

All of the above is documented in the Trustee meeting agendasand minutes. The Trustee also monitor Legal & GeneralAssurance Society Limited’s capacity through the TrustAdministration Governance Reports provided for Boardmeetings and the monthly management information packs thatare issued to the Pension Scheme Manager.

The Pension Scheme Manager for the Mastertrust receivesmonthly management information packs covering bothsystems performance and administration performance

The Pension Scheme Manager has monthly formal meetingswith the Legal & General Chief Operating Officer, providingthe opportunity to raise and address and Trustee concerns onthis subject

3.1 The Trustee receives a bi-monthlyupdate from Legal & General’s Head of DCDistribution confirming that Legal &General has evaluated capacity andrelated resourcing matters. Specificconsideration is given prior to the take onof significant new business.

3.2 There is a Service Agreement in placebetween the Trustee and Legal & GeneralAssurance Society which sets out theservice standards that are required foreach new implementation.

3.3 A detailed Governance Report issupplied to the Trustee at each Boardmeeting setting out administrationperformance against the contractuallyagreed service level agreement.


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Legal & General Assurance Society Limited are required toprovide an annual update on their Workplace strategy at theTrustee Board meetings, which include detail on systemsdevelopment, scalability, investment and controls.

4. New business take-ons are properlyestablished inaccordance withMaster Trust’s rulesand contractualarrangements.

Contractual arrangementsbetween the Master Trust andparticipating employer(s) aredocumented and authorised andshould include the terms ofengagement between variousparties, including theresponsibilities or each party.

The Mastertrust Trust Deed and Rules are the governingdocuments by which the Trust is currently administered andmanaged.

Employers wishing to participate in the Trust are admitted to theTrust through a Deed of Participation, whereby the employeragrees to be bound by the provisions of the Trust Rules. Eachparticipating employer has their own section within the Trust.

Having agreed to join the Mastertrust, and having completed theabove, Legal & General Assurance Society Limited oversee theonboarding process which entails:

1. The setting up of the Participant on the administrationsystem

2. The drafting of the Members Booklet3. The drafting of the Investment Guide4. An administration guide to be documented

To gain comfort in the services that are undertaken by Legal &General Assurance Society Limited on behalf of the Trustee anaudit into the provision of services provide to the Mastertrust wasinstructed by the Trustee in 2015. The report set out suggestedrecommendations to enhance the existing controls. Legal &General Assurance Society Limited have responded to each ofthese recommendations and have formally confirmed this to theTrustee.

The deed of participation represents the legal framework of theemployers’ membership of the Mastertrust. The deed is signed byboth the L&G Resources Limited and participating employer. Anyfuture variance from the terms as set out in the deed of

4.1 The deed of participation is signed by theTrustee and the participating employer. Anyvariation to the terms of the deed isdocumented in a deed of amendment which isalso signed by the Trustee and theparticipating employer prior to commencementof the service provision.


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participation would have to be documented in a deed ofamendment (both the employer and Trustee would have to sign).

There is a standing agenda item at the Trustee Board meetingtitled ‘Scheme Activity’. The Head of Legal & General AssuranceSociety Limited’s DC Distribution presents on all potentialMastertrust activity and new scheme wins during this item.

5. Member data iscomplete andaccurate and issubject to regular dataevaluation. Datatransmissions aresecure andappropriate measuresare implemented tocounter the threatfrom maliciouselectronic attack.

Member data may either becommon or conditional data asdescribed in the Regulator’s DCcode of practice. Member dataand records across allmembership categories should beregularly reconciled and a datareview exercise should beconducted annually or at otherintervals appropriate to the MasterTrust. Data errors are subject toexception reporting and wheredata integrity issues are identifieda data improvement plan isproduced to address poor qualitydata, including arrangements toresource and fund the cost ofaddressing any widespreadmaladministration.

Legal & General Assurance Society Limited have strict validationcriteria that need to be met for the submission for any memberrecords.

All new joiners to the Mastertrust are submitted via a secure onlineportal and have to be in a very stringent format. Data that doesn'tmeet the criteria will not pass through to LGAS systems. Whenan employer submits any instruction on behalf of a member, themember data they hold must match up with that which is held onLegal & General Assurance Society Limited’s administrationplatform.

Legal & General Assurance Society Limited regularly completereports on both the Common and Conditional data that is held onmembers within the Mastertrust. Any concerns are raised with thePension Scheme Manager, in the first instance, on behalf of theTrustee. The review of this data is scheduled on the Trustee’sAnnual Business Plan.

The Trustee monitors the completeness and accuracy of memberdata through the Member Data reports that Legal & GeneralAssurance Society Limited pass to the Trustee for review at theMastertrust Board meeting. These reports will show thepercentage of Trust membership where Common data and

5.1 The Trustee receives and reviewsreporting from LGAS on an annual basison the completeness and accuracy of data(the member data review). This review isminuted in Trustee meeting minutes andany issues identified are tracked andactions are reviewed at subsequentTrustee meetings.

5.2 In addition to the annual data report, aspecific IT MI report is received by thePension Scheme Manager on a monthlybasis. This report includes a summary ofissues and actions against known issuesraised in prior periods. The Pension SchemeManager then reports back to the Trusteeboard on an exceptions basis, asdocumented in Trustee meeting minutes


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Conditional data are present and a full breakdown of theunderlying member data is made available.

Regular reports are produced which detail the member dataheld on the administration system and identify inconsistences inrelation to common and conditional data items

Where poor quality is identified, this is highlighted by Legal &General Assurance Society Limited to the Trustee and theemployer. Legal & General Assurance Society Limited work withthe employer to agree an action plan to improve the quality ofthe data submission.

All exceptions to member data have to be resolved by Legal &General Assurance Society Limited and the employer beforecontributions are submitted, which encourages a promptturnaround, which the Trustees monitor as part of the Legal &General Assurance Society Limited reporting.

The Trustee will review the quality of the member data atTrustee meetings, as required


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6. Physical and logicalaccess to computersystems, and memberand Master Trustrecords and data, isrestricted toauthorised persons.

Legal & General Assurance Society Limited have strict protocols on systemsaccess. Only authorised individuals are permitted to access Legal & GeneralAssurance Society Limited systems, services or devices.

The policy requires that access to data and systems functions must beprovided based on users role and approved access rights This must be viathe principle of least privilege to ensure access to the data and systems is ona need to know basis.

For any systems that contain confidential information an approvedauthentication mechanism must be in place.

Automatic login is not permitted for any system or application, unless used inconjunction with an initial primary authentication and access requests forsystems and applications must be through the Access Management function,which is a central team that validate each access request.

The policy requires that procedures must be documented, published andmaintained for the provision of access to systems and applications. Theseprocedures must include, at a minimum:

The authorisation required to access Legal & General AssuranceSociety Limited systems and applications

Changes to access given (including privileged access) Immediate revocation of access for leavers Emergency revocation of access The responsibilities of the system/data owner Reviews of access to systems and access rights Access for support staff who need access to systems holding

production data (e.g. Access on Demand) All Legal & General Assurance Society Limited IT systems must be

assigned a system / data owner who will have overall ownership forthe provision of access.

All users of Legal & General Assurance Society Limited IT systemsmust be supplied with a unique user ID.

Users must have a separate account for each environment they havebeen authorised to access

Accounts must be secured using an appropriate authenticationmechanism (e.g. Password or Certificates).

6.1 There is a ServiceAgreement in place betweenthe Trustee and Legal &General Assurance Societywhich sets out the servicestandards that are required inrespect of IT services.

6.2 The Trustee reviews theLegal & General AssuranceSociety Limited policy onaccess to its IT systemsannually at the Trustee Boardmeeting, which is included inthe Trustee’s Annual BusinessPlan.

6.3 Monthly service reportsinclude any areas of concernand are reviewed by thePension Scheme Manager andreported on to the Trustee atTrustee meetings. Any follow-up actions identified by theTrustee are monitored andcleared at subsequent Trusteemeetings.


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7. IT equipment ismaintained in acontrolledenvironment and themaintenance anddevelopment ofsystems, applicationsand software isauthorised, testedapproved andimplemented.

To prevent theft, loss or damage, all Legal & General AssuranceSociety Limited IT equipment must at all times be kept physicallysecure, in line with the requirements detailed in the Legal &General Assurance Society Limited usage policies, which are:

Laptop Usage Policy Computer and Software Usage Policy Removable Media Usage Policy Handheld Device Usage Policy

This insists that the removal of any IT equipment from L&Glocations must be authorised.

Responsibility for the security of all L&G equipment must beowned and documented by a named individual.

All equipment owned by L&G must be assigned to an operationalsupport group or individual who has the overall responsibility foradministration, maintenance or ownership.

Individuals who are defined as system owners are responsible forensuring that their equipment is registered within and kept up todate in the asset management database.

The damage, loss or theft of any L&G IT equipment must beimmediately notified to the local IT Helpdesk, and local policeauthority if relevant.

All key L&G systems including but not limited to servers,networking devices and telephony infrastructure must be locatedin a secure area with access restricted to authorised individuals.

Physical access controls must be used to provide entry restrictionand detection to protect the secure areas.

Access to secure areas will be restricted to authorised L&G orMSP staff whose job function requires access to that particulararea/equipment, unless escorted by an authorised person.

7.1 The Trustee and Legal & GeneralAssurance Society Limited have acontractual agreement (the Service LevelAgreement) which sets out the IT servicelevels and the reporting that Legal &General should provide to the Trustee andtheir frequency.

7.2 The Trustee reviews the Legal &General Assurance Society Limited policyon access to its IT systems, themaintenance and control of IT systemsand the development of systems,applications and software annually at theTrustee Board meeting. This activity isincluded in the Trustee’s Annual BusinessPlan

7.3 Monthly service reports include anyareas of concern and are reviewed by thePension Scheme Manager and reportedon to the Trustee at Trustee meetings withfollow-up actions agreed as necessary.


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One-off access may be given to staff where there is a specific jobfunction need for such access but approval must be obtained fromthe equipment owner.

Representatives of third party organisations will only be givenaccess via specific authorisation and must be supervised at alltimes.

8. Member assets orentitlements aresafeguarded fromloss,misappropriation andunauthorised use inaccordance with adefined policy.Trustees should authorise apolicy setting out whether anyform of collateralisation ispermitted, for example stocklending. All members assetsare segregated from assets ofthe provider and entitlementsor rights are the subject ofother regulatory requirementsand safeguards that relate toasset protection. Forexample Financial ConductAuthority (FCA) rules thatrelate to insured schemes(and rights under theinsurance policy).

The Trustee invests in a policy of insurance through Legal &General Assurance Society Limited. This insurance policy allowsparticipating companies, and their members, access to Legal &General’s WorkSave Investment Platform, which comprisesapproximately 180 funds and 27 lifestyle profiles. The investmentmanagers and funds on the platform have been selected followingformal procedures and reflect the mainstream of investmentmanagement and funds that are most appropriate to the needs ofcorporate customers and their workforces. The platform isintentionally dynamic, with the flexibility and expectation that therewill be fund additions and fund deletions.

There is a Statement of Investment Principles (SIP) in place thatdescribes the principles governing investment decisions made bythe Trustee of the Legal & General WorkSave Mastertrust.

The Mastertrust offers two forms of investment governance; SoleGovernance and Shared Governance. Under Sole Governancethe Trustee selects a range of suitable funds that members mayinvest their pension pots in. With Shared Governance employerswho have internal Governance Committees may choose tooperate a shared governance arrangement with the Trustee. Thelatter requiring investment advice and agreement to the proposalby the Mastertrust Trustee.

An Investment Committee supports the Trustee and has theobjective of providing technical investment support, assistanceand guidance to the Trustee in both their day to day activities andin meeting their strategic investment objectives. The committeealso acts as a conduit between Participating Employers’

8.1 A Statement of Investment Principlesis in place and reviewed on a triennialbasis. This sets out the Trustee’sapproved policy for investing in regulatedinvestments to safeguard member assets.

8.2 The Trustee’s monitoring of financialperformance of Trust assets takes place atTrustee Board meetings and is minuted inTrustee meeting minutes and includesmonitoring of fund performance, servicelevels and complaints.

8.3 The Trustee monitors controls toprotect the misuse of member benefits; i.e.pension’s liberation through its review ofthe quarterly stewardship reports.


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Governance Committees and the Trustee.

The Investment Committee meets monthly to review allinvestment related matters

The Trustee reviews the financial position of the Trust on a bi-monthly basis at the Mastertrust Trustee Board meetings. Theseare minuted by the Secretary to the Trustee.

Legal & General Assurance Society Limited apply the FCA’s‘Second Line of Defence’ processes to all trust based business tosafeguard against inappropriate use of benefits at retirement. TheTrustee is supportive of this approach.

Controls are in place to mitigate pension’s liberation. Theseinclude:

- Member literature references pension scams andincludes a link to a website that includes informationbooklets from TPR, FCA and HMRC

- The TPR Scam booklet is issued with all transferquotations

- L&G update the Trustee on their meetings with otherproviders to discuss pension liberation / scam issues tobecome aware and share new trends (with competitionlaw riders)

- Central records are utilised across all business areas torecord decisions made for particular schemes

In the event of any concern Legal & General Assurance SocietyLimited write to Trustee highlighting concerns and asking theTrustee to confirm whether the transfer can proceed.

9. Cash is safeguardedand all payments aresuitably authorisedand controlled.

Cash is safeguarded and all payments are subject to 100%checking by a more senior / experienced member of the team.

9.1 Legal & General Assurance SocietyLimited provide the Trustee with quarterlystewardship reports which include anoverview of any relevant weaknesses in


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Maximum limits existing so that larger amounts are signed off bymore senior and experienced managers.

The Pension Scheme manager has reviewed all procedures andcontrols for the authorisation of payments.

Legal & General Assurance Society Limited have explained thatthey have segregations of duties between its money in and outprocesses and a ‘risky access policy’ is in place which ensuresinappropriate access is not granted.

controls identified by management, GroupInternal Audit and Conduct Risk functions,any complaints and the service levels inline with the service level agreement.

9.2 The Trustee reviews governancereports which include summaries ofpayments made by Legal & GeneralAssurance Society on behalf of theTrustee.

10. Financial protectionavailable to membersin the event of defaultis assessed anddocumented, andcommunication toemployers andmembers on request.Whilst investment decisionsshould not be based primarilyon the availability ofcompensation, trusteesshould understand the levelsof financial protection whichmay be available to members.Trustees should acknowledgethe reasons for selectinginvestments wherecompensation arrangementsare not in place.

The Trustees have secured the benefits under the Trust byentering into an insurance policy with Legal & General AssuranceSociety Limited (“LGAS”). LGAS is covered by the FinancialServices Compensation Scheme (FSCS). The FSCS is designedto pay customers compensation if they lose money because a firmis unable to pay them what they owe for any reason. It is a “safetynet” of last resort for customers of financial services firms. In theevent of the insolvency of LGAS the Trustee of the Trust may havea claim under the FSCS as it is the customer of a financial servicesfirm (LGAS). A member of the Trust will not have an eligible FSCSclaim and would be reliant upon the Trustee to make theappropriate FSCS claim. The amount the Trust will be entitled towill depend on the circumstances of the claim.

10.1 The Statement of InvestmentPrinciples permits only investment inregulated assets. The SIP is documentedand reviewed by the Trustee.

10.2 The Trustee has reviewed the FSCSprotection available to members underLGAS. This review has been documentedin Trustee meeting minutes. A note isavailable for members and employers onrequest confirming the FSCS protectionavailable to members.


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11. Investment decisionsrelating to theselection ofinvestments onregulated markets andunregulatedinvestments areresearched,authorised andmonitored.

Trustees must predominantlyinvest member funds in assetswhich are admitted to trading onregulated markets. Whereunregulated investments areoffered to members or investmentsare made through investmentmanagers which are not regulatedin either the UK or otherjurisdictions;

the decision to selectand offer theseinvestments inapproved by thetrustees and thisdecision is formallyrecorded;

the trustees review thesuitability of theseinvestments and thisreview should bedocumented;

monitoring mechanismsare established toevaluate theperformance ofunregulatedinvestments; and

information communicated tomembers clearly indicatesinvestment choices which arenot subject to regulation andhighlights the implication ofthis.

The Mastertrust does not offer unregulated investment options toany member.

The Trustee regularly review the suitability of the regulatedinvestment funds within the sole and shared governance rangescompared with the member needs profile. These are reviewed inconjunction with the Trustee’s Independent Adviser and theInvestment Committee.

The Investment Committee supports the Trustee and has theobjective of providing technical investment support, assistanceand guidance to the Trustee in both their day to day activities andin meeting their strategic investment objectives. The committeealso acts as a conduit between Participating Employers’Governance Committees and the Trustee.

The Investment Committee meets monthly to review and monitorall investment related matters. It reports to the Trustee Board ateach meeting.

11.1 A Statement of Investment Principlesis in place and has been reviewed andapproved by the Trustee. The SIP isreviewed on a triennial basis.

11.2 Monitoring of financial performanceof Trust assets takes place at on a monthlybasis and is documented in theInvestment Committee meeting minutes.In addition, the Investment Committeereviews the suitability of regulatedinvestment funds. This review isdocumented in the minutes of theInvestment Committee which are sharedwith the full Trustee board.


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12. A value for moneyreview is undertakenand this review isdocumented,approved andfindings actioned.

A scheme offers value for money(VFM) where the costs andcharges deducted from members’assets of entitlements ofcontributions (the costs ofmembership) provide good valuein relation to the benefits andservices provided (the benefits ofmembership) when compared toother options available in themarket. Trustees should carry outa periodic strategic VFM review,for example every three years.The VFM review should take intoaccounts guidelines set out in theRegulator’s DC regulatoryguidance requiring trustees toobtain administration andinvestment reports and marketdata which enable them to assessthe quality of service provided andthe level of costs and chargesapplied to different classes ofmembership. A VFM report shouldbe made available to customers(i.e. existing and potentialparticipating employers) uponrequest. Where trusteesdetermine that VFM is not beingprovided, documented action istaken.

The Trustee provides a governance statement within the Trust'sannual report and accounts, setting out how the Trustee will meetthese minimum governance standards, which are:

Design default arrangements in the best interests of theTrust members and keep these under review

Ensure that core financial transactions are processed ina timely and accurate manner

Assess whether member borne costs and chargesrepresent good value.

The trustee has set out a statement of intent which confirms howthey will assess whether the Trust is delivering value for money toTrust members. This statement covers:

Price - this will cover any costs that relate to memberspension arrangements

Default Investment Strategies - default funds are thefunds that members pension contributions are invested inif they do not make an alternative choice

Returns on investment Flexibility - members should be able to access their

pension savings however they wish Administration - this will test the level of customer

service members receive and the speed and accuracy offinancial transactions

Communications - these should be clear and availablein a variety of ways

Feedback - each year from 2016 we will carry out amember survey, independently of Legal & GeneralAssurance Society Limited, to gain member views onwhether they believe that they are receiving a value formoney service. We will publish these results on ourwebsite.

12.1 A comprehensive list of fees andcharges is provided to the PensionScheme Manager for review in a monthlypack provided by LGAS.

12.2 The default investment strategy isreviewed and approved biannually byindependent investment adviser and theTrustee. This review is documented inTrustee meeting minutes.

12.3 The Trustee has a Value for Moneypolicy (a Statement of Intent) which isreviewed, documented and approved atTrustee meetings on an annual basis inaccordance with the business plan. Avalue for money review against thisStatement of Intent is undertaken on atriennial basis and any findings areactioned on a timely basis anddocumented in Trustee meeting minutes.


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13. A complete andaccurate list of the typesof costs and chargesincurred by membersand employers isdocumented, monitoredand approved.The trustees regularly assesscosts and charges to ensureaccuracy and completeness.

The charging structure under the Mastertrust varies fromemployer to employer. The product has a charge cap of 0.5%AMC & FMC combined (when investing in the default fund – theMulti-Asset Fund).

The AMC applicable to the participating employer is contained inthe Deed of Participation. If the employer agrees to pay some orall of the members’ AMC this will be captured in a separate feeagreement

The charges of each Participating employer are reviewed by thePension Scheme Manager each month and form a part of theTrustee monitoring of ‘Value for Members’ as detailed underControl Objective 12.

13.1 Both the Deed of Participation andany applicable fee agreements are signedby the Trustee and the participatingemployer. No changes will be madewithout the agreement of both parties.

13.2 Value for members/money ismonitored by the Trustee on a triennialbasis. The value for money review usesinformation about fees and charges whichis provided to the Pension SchemeManager for review in a monthly MI Pack.

13.3 A complete list of fees and charges ismaintained and reviewed by the PensionScheme manager on a monthly basis andis updated for any new employers/members.

14. Disclosure ofinformation on costsand charges borneby members isprovided toemployers at thepoint of selectionand is complete andaccurate.

Employers are provided with clearinformation about costs andcharges when choosing a pensionscheme for their employees. Theform and content of thisinformation should take intoaccount Government and industrystandards, for example the JointIndustry Code: Pension charges

The costs and charges are set out in the Member’s booklet andset out in detail in the Deed of Participation; the employer signsthe deed. Where an employer has agreed to pay some or all ofthe member borne charges this will be reflected in a separate feeagreement.

The charging structure under the Mastertrust is capped at 0.5%AMC & FMC combined (when investing in the default fund – theMulti-Asset Fund).

14.1 All charges are initially set by theLGAS Underwriting team in accordancewith the service level requirements.Charges are clearly set out in eachMember Booklet which is reviewed by theCommunication Committee.

14.2 Value for members/money ismonitored by the Trustee on a regularbasis. The value for money review usesinformation about fees and charges whichis provided to the Pension SchemeManager for review in a monthly MI Pack.

14.3 The Deed of Participation is agreedbetween the Trustee and the ParticipatingEmployer. The deed can be altered only


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Control Objective Process Control activitiesmade clear (which is available atwww.napf.co.uk)

by a deed of amendment signed by boththe employer and Trustee. All memberswill be informed by the Trustee if there isan amendment to the funds and/orcharging.

15. Disclosure ofinformation tomembers of costs andcharges (rates (%) andamounts (£)) arecomplete andaccurate.

Trustees should provide memberswith a breakdown of costs andcharges they incur in a readilyaccessible form and in line withindustry and Governmentstandards. This should beprovided to members atappropriate points of time, forexample;

on joining annually thereafter (for

example, in themembers’ annualbenefit statement)

prior to memberscarrying outtransactions that incurcosts (for example,switching funds)

on request on leaving the

scheme/employer (inparticular, increasedcharges for deferredmembers should beclearly flagged)

A Communications Committee has been established on behalf ofthe Trustee. The purpose of the Member CommunicationsCommittee is to provide oversight on behalf of the Trustee ofmember facing communications and bespoke clientcommunications. This covers items that are delivered both inpaper form and electronically. This Committee has a duty toensure that information on costs and charges is disclosed in aclear and meaningful way.

This is achieved through:

The member’s booklet – which sets out the annualmanagement charges; the transactional charges areimplicit in the fund pricing.

The Investment Guide - which details the charges that areapplicable to the funds available

The Annual Benefit Statement – which reflects the valueof the charges deducted from the member’s arrangement

Each Participating employer also has their own website, which isestablished for their employees to access scheme information ina simple and intuitive manner.

15.1 Costs and charges arecommunicated to members followingreview by the Trustee. The Trusteereviews costs and charges to ensureamounts are complete and accurate andeach communication is reviewed andgiven an electronic signature by theTrustee prior to distribution.

15.2 It is the participating employer’sresponsibility to ensure that any disclosureof costs and charges on the participatingemployer’s website are complete andaccurate. This responsibility is set out inthe deed of participation signed by theparticipating employer.


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before charges or fundschange.

16. The design and on-going suitability of thedefault strategies isregularly reviewedand monitored. Thisreview is documentedand approved.

Trustees should take into accountchanges in regulatoryrequirements, the demographicsof the scheme membership andinnovations in the decumulationmarket and DC investmentproducts. The governance of thedefault strategy should also takeinto accounts standards set out inthe DWP “Guidance for offering adefault option for definedcontribution automatic enrolmentpension schemes” and theinvestment strategy. The designand continued suitability of defaultstrategies should undergo a fullreview at least every three years.

The Independent Investment Adviser to the Trustee regularlyreviews the suitability of the Mastertrust sole governance defaultinvestment strategy with the Trustee.

The Trustee will review all default investment strategies on atriennial basis, in line with the Statement of Investment Principles(SIP), ensuring that they are designed and executed in members’interests and have clear statements of aims and objectives.

Ahead if the introduction of the Pensions Freedoms a review ofthe Mastertrust’s default fund was completed in 2014 and wasimplemented in April 2015.

A further paper on the Multi Asset Funds suitability was reviewedin May 2015, which was produced by the Trustee InvestmentAdviser.

An annual review is provided to the Trustee on the asset allocationstrategy of the default fund.

The Investment Committee, established by the Trustee, providestechnical investment support, assistance and guidance to theTrustee in both their day to day activities and in meeting theirstrategic investment objectives. This includes the monitoring ofthe default investment strategy.

16.1 The Trustee reviews all defaultinvestment strategies on a bi-annual basisin line with the Statement of InvestmentPrinciples. This review considers themember profile of the Trust and isdocumented in Trustee meeting minutes.This review occurs in accordance with theTrustee’s business plan.

16.2 Investment Committee Terms ofReference in place and reviewed regularlyand the Investment Committeecomposition is reviewed annually toensure members are of the requiredknowledge and skill levels to act on theTrustee’s behalf.


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17. The performance ofthe default strategiesand fund within thedefault strategies areregularly reviewedand monitored.

The performance of the defaultoption should undergo a full reviewat least every three years and theperformance of the funds withinthe default strategies should bechecked at regular intervalsthroughout the year, taking intoaccounts the DWP “Guidance foroffering a default option for definedcontribution automatic enrolmentpension schemes”.

The Independent Investment Adviser to the Trustee regularlyreviews the suitability of the Mastertrust sole governance defaultinvestment strategy with the Trustee.

The Trustee will review all default investment strategies on atriennial basis, in line with the Statement of Investment Principles(SIP), ensuring that they are designed and executed in members’interests and have clear statements of aims and objectives.

Ahead if the introduction of the Pensions Freedoms a review ofthe Mastertrust’s default fund was completed in 2014 and wasimplemented in April 2015.

A further paper on the Multi Asset Funds suitability was reviewedin May 2015, which was produced by the Trustee’s InvestmentAdviser.

An annual review is provided to the Trustee on the asset allocationstrategy of the default fund. The next one will take place on 16May 2016.

The Investment Committee, established by the Trustee, providestechnical investment support, assistance and guidance to theTrustee in both their day to day activities and in meeting theirstrategic investment objectives. This includes the monitoring ofthe default investment strategy.

17.1 The Investment Committee reviewsthe investment performance and returns ofthe default strategies on a monthly basisat each meeting. This review isdocumented in the meeting minutes of theInvestment Committee.

17.2 The default strategy is reviewed bythe Trustee every two years and thereview is documented in the Trusteemeeting minutes.

18. The range andrisk profile of otherinvestment options aredocumented, approvedand regularly reviewedfor suitability.

When determining the range andsuitability of other investmentoptions offered to members,trustees;

The Independent Investment Adviser to the Trustee regularlyreviews the suitability of the Mastertrust sole governance fundrange on behalf of the Trustee. The adviser is supported by theInvestment Committee and the advisors recommendation on anychange is reviewed by the Trustee.

The sole governance range is being reviewed at present. Thisannual review is detailed in the Trustee’s Business Plan.

18.1 The Investment Committee willproduce a formal written report to theTrustee in advance of each Trusteemeeting documenting the range and riskprofile of the investment options. Theminutes of the Investment Committee,including their assessment of suitability,are presented to the Trustee at theTrustee meeting for full boardconsideration and approval as


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should have regard tothe needs of themembership.

Can demonstrate thatthey have consideredthe financial literacy ofthe membership.

Should ensure thatcharacteristics of otherinvestments are clearlydescribed.

appropriate. Trustee reviews aredocumented in Trustee meeting minutes.

19. The performance ofother investmentoptions is regularlyreviewed againstrelevant investmentobjectives and (whereavailable) industrybenchmarks. Thisreview is documentedand approved.

The Trustee are advised by their independent advisor on therange of investment options available to members.

Performance of the funds is submitted to the Trustee on aquarterly basis and these are reviewed formally at boardmeetings.

The investment report contains information about theperformance of the funds compared with the relevantbenchmarks.

All active funds have expected returns which show the positivebenefit for the risk the member is taking. Passive funds will beexpected to show benchmark returns within a tracking error setout in the fund objectives.

19.1 The Investment Committee reviewthe investment performance and returnscompared with industry benchmarks of theother investment options on a monthlybasis at each meeting. This review isdocumented in the meeting minutes of theInvestment Committee. Any issuesidentified by this review are escalated tothe full Trustee board for consideration atthe next Trustee meeting.

19.2 The investment strategy is reviewedby the Trustee every two years and thereview is documented in the Trusteemeeting minutes.

19.3 Quarterly investment reports aresubmitted to the Trustee for considerationand approval. This review is documentedin Trustee meeting minutes.

20. A complete andaccurate descriptionof all investmentoptions is maintainedand approved.

Whether sole or joint governance the members are pointedtowards the Members Investment Guide, which is held on eachParticipating Employers website.

In addition details of the respective funds are contained in therelevant Fund Factsheet.

20.1 The Trustee maintains a completeand accurate description of all investmentoptions and this is reviewed by theInvestment Committee on an annual


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Control Objective Process Control activitiesTrustees should make thisavailable for distribution by theemployer to prospective memberson a timely basis.

The Mastertrust offers a member website, which can be found atwww.landg.com/mastertrust. This website details the Trustee’sStatement of Investment Principles, which sets out how theinvestment options are selected and governed.

basis. This review is documented in theInvestment Committee meeting minutes.

20.2 The Fund Factsheets are reviewedon behalf of the Trustee by the InvestmentAdvisers to ensure they are complete. TheTrustee reviews the Investment Advisers’report and this review is documented inTrustee meeting minutes.

21. A Statement ofinvestment Principles(“SIP”) is documented,approved and regularlyreviewed.The SIP, which sets out theinvestment objectives and theprinciples governing howdecisions about investments aremade, should include theinvestment policies set out in theRegulator’s DC code of practice.The SIP should be reviewed atleast every three years and withoutdelay after any significant changein investment policy.

The Statement of Investment Principles (SIP) was documentedwith the advice of the Trustee’s independent adviser. It describesthe principles governing investment decisions made by theTrustee of the Legal & General WorkSave Mastertrust.

The Mastertrust offers a member website, which can be found atwww.landg.com/mastertrust. This website details the Trustee’sSIP, for the benefit of Participating Employers and Members.

21.1 The Investment Committee meetregularly to discuss the investment optionsand whether they continue to perform inaccordance with the SIP. The SIP is inplace and is reviewed on a triennial basis,or more regularly if appropriate. Thisreview is documented in Trustee meetingminutes.

21.2 Quarterly investment reports aresubmitted to the Trustee for considerationand approval. This review is documentedin Trustee meeting minutes.


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22. Conflicts of interestare identified,recorded andmanaged inaccordance with adefined policy whichis regularly reviewedand approved.

Trustees should maintain adocumented conflicts of interestpolicy which sets out theirapproach for identifying, recordingand managing conflicts of interestthat affect or could affect theMaster Trust and its trustees,employers, members andproviders.

As part of the conflictsmanagement procedures, trusteesmaintain a register of interests forall trustees and the conflicts ofinterest identified. These aremanaged in accordance with theconflicts of interest policy. Inparticular, conflicts which need tobe managed carefully arise whenemployees of the provider areappointed as trustee and/or theprovider (or a related party) of theMaster Trust is also providinginvestment management, and/oradministration services or whenthey also provide annuities.Trustees need to be able todemonstrate that the use of relatedparties is in the interest of themembership.

A written Conflicts of Interest policy is in place for the MastertrustTrustee. This details the process for determining when a potentialconflict situation might arise and how this needs to be managed.

The Trustee also maintains a Conflicts of Interest registerrecording any actual conflicts of interest as well as any potentialand perceived conflicts of interest.

Conflicts are recorded at each Trustee Board Meeting as well asat each Mastertrust Sub Committee. This is recorded in theTrustee meeting minutes. Before seeking to take up any additionaloutside interest’s Trustee must seek the approval of the Boardhaving first discussed the matter with the Managing Director of DCPensions at Legal & General Assurance Society Limited.

22.1 A conflicts of interest policy has beenapproved by the Trustee and is updated ona triennial basis. This review is documentedin Trustee meeting minutes.

22.2 The conflicts register is updated andsubmitted for review and approval in theTrustee Board meetings on a quarterlybasis.


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23. Fitness and proprietyrequirements arerecorded andmanaged inaccordance with adefined policy whichis regularly reviewedand approved.

The policy should address mattersrelating to the trustee’s;

Honesty and integrity; Competency and

capability, includingtrustee skills andknowledge; and

Financial soundness.

Standards associated with each ofthe above criteria can be found inthe Regulator’s Prohibition OrdersStatement.

The Trustee are required to have sufficient expertise, experienceand independence to act in the interests of scheme members.This is assessed annually through an evaluation.This evaluation covers the Boards composition, an assessment ofhow the Trustee’s view their independence and the independenceof each of its members and gives consideration to the diversity ofits membership, performance, skills and effectiveness.

The board has an independent chairman (Paul Trickett) whocarries out evaluations on the Board’s composition to ensureits responsibilities and legal duties. It operates entirelyindependent from the Legal and General group.

23.1 The Trustee has a Fitness andpropriety policy which is reviewed andupdated by the Trustee. The review isdocumented in Trustee meeting minutes.

23.2 A Fitness and propriety questionnaireis completed on an annual basis by eachTrustee Director. The review of thesequestionnaires is documented in Trusteemeeting minutes.

23.3 The letter of appointment requires theTrustee to declare conflicts of interest anddefines their role and services.

23.4 An annual evaluation is completed byeach Trustee Director and Trustee andreviewed by the Chairman. This isdocumented in Trustee meeting minutes.

23.5 Training needs are consideredthroughout the year to address any gaps inknowledge, for example there is a regulatoryupdate at every Trustee Board meeting. Thereview of Trustee Training features on theTrustee’s Business Plan.

24. The fitness andpropriety of trusteesis regularly reviewedand monitored prior toappointment andthereafter. Thisreview is documentedand approved.

Trustees are only appointed andtheir appointment maintainedwhere the trustee board (or othertrustee appointing body) has

When recruiting for a Trustee replacement the following approach

is followed:

LGTL ( Legal & General’s Corporate Trustee)

Draft Briefing document for Role Chairman and Secretary select recruitment firm Recruitment firm produces long list Chairman and Secretary review long list and produce

short list

24.1 A Fitness and propriety questionnaireis completed on an annual basis by eachTrustee Director. The review of thesequestionnaires is documented in Trusteemeeting minutes.

24.2The letter of appointment requires theTrustee to declare conflicts of interest anddefines their role and services.

24.3 An annual evaluation is completed byeach Trustee and reviewed by the


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Control Objective Process Control activitiesassessed, against requirementsset out in the policy, and concludedthat the individual is fit and properfor the role.

Chairman and Secretary interview shortlisted candidates Preferred Candidate identified; Preferred candidate invited to meet Board of Trustee References taken on preferred candidate Recommendation made to Board of LGTL to appoint

preferred candidate as a Director of LGTL – Legal &General’s Corporate Trustee.

Corporate Trustee ( Trustee of the Legal & General Mastertrust)

Draft Briefing document for Role Chairman and Secretary identify corporate trustees that

can meet requirements based on the PensionsRegulator register

Long list of potential Trustees identified Chairman and Secretary review long list to produce a

short list Chairman and Secretary interview short listed

Corporate Trustees and nominated representative Preferred Corporate Trustee and nominated

representative identified Preferred Corporate Trustee and nominated

representative invited to meet Board of Trustees References taken on Preferred Corporate Trustee and

nominated representative Recommendation made to Board of Trustee to appoint

preferred Corporate Trustee and nominatedrepresentative.

Chairman. This is documented in Trusteemeeting minutes.

24.4 Training needs are consideredthroughout the year to address any gapsin knowledge, for example there is aregulatory update at every Trustee Boardmeeting. The review of Trustee Trainingfeatures on the Trustee’s Business Plan.


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In the letter of appointment the role of Trustee contains a term of

office. Subsequent renewal will be by agreement based on

performance. The period of office is three years.

A review of the fitness and propriety of each Trustee Director is

carried out by the Chairman of the Trustee each year, the last one

having taken place in November 2015. This is documented in the

recorded in the Trustee meeting minutes and features on the

Annual Business Plan.

25. Trustee skills andknowledge aremanaged andmaintained inaccordance withan approvedtrainingprogramme. Thetrainingprogramme isregularlyreviewed andupdated.

Each year an assessment isundertaken to identify knowledgeand skill gaps on the trustee boardand assess whether trustees havesufficient knowledge and skills fortheir role. Training records aremaintained by all trustees.Trustees should successfullycomplete the Regulator’s Trusteetoolkit within 6 months of theirappointment or demonstrate thatthey otherwise meet therequirement for appropriateknowledge and understanding

As part of the letter of appointment is a requirement that the

Trustee:

“Undertake appropriate educational and/or professional

development programmes which may be identified as part of an

annual board evaluation programme or by the board generally.”

At each quarterly Board meeting the Trustee receives a regulatory

update.

The Trustee and Trustee Directors are required to have sufficientexpertise, experience and independence to act in the interests ofscheme members and this is assessed annually through anevaluation.

This evaluation covers the Boards composition, an assessment ofhow the Trustee’s view their independence and the independenceof each of its members and gives consideration to the diversity ofits membership, performance, skills and effectiveness.

Each of the Trustee Directors holds the Trustee Toolkitqualification.

Trustee knowledge and skills are reflected on the Annual

25.1 An annual self- evaluation of trainingrequirements is completed by eachTrustee Director and Trustee andreviewed by the Chairman. Individualtraining needs identified from this processare discussed and a training plan isagreed.

25.2 Training needs are consideredthroughout the year to address any gapsin knowledge, for example there is aregulatory update at every Trustee Boardmeeting

25.3 Trustee Training features on theAnnual Business Plan.


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Business Plan.

Both of the Corporate Trustees; Pitman’s and BESTrustees, holdthe Trustee AAF accreditation.

26. A plan is maintainedand regularlyreviewed to ensurethat resources areproperly allocated.

Trustees should use this plan todetermine whether key tasks, forexample trustee meetings, riskmanagement, data evaluationexercises, a review of theStatement of InvestmentPrinciples and investmentgovernance, are sufficientlyresourced, by trustees withappropriate skills to undertake thisactivity.

The Trustee has agreed a Business Plan setting out key

objectives covering governance, communication, investments

and administration.

The plan sets out when each of the three committees will meet

during the year details which subject should be covered.

26.1 The Trustee business plan has been

approved by the Trustee.. It is reviewed

annually and this review is documented in

Trustee meeting minutes.

27. Roles,responsibilities, andduties of all trustees,advisers and serviceproviders aredocumented,approved andregularly reviewed.

Services provided by all thirdparties and/or organisationsrelated to the Master Trust(including fund managers) arespecified clearly in contractual

The Trustee are required to oversee all Sub Committees of the

committees and this is reflected in the Terms of Reference of

each.

There is a service agreement in place between Legal & General

Trustees Limited and Legal & General Assurance Society. This

sets out the roles responsibilities and duties of the service

provider.

27.1 The roles and responsibilities of alltrustees, advisers and service providersare set out in formal letters of engagementwhich are documented, approved andreviewed on a regular basis. This review isdocumented in Trustee meeting minutes inaccordance with the Trustee’s businessplan.


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Control Objective Process Control activitiesdocuments, including the roles,responsibilities and duties or eachparty.

A review on the services provided by the investment adviser and

legal adviser take place triennially. The roles and responsibilities

of each party are set out in contractual agreements.

28. Activities undertakenby all schemeadvisers and serviceproviders are properlymanaged and subjectto regularperformance reviewswhich aredocumented andapproved.

The performance and quality of allscheme advisers and serviceproviders (including fundmanagers) are managed andmonitored through application offormal agreements, regulardocumented reviews (for exampleassurance reviews) and servicequality measures (includingservice level agreements).Trustees will need to determinewhat levels of assurance can beprovided by service providers inthe absence of independentassurance reviews, in the case ofadministration for example. Thetrustees have a mechanism formeasuring poor performancewhich is acted upon. Duediligence is carried out beforeappointing advisers and serviceproviders prior to appointment, orcompliance with other definedprocurement requirements.

Each quarter the Trustee receive administration reports detailing:

Joiners, leavers, opt-outs.

Contributions received, payments mad and assets under

management

Performance against agreed service standards (both

investment and administration).

Complaints (early resolution & full IDRP).

To monitor service provision the in between these periods the

Pension Scheme Manager receives a monthly management

information pack, which covers all services as detailed within the

Service Agreement. The report covers the volume of transactions,

timeliness of completion, trend analysis, quality provision and

customer satisfaction.

The Pension Scheme Manager meets with the Operational Chief

Operating Officer each month to discuss service performance.

The appointment of new advisors is subject to a formal review

process and Trustee approval is given prior to appointment.

28.1 The board has an independentchairman who carries out evaluations onthe Board’s composition to ensure itsresponsibilities and legal duties.

28.2 A review of the Trustee investmentadviser and legal adviser is carried out inaccordance with the Annual BusinessPlan and the review findings aredocumented in Trustee meeting minutes.

28.3 A review of the Trustee’s auditor willbe carried out as per the Annual BusinessPlan.

28.4 The Pension Scheme Managerformally meets with Operational ChiefOperating Officer to review serviceperformance and an Annual report onservice is produced by the Chair of theTrustee and presented to the Legal &General Assurance Society LimitedBoard. This conclusions of this report aredocumented in Trustee meeting minutes.

29. A risk managementframework isestablished toidentify, manage and

The Trustee have overall responsibility for internal controls andrisk management. They are committed to identifying, evaluatingand managing risk and to implementing and maintaining controlprocedures to reduce significant risks to an acceptable level. In

29.1 The Trustees have a risk register andframework in place which is reviewed at


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monitor significantoperational, financial,regulatory andcompliance risks.

These risks should be evaluatedfor impact and likelihood andadequate mitigating actions shouldbe implemented. Risks should berecorded in a risk register.Trustees should review the riskregister at least annually andevaluate their risk assessmentarrangements, procedures andsystems for material changes.They should record these changes(usually on the risk register itself)with any agreed actions to mitigatethe risk.

The risk management and internalcontrols framework should takeinto account requirements set outin the Regulator’s DC code ofpractice. As part of the overall riskmanagement process, trusteesshould have access to relevantinformation held by the MasterTrust provider in order to managebusiness and commercial risksthat may affect the Master Trust.

order to meet this responsibility the Trustee have adopted a riskpolicy. The objective of this policy is to limit the exposure of theTrustee, and the assets that they are responsible for safeguarding,to business, financial, operational, compliance and other riskswhere possible.

The Trustee have established a Risk Register for thispurpose, which is a standing agenda item at each Trustee’smeeting. The purpose of the Risk Register is:

to highlight the scope of risk to which the Scheme isexposed from the Trustee’s perspective;

to highlight the scope of risk to which the SchemeAdministrator 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 taken, in orderto mitigate the identified risks.

Additionally, the Trustee require the Scheme Administrator (Legal& General Assurance Society Limited) to maintain a separate riskregister which covers additional items specific to their role andduties. They are required to present their risk assessment to theTrustee at least quarterly.

Legal & General Assurance Society Limited have a central riskmanagement tool that enables the identification, monitoring andsignificance of each issue to be managed. The Trustee have beenbriefed on this system and are reassured on its use in thebusiness. The risk manager keeps the Trustee informed of anyemerging matters.

each Trustee meeting. This review isdocumented in Trustee meeting minutes.


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30. Contributions benefitpayments, investmenttransactions andcalculations andrelated income andexpenditure arecompletely andaccurately processedin a timely mannerand recorded in theproper period.

Trustees must establish andoperate adequate internal controlsto ensure that all core schemefinancial transactions areprocessed promptly, even wherethis has been outsourced. Wherethe processing of core schemefinancial transactions areoutsourced,, trustees shoulddescribe how they monitor theseoutsourced activities and shouldask their service providers todemonstrate how theirarrangements ensure that theMaster Trust meets relevant legaland regulatory requirements inrelation to those services provided.The service provider may, forexample, prepare an internalcontrols report covering thegeneral control environment underwhich the Master Trust’soutsourced services operate whichmay be used by the trustees.

Where member assets orentitlements are unitised (whetherby the Master Trusts or externalservice provider) controls shouldinclude a reconciliation of memberunits (between those records heldby the administrator and the unitallocations held by fundmanagers). This should beundertaken at least on a monthly

The Trustee formally monitor Legal & General Assurance SocietyLimited’s service provision on a quarterly basis. This is presentedto the Trustee by senior Legal & General Assurance SocietyLimited personnel.

To complement this the Pension Scheme Manager receives a

monthly management information pack, which covers all services

as detailed within the Service Agreement. The report covers the

volume of transactions, timeliness of completion, trend analysis,

quality provision and customer satisfaction.

The Pension Scheme Manager meets with the Operational Chief

Operating Officer each month to discuss service performance.

Legal & General Assurance Society Limited has processes andprocedures in place for carrying out core scheme transactions andensures that related income and expenditure are completely andaccurately processed in a timely manner and recorded in theproper period.

Legal & General Assurance Society Limited’s Internal Audit andConduct Risk function provide the Trustee with updates on allactivity that concerns the Mastertrust.

The Trustee monitors Service Performance and the complete,accurate and timely processing of transactions at Trustee boardmeetings. These updates are presented by senior Legal &General Assurance Society Limited personnel and are included inTrustee meeting minutes.

The Dispute Resolution & Discretionary Payments (DRDP)Committee tracks the timeliness of death benefit settlement onbehalf of the Trustee and meet quarterly basis. The findings of theDRDP Committee are shared with the full Trustee board on aquarterly basis and documented in Trustee meeting minutes.

30.1 Reporting against service levels andpayment and transactional managementinformation is reviewed monthly by thePension Scheme Manager and is providedby the Head of Customer Services, onbehalf of the Chief Operating Officer.There is a clear escalation policy fornotifying the Trustees of any income orexpenditure that has not been processedcompletely, accurately or on a timelybasis. The format of reporting is agreedcontractually as part of the service levelagreement.

30.2 The Trustee monitors ServicePerformance and the complete, accurateand timely processing of transactions atTrustee board meetings. These updatesare presented by senior Legal & GeneralAssurance Society Limited personnel andare included in Trustee meeting minutes.

30.3 The findings of the DRDP Committeeare shared with the full Trustee board on aquarterly basis and the Trustee’s decisionis documented in Trustee meetingminutes.


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Control Objective Process Control activitiesbasis and following contributionand switching exercises.

31. Contributions areinvested inaccordance withmember instructionsor the default policy.

Trustees should have controls inplace to check whether there is amatching transaction for eachcontribution recorded and that thecontribution has been invested atleast within five working days ofreceipt of monies and relevantdata.

When a contribution is paid for a Member, the Pension Accountwill be credited with a number of Units in one or more of the Fundschosen (or the default if no specified fund(s)). The proportion ofa contribution to be allocated to Units is shown on the Schedule.The number of Units to be credited to the Pension Account inrespect of a given Contribution will be calculated on the basis ofthe unit price of the relevant Fund.

When contributions are paid by direct debit (this excludes directcredit payments made via BACS) the unit price is that calculatedon the working day on which we receive the contribution. For allother contributions, the unit price used is that calculated for thesecond working day following the date we receive payment

Where the payment of any contribution is not cleared through thepayer’s bank account, any Units credited in respect of thatcontribution will be cancelled.

The timely and accurate allocation of contributions is formallymonitored on a quarterly basis. This is presented to the Trusteeby senior Legal & General Assurance Society Limited personnel.

To complement this Pension Scheme Manager receives a

monthly management information pack, which covers this

process.


31.1 The quarterly stewardship reportsinclude information of the contributionallocation and the reconciliation ofinvestments and is reviewed by the Trusteeand documented in Trustee meetingminutes.

31.2 Review of this information is alsoconducted by the pension scheme manageron a monthly basis and fed back to theTrustee at Trustee meetings, asdocumented in the Trustee meetingminutes.


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32. Transaction errorsare rectified andmembers are treatedfairly as a result ofthe rectification.

Where core scheme financialtransactions are not processedpromptly and accurately, there isan agreed and transparentresolution process for errorsincluding how members’ funds willbe adjusted. Trustees shouldensure that arrangements are inplace to fully fund the cost ofadministrative errors that mightreasonably be expected to affectmember benefits, for examplefinancial resources and/orinsurance policies maintained bythe administrators to fund the costof addressing maladministration,and regularly assess the suitabilityof these arrangements.

The Trustee formally monitor Legal & General AssuranceSociety Limited’s service provision on a quarterly basis. This ispresented to the Trustee by senior Legal & General AssuranceSociety Limited personnel.


monthly management information pack.

In the event of any transaction errors occurring, Legal &

General Assurance Society Limited will provide the Trustee

with a paper containing details of the error, the root cause of

the issue, the impact to the member(s) and their proposed

resolution. The Trustee then consider this proposal and advise

accordingly.


In the event of any transaction errors occurring, Legal &General Assurance Society Limited will provide the Trusteewith a paper containing details of the error, the root cause ofthe issue, the impact to the member(s) and their proposedresolution. The Trustee then consider this proposal and adviseaccordingly. The Trustee minutes contain details of theapproaches that are adopted in the event of a transactionalerror occurring. Individual errors are corrected and Legal &General Assurance Society Limited have confirmed that nomember will ever be disadvantaged as a result of atransactional errors occurring.

32.1 The Service level agreementbetween LGAS and the Trustee confirmsthat LGAS are responsible for ensuring nomember is disadvantaged as a result of atransactional error and that individualerrors will be corrected by LGAS.

32.2 The Trustee considers anyrectification action taken by LGAS asreported in the stewardship reports andthis review is documented in Trusteemeeting minutes.


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33. Late and inaccuratecontributions arepursued and resolved.

Trustees monitor contributions onan ongoing basis, in accordancewith the Regulator’s code onreporting late payment ofcontributions, so that they are ableto report to the Regulator wherethey identify that a materialpayment failure has arisen.Trustees have a duty to check thatcontributions falling to be paidunder the scheme rules are takeninto the scheme in accordancewith the payment schedule andhave a duty to seek to recover anyoutstanding payments and debtsto the scheme.

The Trustee reviewed Legal & General Assurance SocietyLimited’s approach to monitoring contributions and this isdocumented in Trustee meeting minutes.

Contribution monitoring results are shared with the PensionScheme Manager on a monthly basis and formally with theTrustee on a quarterly frequency.

In the event of the Legal & General Assurance Society Limitedexperiencing any difficulties in obtaining this data the Trusteeliaise with the Participants. Legal & General Assurance SocietyLimited monitor the late payment of all contributions; this includesan early notification process from the operational team to theTrustee.

Legal & General Assurance Society Limited has a robust latecontribution process that it applies to the whole of its definedcontribution portfolio. Legal & General Assurance Society Limitedpresented to the Trustee on this process on 8 March 2016 andadvised that TPR visited their operation for an overview on thissubject in December 2015. This process is contained within theMI that the Trustee receive from Legal & General AssuranceSociety Limited.


The process adopted by Legal & General Assurance SocietyLimited is based on sampling 5% of active memberships frommultiple payroll sites. The Trustee have sight of activity being

33.1 The Trustee monitors the timelinessof contribution receipts on a quarterlybasis by the updates given at Trusteemeetings from the Legal & GeneralAssurance Society Limited OperationsManager. These are included in Trusteemeeting minutes and cover both theeffectiveness of managing late paymentsand the contribution monitoring process.

33.2 The results of the annual sampling ofthe deduction of contributions inaccordance with the payment schedulesare shared with the Trustee board and thereview and any follow up actions aredocumented in Trustee meeting minutes.


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undertaken by Legal & General Assurance Society Limited’sGroup Internal Audit and Conduct Risk functions – any findingsthat are relevant to the Trustee are disclosed. The Trustee havebenchmarked their approach for monitoring contributions againstthe requirements set out in the Pensions Regulator’s latepayment code and related pensions legislation. For example, atthe request of the Trustee, Legal & General Assurance SocietyLimited follow a risk based approach for manually testingcontributions received against payroll information provided byparticipating employers and payroll bureau. Legal & GeneralAssurance Society Limited share a quarterly update with theTrustee on the contribution monitoring results and share detailsof any participating employer who requires further investigation.

34. Retirements aremanaged inaccordance with adocumented processwhich is regularlyreviewed andapproved.

Trustees should produce adocumented retirement processtaking into account requirementsset out in the Regulator’s DCregulatory guidance, for examplekey activities and who isresponsible and timeframes.

The Mastertrust offers all of the flexibilities following the

implementation of Pensions Freedoms in April 2015, meaning that

our members are able to take their benefits however they wish.

The Trust Deed and Rules reflect this.

The timely and accurate settlement of retirement benefits isformally monitored on a quarterly basis. This is presented to theTrustee by senior Legal & General Assurance Society Limitedpersonnel. This includes details of all complaints activity.


monthly management information pack, which breaks down each

retirement event so that service can be monitored at a granular

level.


34.1 The Trustee has a clear retirementpolicy which is reviewed on a regular basisin accordance with the Trustee businessplan and is documented in Trusteemeeting minutes.

34.2 The quarterly stewardship reportsprepared by LGAS and shared with theTrustee on a quarterly basis summarisehow retirements have been managed inthe reporting period. The review of thestewardship reports is included in theTrustee meeting minutes.


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35. Retirement productsselected by membersare monitored and therange of retirementproducts madeavailable is reviewedregularly for ongoingsuitability.

Trustees need to be confidencethat the retirement processenables, as far as reasonablypossible, members to select aproduct that optimises theirretirement income. Prior toexecution trustees shoulddetermine (as far as reasonablypossible) whether members aretaking advantage of the full rangeof options.

Trustees should review the designand operation of the retirementprocess at least every three yearsand monitor data that shows therange of retirement productsselected by members atretirement.

The Mastertrust offers the full range of retirement options and

extended its scope to those eligible to transfer funds in to the

Mastertrust to use the flexibilities available under the scheme.

This provision is in place to assist those members in pension

schemes that do not offer the full range of Pension Freedoms.

The Trustee review the options available and will consider new

opportunities as required.

The Trustee regularly review the charges and service relating to

these processes and the ongoing value for money that members

receive, as set out in control objective 12.

The Trustee consult with their independent investment adviser

when considering any new retirement product.

Updates on member retirement behaviour and futuredevelopments are covered with Participating employers on aquarterly frequency to invite external views (at MastertrustEmployer Groups)

Annual Member forums held in September each year invitingopinions from members. Member website was launched inMarch 2016 inviting direct feedback to the Trustee fromscheme members (www.landg.com/mastertrust)

35.1 The Trustee receives quarterlyreports setting out the options chosen bythose wishing to access their benefits.These form the basis for the annual reviewconducted by the Trustee to evaluate thesuitability of the retirement productsoffered to members. This review isdocumented in Trustee meeting minutes.

36. Members are regularlymade aware of theirinvestment choices,the importance of

An investment guide is made available to all members and

prospective members who join the Mastertrust. The investment

guide is tailored if the employer is participating on a “joint-

36.1 The Communication Committeeoperates on behalf of the Trustee and meetsquarterly and reviews the quality of membercommunications setting out their investment


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reviewing thesuitability of theirinvestment choicesand that their level ofcontributions is a keyfactor in determiningthe overall size oftheir pension fund.

governance” basis. The member’s booklet also provides basic

information and point the member to the Investment guide for

detailed information. All information is available from the website.

In addition members can access fund factsheets providing a

detailed analysis on respective funds; these are available through

the L&G website or “Manage your account” available to members

on-line.

An annual benefit statement is also made available to members

setting out the funds invested in and the contributions made in the

previous 12 months.

choices and the suitability of their choices inlight of their pot value. Membercommunications are reviewed by theTrustee, in accordance with theCommunications Committee terms ofreference, prior to distribution and anelectronic signature is given tocommunications as evidence of review andapproval.

37. Schemecommunications areaccurate, clear andunderstandable andare produced inaccordance with adocumentedcommunications plan.The plan is regularlyreviewed andmonitored.

The communications plan shouldinclude:

The process forassessing the accuracyand quality ofcommunications.

The process forgauging whethercommunications areunderstandable andengaging.

The frequency ofcommunications.

Informationrequirements fordifferent members atdifferent stages of thepensions lifecycle.

A Communications Committee has been established on behalf ofthe Trustee. The purpose of the Member CommunicationsCommittee is to provide oversight on behalf of the Trustee ofmember facing communications and bespoke clientcommunications. This covers items that are delivered both inpaper form and electronically.

The committee has the responsibility:

To work in partnership with clients to recommend (asappropriate and where requested) and facilitate bespokecommunication plans

To input into the Mastertrust Employer Group, as requiredby the Trustee

To Manage and facilitate an external CommunicationsWorking Group

To facilitate and agree ad-hoc communication requests To work with the business on shaping the strategic

direction of member communications To liaise with client companies’ governance committees

and / or the Mastertrust Employer Group oncommunication issues and developments

To ensure that all communications:

37.1 The Communication committee ensurethat communications are accurate, clear andunderstandable. Member communicationsare reviewed by the Trustee, in accordancewith the Communications Committee termsof reference, and electronic signatures aregiven prior to distribution.

37.2 The Trustee communicationsobjectives set out the communication planwhich are reviewed and monitored on anannual basis in accordance with the Trusteebusiness plan.


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The timescales forreviewing allcommunications.

o meet legal and regulatory requirementso meet client or Legal & General brand and language

standardso are targeted, clear, concise and engaging

An approvals process is established outside of formal meetings inorder to expedite the completion of communications projects.

The Trustee also assess the Value for Money thatCommunications offer, as detailed under Control Objective 12.

The Trustee Communications Objectives are detailed on theAnnual Business Plan.

38. Communicationscontain information tosupport the decisionsmembers need tomake at retirement.

Trustees communicate relevantinformation at the right time tosupport the decisions membersneed to make at retirement. Thetiming of information sent tomembers to help inform retirementdecisions should take into accountthe communication timeframes(throughout the scheme lifecycle)set out in the Regulator’s DCregulatory guidance.

Trustees communicate relevantinformation at the right time tosupport the decisions membersneed to make at retirement. Thetiming of information sent tomembers to help inform retirementdecisions should take into account

The Mastertrust provides members with a full range of retirement

options Drawdown (regular and flexible), annuity purchase, Open

Market Option and transfer-out.

At the members selected retirement date a Warm Up Pack isproduced 4 months from the member’s retirement age. This isissued directly to the member.

This pack will contain the following:

Your retirement options pack - this pack introduces Money AdviseService and Pension Wise and recommends that the membermakes use of these services. It then explains all the

options available under the current plan. Money Advice Service Guide Pension Wise Leaflet

38.1 The Communications committeereview communications prior todistribution to members, in accordancewith the Communications Committeeterms of reference. This review includesthe communications sent to memberssetting out their options at retirement.Electronic signatures provide evidence ofTrustee review prior to distribution.

38.2 The service level agreement sets outthe timing requirements for the distributionof member communications in relation toretirement. The Trustee monitorscompliance of Legal & General AssuranceSociety in their review of the stewardshipreports that are reviewed on a quarterlybasis in Trustee meetings.


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Control Objective Process Control activitiesthe communication timeframes(throughout the scheme lifecycle)set out in the Regulator’s DCregulatory guidance.

Pre-paid envelope

These Options are:

Shop Around (transfer all or part of pension pot to anotherprovider).

Take benefits later by extending the plan retirement age

Annuity with Legal & General Assurance Society Limited.

Take tax free cash and / or Flexi-Access Drawdown

Take part of benefits as cash lump sum

Take all of benefits as cash lump sum

Members who wish to access benefits early, if they are older than55, can request a quotation via the employee helpline, throughmanage your account or in writing. This is in addition to the aboveprocess taking place. Legal & General Assurance Society Limitedwill then issue a quotation to the member’s home address.

Information on retirement options can also be found in themember’s booklet and on the participating employer’s website.

AS AT 16 MAY 2016 LG MASTER TRUST REPORT - DRAFT

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Legal & General Investment ManagementOne Coleman StreetLondonEC2R 5AA

Authorised and regulated by the Financial Conduct Authority.

Legal & General Investment Management does not provide advice on the suitability of its products or services.

Ultimate holding company - Legal & General Group plc.

Documents

Report on the Governance and Administration Control ... · AS AT 16 MAY 2016 LEGAL & GENERALWORKSAVE MASTERTRUST AAF 02/07 REPORT Report on the Governance and Administration Control